'Parity' Laws for Costly Oral Cancer Drugs Not a Solution

End Result Is a Shell Game

Nick Mulcahy

October 02, 2014

CORRECTED // The much-lauded legislation to protect patients in the United States from the ruinously high cost of oral cancer drugs should not be whole-heartedly cheered, suggest a trio of experts in a Viewpoint essay published online September 22 in JAMA Internal Medicine.

The so-called "oral chemotherapy parity laws" — passed in 34 states plus the District of Columbia — require health insurers to cover oral chemotherapeutic agents under "no less favorable" terms than intravenous (IV) chemotherapy. The latter tends to be comprised of old drugs and is much less expensive.

In short, the laws, which have been praised by law makers, physicians, and patient advocates, make oral cancer drugs "more affordable and accessible to patients," write Bo Wang, PharmD, and Aaron Kesselheim, MD, JD, MPH, both from Harvard Medical School in Boston, and Steven Joffee, MD, from the University of Pennsylvania in Philadelphia.

So why do these distinguished analysts also say that the laws are "an inadequate response"?

They explain that the laws "merely shift the responsibility" for the cost of the drugs to insurers, who in turn will inevitably pass the additional costs on to all policy holders.

In other words, some cancer patients might be spared the potential financial ruin resulting from the exorbitant cost of oral agents, such as imatinib (Gleevec, Novartis), but all Americans who have health insurance will ultimately pay more for coverage to compensate.

It's a shell game, they suggest.

One thing stays the same under the new laws — the high cost of cancer drugs is not challenged or changed for the United States as a whole, the essayists report. And the cost of cancer medications will continue to go up, they predict.

Indeed, one prominent American oncologist recently pointed out that the prices appear to be set at whatever the market will bear, and noted that recently launched oral cancer drugs are costing more than $100,000 per year.

 
It is unclear how many patients will actually benefit.
 

In their Viewpoint, the essayists assert that the parity laws are weakened by the fact that they "only apply to the limited number of private insurance plans," which have "large" discrepancies in cost-sharing arrangements for oral and IV chemotherapy.

"It is unclear how many patients will actually benefit," they state, adding that the continuing legislative focus on these "well meaning" laws "misses the mark."

How Insurance Works in the United States

Dr Wang and colleagues explain how "oral chemotherapy parity laws" work and how the insurance industry is designed to fend off any negative influence on profits.

First, they describe the differences between oral and IV chemotherapy in terms of insurance coverage. The hit to a patient's pocketbook is likely to be radically different with oral drugs, they report.

Oral cancer drugs are handled through a patient's "pharmacy benefit," whereas IV chemotherapy is handled through what is known as "medical benefit."

Medical benefits (for IV chemo) usually require patients to pay a flat copayment ($20 to $50 per visit) for care in an outpatient setting, which can include the administration of IV medications. In short, the cost to the patient is very modest.

Pharmacy benefits (for oral chemo) are a very different arrangement. They often have a "tiered" copayment structure and other provisions that increase cost-sharing for more expensive medications.

Pharmacy benefits can include coinsurance (patients are responsible for a percentage of the medication cost), high overall deductibles, and caps on annual drug benefits.

The essay spells out what this means for a pair of oral drugs approved by the US Food and Drug Administration in 2012 for the treatment of chronic myelogenous leukemia — ponatinib (Iclusig, Ariad), priced at $138,000 per year, and bosutinib (Bosulif, Pfizer), priced at $118,000 per year.

If a health insurance plan imposed a typical 25% coinsurance, a patient would then incur monthly out-of-pocket costs of about $2500 for either drug.

By comparison, the copayment for each office visit during which a patient receives IV chemotherapy might be $50, they explain.

Parity laws change all of this — a patient with chronic myelogenous leukemia being treated with a pricey oral drug would end up paying the same $50 charge as a patient being treated with IV chemo.

However, one of the players in the business of drug provision in the United States is not waiting for legislators to change laws.

Pharmacy benefit managers are taking matters into their own hands and refusing to pay for certain drugs.

Recently, Express Scripts and CVS Caremark, the 2 largest such managers in the United States, began excluding certain drugs from their formularies after drug companies refused to provide substantial price reductions.

"The exclusion of certain drugs is a departure from the usual practice of insurers of simply shifting expensive therapeutics to a higher cost-sharing formulary tier," the essayists observe.

"This cost-containment strategy might be considered in oncology, including for newer injectable agents that are priced at levels comparable to that of oral agents," they add.

They cite an example of how the oncology community made a difference. In 2012, the newly launched ziv-aflibercept (Zaltrap, Regeneron/sanofi-aventis) for colorectal cancer was initially priced at more than $11,000 a month. This was challenged publicly in the by clinicians at the Memorial Sloan Kettering Cancer Center in New York City, which resulted in a price cut.

JAMA Intern Med. Published online September 22, 2014. Abstract

Editor's note : The incorrect reference to pertuzumab as an oral agent has been removed.

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