AIDS, Formularies and Gresham’s Law

Business Week earlier this month reported on the pharmaceutical formularies (the list of drugs available and at what prices) for Florida Exchange plans. The article noted that there is a significant access problem to affordable drugs for individuals with expensive chronic conditions:

Before the Affordable Care Act, insurance companies could refuse to cover people with HIV or other costly conditions. Obamacare was supposed to end that by making insurers sell policies to all comers, regardless of preexisting conditions. Now advocates for HIV patients and others with chronic diseases say some health plans are making them bear a huge cost for life-saving medications—and that the strategy’s a backdoor method of discriminating against sick people.

The nonprofit AIDS Institute filed a formal complaint (pdf) with the federal government May 29 over how four insurance companies structured their drug coverage in Florida’s Obamacare exchange. “We found this pattern where every single [HIV/AIDS] drug for some plans was on the highest tier, including generics…”

Insurance companies are “making the plans for people with HIV absolutely unattractive so they don’t choose them,” he says.

One of the major challenges for Obamacare is transitioning the health insurance industry from being extremely competent at finding ways to not covering sick people towards finding ways to keep people from getting too sick. The biggest stick in this transition is the massive sea change in underwriting from exclusionary, statistical and experience underwriting to an inclusionary community rating system of underwriting. This change, as we have discussed ad nauseum, allows all people, including those with expensive pre-exisiitng conditions to get insurance. It is why the Exchange risk pools are sicker, on average, than the risk pools of the pre-Exchange underwritten individual insurance markets as those markets kept the sick people who could actually need services out of the market.

Insurers are required to accept and cover HIV patients. They don’t want to.  So they are trying to avoid them by being fugly. 

Insurance comnpanies still want to tilt their risk pools to be as healthy as possible while letting their competitors eat the costs of covering the known sick. This is despite some back-end risk adjustment mechanisms that are supposed to transfer money from health plans that are composed of overwhelmingly healthier than average members to health plans that are composed of sicker than typical members. Plans want to be as attractive as possible to healthy people and as unattractive to known sick people. This incentive structure creates an adverse selection mechanism collective action problem. We are seeing this problem emerge with AIDS/HIV drugs in Florida.

What do I mean by an adverse selection collective action problem?

Let’s assume that any given insurance company wants to minimize their HIV treatment costs and that they are also required to cover any HIV patient who signs up with them. The goal then for the insurance company is to make themselves as unattractive as legally possible to HIV patients. Futzing around with networks is possible, but since most HIV treating docs and facilities are common providers for lots of much healthier members, this will not be too effective. Additionally plans are required to contract with Ryan White AIDS clinics. The simplest legal way to target unattractiveness to HIV patients is to make the drugs as expensive as possible.

And that is what is happening. Even relatively inexpensive AIDS mediciation for the first insurance company with this idea would get put on the most expensive formulary where pre-authorizations, high co-insurance and high co-pays apply until the member reaches the out of pocket maximum. This anti-social but rationally based business model should make the plan very unnattractive to individuals with HIV. They will logically look at the market and look for a plan that does not completely fuck them over.

The same logic applies to diabetics, cancer survivors, transplant recipients and other high cost individuals. 

And here is where problems emerge. Once one plan in a market decides to make themselves as unattractive as possible, every other plan has to either follow suit in making themselves unattractive or be willing to take on massive health costs as they become the preferred plan for HIV positive individuals. At that point, there is a local death spiral as the attractive plan has to raise premiums to cover costs which drives them away from the Second Silver subsidy determination point, which then drives away cost sensitive but fairly healthy individuals from the plan. So a region will see either the “nice” plan become a “nasty” plan as a self-defense measure or that “nice” plan will leave the market so the new baseline is “nasty”. It is Gresham’s law for health insurance.

What are the policy solutions?

The obvious one, if we want near universal coverage for people who need access to health care services, is to move to single payer so as to remove the incentive to cost and risk shift. That is not happening before my younger child can vote (he is at the guaranteed twenty minutes of no diaper naked time as a reward phase of life right now).   Single payer has the incentive structure to get appropriate drugs to people at the earliest potential intervention point instead of holding off hoping that you become someone else’s headache. 

A second and much more plausible solution is to take a regulation from Medicare Part D, “protected classes” and require all insurers to offer at least all chemical/bio-equivilant compounds for HIV, diabetes etc at a “reasonable” formulary tier. If there is a brand and a generic chemical available, the insurer could offer the generic at the “protected class” rate and the brand at a worse tier. The goal would be to force all insurers to not compete on avoiding the sickest people by forcing them to offer the same formulary at roughly the same rates of attractiveness for identified high cost diseases.

I am not sure if this is a legal fix or an administrative fix.  If it is a legal fix, it won’t happen until at least 2017 with actual implementation in 2018 or beyond.  If it is an administrative/rule making fix, we could see a “protected class” style rule for the 2016 benefit year.

51 replies
  1. 1
    Mnemosyne says:

    Is there a way to find out if a drug is about to come out of patent? That’s my suspicion for why my rosacea cream suddenly went from a retail price of $150 to a retail price of over $800 when I can buy the same goddamned thing from Canada for $50 retail.

    ETA: This is semi-relevant because it was on my company’s formulary when the retail price wasn’t insane, but now I have to pay out of pocket for it because my company doesn’t see why they should pay $800 for something I smear on my face.

  2. 2

    OT bleg: I’m going to war with our state Blues. The CS tron I talked to this morning insisted that their policy to offer cards only in the name of the insured isn’t discriminatory & doesn’t need to be changed so that all covered family members, regardless of surname, can get care without a round of abuse from clerks.

    1) How heavy is this lift? Is there some reason that they don’t want to issue cards with the name of each insured person?
    2) What dept. should I be raising hell with?

    KTHXBAI.

    PS it was apparently unpersuasive when I double dog dared the young man who takes member calls to go into the ER at his local hospital in Dallas with a card listing some other dude’s name and a chest wound, & see if they decided to let him bleed instead of checking his photo ID against the BCBS database for that policy. Because he’s not a hypothetical, empathetical kind of dude.

  3. 3

    @Mnemosyne: Yes. The USPTO registers drug patents, and therefore expiry dates. Often big pharma begs for an exemption, for their new improved long acting short pulsing overnight whatever “improvement”, though. There is an industry DB that can tell you about that, but it’s frickin’ expensive for the proprietary version.

  4. 4
    Mary G says:

    Boy, is this ever true. I have had rheumatoid arthritis for 34 years, and as a consequence, have always been as welcome at an insurance company as a pack of ants at a picnic. The new drugs that work so much better than the old ones cost a fortune. Even with insurance, they are out of reach for most people.

    I got the best Medicare part D supplemental coverage available, plan F, I think, and still if I need to have a self-injectable drug like Embrel, I have to pay 33% of the cost. The drug companies have some supporting programs, but not enough.

    However, if I get a drug by IV at the hospital, between Medicare and the supplement, I pay nothing. (Well, except the $484 a month premium for the supplement, of course). Every time my rheumatologist mentions a new drug, I ask if it is injectible or IV. If it’s not an IV, I refuse it, because then I’d be paying several hundred dollars more than I pay now.

    Every time I go to the hospital for the IV, I feel terrible because there are never any poor people in the infusion center there. Mostly it’s rich people have chemo that costs a fortune. And a significant percentage, not all, but a lot, spend the whole time denouncing that socialist Obama and his insurance plan from hell. I don’t want to yell at people dealing with cancer, but sometimes I get a little snippy with them.

  5. 5
    Mnemosyne says:

    @PhoenixRising:

    This was years ago, but I remember a co-worker had to bring in his marriage certificate and show it to HR to prove that his wife was covered even though they had different last names. That was kind of a pain in the ass, but it worked. I’m not sure if you have any “official documentation” like that, though.

  6. 6
    japa21 says:

    @Mnemosyne: That is actually a common practice. Several years ago, a lot of people were discovered to report people as dependents on their employer based policy who did not meet the criteria and it was costing both employers and insurance companies a lot of money.

  7. 7
    Villago Delenda Est says:

    @Mary G:

    And a significant percentage, not all, but a lot, spend the whole time denouncing that socialist Obama and his insurance plan from hell.

    These vile creatures should be cut off from all medication and be left in the curb to die slow, painful, lonely deaths. Fuck them.

  8. 8
    MomSense says:

    @Mnemosyne:

    I feel your pain. I take a medication only as needed that costs $750 for a tiny little dropper sized bottle with a spray nozzle. Apparently there are only two rare blood disorders that require the use of this medication so they manufacture very little of it and there is no incentive to come up with new formulas. It stinks but it is better than bleeding to death.

  9. 9
    El Caganer says:

    So people who require expensive medications are still dicked? Fuck me on toast. I’m not a fan of ACA, but for some reason I thought this had already been covered.

  10. 10
    Gin & Tonic says:

    @Mary G: How’s HBM?

  11. 11
    Mary G says:

    @Gin & Tonic: He is back building me a plant table for the back yard.

  12. 12
    raven says:

    @Mary G: Tell him his dogface pal says hi.

  13. 13
    burnspbesq says:

    @Mnemosyne:

    That’s pretty counterintuitive. The price of prescription drugs is supposed to go down when they go off patent, because of competition from generics. Which is, in fact, exactly what happened to me when Actos went off patent last year, while I had no prescription drug coverage; the price dropped by about 60 percent, in two stages, over a three-month period.

    Diabetics must have more political clout than AIDS patients, because I have either a $5 or a $15 co-pay on everything I take. I’m surprised CVS doesn’t just give me a big jug of metformin every three months in order to save the cost of processing my monthly refills.

  14. 14
    Gin & Tonic says:

    @Mary G: Thx.

  15. 15
    Mnemosyne says:

    @MomSense:

    In a way, the most annoying part is that it’s not a life-saving medication — it just stops my face from being constantly red and flaring up. That’s why I’m like, Come on, it’s essentially an acne cream and you’re going to charge me EIGHT HUNDRED FREAKING DOLLARS for it?!?

  16. 16
    japa21 says:

    @burnspbesq: However, as it gets close to going off patent the manufacturer may well up the price to get as much profit as they can prior to the generic being available.

  17. 17
    Cervantes says:

    @Mary G: Glad to hear it. Warm regards.

  18. 18
    Mnemosyne says:

    @burnspbesq:

    The price of prescription drugs is supposed to go down when they go off patent, because of competition from generics.

    I think you misread — my supposition is that it’s about to go off patent but has not actually gone off patent yet, which is why they’re trying to eke out a last few bucks from it before they have to deal with competition from generics. It’s metronidazole in a patented base, so it’s the specific prep that’s under patent, not the active ingredient.

  19. 19
    Elizabelle says:

    @Mary G:

    Please give HBM and Leland a hug from me.

    Cannot wait to see the next round of garden photos. Love SoCal.

    (Although it’s gorgeous in Northern Virginia today. Crisp sunny fall weather.)

  20. 20
    Elizabelle says:

    PBO giving a speech on the economy; listening to it. He’s loose and poking fun at Republicans who won’t work with him and that ridiculous lawsuit.

    ETA: He just brought up “economic patriotism.” I think that phrase will have legs.

  21. 21
    Elizabelle says:

    @Mnemosyne:

    Can you get it inexpensively (and verifiably full-strength) from Mexico? That’s worth a jet flight to pick it up.

  22. 22
    askew says:

    @Mnemosyne:

    In a way, the most annoying part is that it’s not a life-saving medication — it just stops my face from being constantly red and flaring up. That’s why I’m like, Come on, it’s essentially an acne cream and you’re going to charge me EIGHT HUNDRED FREAKING DOLLARS for it?!?

    Out of curiousity, what is the name of this drug? I’ve seen a couple of dermatologists for my rosacea and they always tell me the only thing that really works is laser treatment which is insanely expensive.

  23. 23
    big ole hound says:

    @burnspbesq: Get your MD to write scrips for 90 days, which they all will for maintenance drugs. Cheaper co-pay (if any) and fewer trips to the pharmacy.

  24. 24
    Mnemosyne says:

    @askew:

    It’s Noritate. It works really well for my rosacea — even though it’s the same active ingredient as the generic Metros (Metrogel, Metrocream, etc.), it doesn’t irritate my skin like those do.

    I also switched over to using organic skincare products from Ilike — it’s $50 for a bottle of cleanser and another $50 for moisturizer, but the surface redness has mostly gone away. And I wear 45 SPF every single day (by Epicuren). It seems as though reducing irritation from the products I use helps the Noritate do its job better.

    @Elizabelle:

    My Canadian source is good, so I’m going to stick with them. (CanadaDrugs.com, FWIW — very quick, good customer service, but you do need a doctor’s prescription and they do NOT do any Schedule II drugs.)

  25. 25
    narya says:

    The potential challenge with the Medicare Part D solution for HIV, however, is that some of the drugs that are easiest to take–and that, therefore, encourage patient adherence, which in turn encourages viral suppression, which in turn reduces risk for the surrounding population–might not end up on those formularies, especially if the formularies aren’t constructed by people who understand HIV treatment.

    Another solution, however, and one that’s being considered a bit by HRSA, is allowing Ryan White grantees to use their funds to assist in paying co-pays, or possibly even paying insurance premiums, which would enable the patient to pay for the tier of plan that has their preferred drugs in it.Patients ALSO have a cap in terms of what they’re responsible for paying, based on their income, even if they’re insured. Thus, if HIV+ folks get their care from a health center that’s a RW grantee and that is doing it right, they’ll only have to pay out of pocket up to a certain point. It’s still not nothing–because it’s a percentage of their income–but at least it’s not endless.

    From an adminstrative point of view, however, it’s something of a nightmare at the health center level.

  26. 26
    Mnemosyne says:

    @askew:

    Also, too, the Noritate and gentler face products help my face not feel like it’s constantly itchy and on fire, so it’s worth the money for that alone.

  27. 27
    C.V. Danes says:

    This anti-social but rationally based business model should make the plan very unnattractive to individuals with HIV.

    Anti-social, yes. Rational only if you remove any sense of morality or emotional connection to the human race, e.g., sociopathic.

  28. 28
    Mnemosyne says:

    The skincare products that work for my rosacea:

    Ilike Organic Skin Care (I use the Ultra Sensitive Cleansing Milk and the Rosehip Whip Moisturizer)

    Epicuren X-Treme Cream Propolis Sunscreen SPF 45+ (do not use if allergic to bees!)

    I used to see a really good facialist who helped get my skin under control — if you go that route, you need to find someone who is experienced with rosacea and problem skin, because the usual facialist stuff will only make matters worse.

  29. 29
    C.V. Danes says:

    @Mnemosyne: Reminds me of the time I went ahead and paid full price for some pain medication for my wife because the insurance company wanted her to hobble around in pain for three days until one of their bureaucrats decided if her doctor knew what he was doing by prescribing it for her.

  30. 30
    Keith G says:

    I am an AIDS patient who learned of my status in 91. I am fortunate in that during that time I’ve only had one health crash which resulted in a 30 day hospital stay in 2003. At that time, I had a wonderful health insurance policy as a public school teacher.

    I moved out of teaching and was uncovered and untreated for a while. I then became a patient of the wonderful Harris County Hospital District in Houston Texas. Their medical management of AIDS patients is truly amazing and life saving. Yet, were I to seek medical care for a condition not related to my status, I would be in the general county health care system and that is very lacking.

    ACA allows AIDS patients to purchase health care coverage. However, that coverage is not affordable to many AIDS patients. I make a bit more than 30 k per year. The ACA credit takes my premium payment down to 350 per month. With corporate coupon discounts, the retail price for the three antivirals that I must take is lowered to about 2200 per month. What I’ve mentioned are the costs I’m responsible for even before I see a doctor or take a lab test.

    I am very fortunate that the community I live in has a fairly extensive charity and AIDS care infrastructure that is able to utilize a combination of private money and Ryan White funds in order to supplement the payments for people like me so we may get medical care and still afford the basics of life on a middle class income.

    Further in my favor is the fact that the company that I have chosen to get medical care with is a local non-profit, called Community Choice Healthcare. They do not have to function in ways that increase shareholder value.

  31. 31
    Roger Moore says:

    @Mnemosyne:

    In a way, the most annoying part is that it’s not a life-saving medication

    In practice, though, those are the ones they can most easily get away with charging an arm and a leg for. If it were actually saving your life, there would be a lot of pressure on them to keep the price reasonable so nobody was missing out on life-saving medicine because they couldn’t afford it.

    If it’s not a life-saving medication, the drug companies can portray you as somebody who’s only taking their medication because you want to, not because you have to. People demanding their dermatology medicine just don’t have the public sympathy that people asking for cancer or AIDS medicine do. That’s exactly why drug companies are working so hard on “lifestyle” drugs, like the kind we can’t mention on the blog for fear of spammers. They can gouge to their hearts content without having to worry too much about pushback.

  32. 32
    askew says:

    @Mnemosyne:

    It’s Noritate. It works really well for my rosacea — even though it’s the same active ingredient as the generic Metros (Metrogel, Metrocream, etc.), it doesn’t irritate my skin like those do.

    Thanks. I’ll have to try that. Metrogel did nothing for me. I use Triderma’s lotions for my redness and that helps plus a ton of sunscreen and a hat when going outside. But, it is still getting worse. Frustrating.

  33. 33
    C.V. Danes says:

    @Keith G: Thanks for sharing your experience. I’m glad you are able to get the care you need, although I have no idea how you can afford that on $30k per year :-)

  34. 34
    OzarkHillbilly says:

    @askew: It’s here: @Mnemosyne:

  35. 35
    Mnemosyne says:

    @askew:

    I discovered that a LOT of the “gentle” stuff that’s supposedly made for sensitive skin was irritating to my skin. Cetaphil irritates my skin, fer chrissakes! Staying away from preservatives seems to have helped, though I can’t name any specific ones, unfortunately.

  36. 36
    askew says:

    @Mnemosyne:

    Yeah, a lot of that stuff irritates my skin as well. I am thinking the Nutregena face wash may be one of them. I’ve been using it for awhile now and I think it is aggravating my skin. I can deal with the redness even though it looks horrible. I just hate the dry skin that comes with it because I can’t wear make-up when my skin is this dry.

  37. 37
    Mnemosyne says:

    @askew:

    I would definitely try and track down stuff that’s organic and/or preservative-free and see if that helps at all. I have a small breakout on my chin because I tried a new sunscreen — d’oh! Back to the same old, same old for me.

  38. 38
    Glidwrith says:

    @askew: @Mnemosyne: For the dry skin, do you call it dry because it is flaky? I have seborrheic dermatitis, which is basically inflammation caused by an oil-loving yeast that naturally exists on your skin. The irritation causes flaky skin, which could be taken as ‘dry’ patches.

    My own regimen is basically nothing touches my face except a bit of Dove soap and my hands. I will use my fingertips to rub off any dead skin. Once out of the shower, I will take a bit of coconut oil (cold-pressed, no chemical processing – the same stuff used for cooking) and use the thinnest layer I can manage on my fingertips. Oil goes only on cheeks and around eyes, tiny bit high on the forehead.

    I have had great success in no more flakes, reddened cheeks are much closer to normal color and using the oil on more keratinized skin on the backs of my upper arms and thighs has also seen great improvement.

    Obviously, internet diagnosis is a silly thing one can do, but it’s my two cents for what has worked for me.

  39. 39
    Mnemosyne says:

    @Glidwrith:

    I definitely have rosacea — I was diagnosed at a young age. I do sometimes get some dermatitis if I use an irritating product, though. I had some dry patches on my hands that wouldn’t go away, and eventually the only thing that worked was Aveeno Eczema Therapy Cream, because it was the only moisturizer that wasn’t further irritating my skin.

    I used to use Dove but, like I said, my skin tends to react to things that other peoples’ doesn’t, so that’s why I’m happy to pay $50 for the Ilike cleanser.

  40. 40
    Glidwrith says:

    @Mnemosyne: I wish you luck and that your skin treatments continue to work well for you. Off to lunch!

  41. 41
    askew says:

    @Glidwrith:

    Mine isn’t flaky but just rough. I got rosacea really late in life and I am still experimenting with what works. I definitely am going to have to do the laser thing to get rid of the broken capillaries though.

  42. 42
    jeannedalbret says:

    Imbalances like Small-Instestinal Bacteria Overgrowth are often expressed in the skin. A family member’s rosacea flushing and acne have disappeared thanks to a specific antibiotic and a diet that avoids feeding the “bad” bacteria at the expense of the good. And the flaking etc means your skin needs more moisturizing, not less, with a plant-based cleansing lotion. Family uses witch hazel as a toner–NO soaps at all.

    We found this out after going the dermatologist for a couple of years, using stronger and stronger pharmas with no inmprovement. We are well-supplied with naturopaths in Seattle, and the first one we saw took patient off all dairy, limited sugar and wheat. Second one sugested we go to hospital for breath analysis, where they measured the amount of off-gassing from bacteria generated by glucose taken on fasting stomach and found quantitative evidence that large-gut bacteria were out of control in gut. SO–short spell of specific antibiotic and a food plan have totally eradicated skin issues.

    (I believe Chinese medicine stipulates a powerful gut-skin relationship too.)

  43. 43
    Keith G says:

    @C.V. Danes: As I mentioned, there is great support infrastructure here, so that many harsh retail costs are softened by supplemental help. Yet I think about three things quite a lot:

    How permanent is the supplemental help?

    What about the folks who live in my community who are not as practiced at self-advocacy as I am?

    What about my friends who do not live places where such social consciousness is abundant?

  44. 44
    jeannedalbret says:

    Sorry for long link above–google explains it far better:

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  45. 45
    jeannedalbret says:

    Sorry for long link above–google explains it far better:

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  46. 46
    C.V. Danes says:

    @Keith G:

    What about the folks who live in my community who are not as practiced at self-advocacy as I am?

    What about my friends who do not live places where such social consciousness is abundant?

    Sad to say, they probably die sooner than later. Such is the state of caring in this country. Just look at the issues that John Cole has had getting into rehab. Most people seeking help would have given up by now, and the system is predicated on most doing just that.

  47. 47
    C.V. Danes says:

    @jeannedalbret:

    Imbalances like Small-Instestinal Bacteria Overgrowth are often expressed in the skin. A family member’s rosacea flushing and acne have disappeared thanks to a specific antibiotic and a diet that avoids feeding the “bad” bacteria at the expense of the good.

    Diet and stress are both contributing factors. I went through a bout of hives a few years ago where I literally woke up one morning covered head-to-toe with hives. The only thing that would clear them up was steroids. After about 9 months of hell, they went away as mysteriously as they came. I changed my diet and began exercising to reduce stress to overcome adrenal fatigue, and it made a world of difference.

  48. 48
    Villago Delenda Est says:

    @Elizabelle:

    He just brought up “economic patriotism.” I think that phrase will have legs.

    The only “patriotism” the Ferengi scum that run corporations have is to Mammon. Hard to say if that phrase will have any real impact, since the teatards can’t get past the color of Obama’s skin to comprehend what he’s talking about.

  49. 49
    Mnemosyne says:

    @jeannedalbret:

    I think Violet tried that — it seemed to work okay for her, but she’s been so busy lately that I don’t know if she can post her experience.

    The gentle soap/Noritate/sunscreen is working just fine right now, so I don’t think I’m going to start messing around with my gut bacteria anytime soon. But my doctor wants me to get my baseline colonoscopy a little ahead of schedule now that I have a family history of kidney cancer, so who knows?

  50. 50
    Ruckus says:

    @Mnemosyne:
    I have very sensitive skin to many soaps and have found that Safeguard works very well. I’m sure you are well past the off the shelf stuff with your diagnosis but I’ve been searching for years to find products that wouldn’t cause itching and sometimes worse. Would have to rinse for a very long time to make sure no soap was left and even then almost all of the OTC bar and liquid soaps would still irritate. Ivory is another one that works for me. I also just started to use a pure aloe gel product that works great. I think you are correct on the preservatives idea.

  51. 51
    Mnemosyne (iPad Mini) says:

    @Ruckus:

    I don’t have nearly as many problems with body soaps, though I do have to stick with things that are moisturizing and not too fragrance-y.

    I went to the allergist and got the skin test for everything under the sun, and it turns out I’m allergic to … nothing. Well, a very mild mold allergy, but other than that, clean as a whistle. I suspect that allergies are a complicating factor for most people trying to figure out skin issues, but I guess as long as I don’t wash my face with bleu cheese, I can discount allergies as a factor for me.

    (My ongoing sinus issues seem to be asthma-related rather than allergy-related.)

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