California Exchange Takes the Lead in Trend Towards Cost-Sharing Caps

Covered California, the state’s insurance exchange, has taken the healthcare spotlight in a recent decision to cap specialty drug copays at $250 per month for patients enrolled in the program, and copay limits ranging from $150 to $500 for other drugs . While this move is not unprecedented – New York and Maryland have already developed copay cap strategies – California’s is the first exchange in the country to adopt such a cost-sharing model. The decision in California has, unsurprisingly, received significant pushback from insurers due to concerns about the addition of notoriously high specialty drug costs onto the plates of insurance plans. A premium increase of less than one percent across plans in the first year will help offset some costs for plans, but as more high-cost molecules hit the market and consumers increase utilisation, this premium increase seems almost trivial. With this new model of risk sharing, the balance of profitability across stakeholders shifts in favour of pharmaceutical companies, who clearly benefit from increased utilisation of high-cost drugs. However it becomes important to consider the implications of such a model on both the policy-holders and the policies themselves – how sustainable is this strategy?

As a result of this new copayment policy, more than 1.3 million Californians who are currently enrolled in Covered California will benefit from having improved access to high cost therapies. From a patient perspective, the move to cap monthly copayments for specialty drugs would reduce the likelihood of foregoing necessary treatments for therapeutic areas including hepatitis C and oncology, where the average monthly cost of treatment can be as high as $5,000. Furthermore, the clinical data of next generation specialty drugs suggest significantly improved health outcomes and patient quality of life relative to today’s treatment options in disease areas where there is currently no cure, and where even minor improvements are especially important. For example, newer hepatitis C medications have cure rates close to 95% with limited side effects when compared to older generations of treatments.

In the wake of California’s monumental step toward the Affordable Care Act’s mission of improving access to medicines for all patients, implications of the program should be considered. For manufacturers, the policy will likely translate to increased sales resulting from increased patient utilisation. Additionally, manufacturers can expect increases in patient compliance and adherence, a by-product of removing financial burden as a barrier for patient access. In the long run, the availability of these treatments through improved patient access balanced with improved health outcomes means that investment in developing these specialty drugs will be “worth it” for the patients. With increased access for patients, the question remains as to whether the policy to cap monthly patient copayments will be sustainable for payers. It is important to consider how, as a result of this policy’s implementation and resulting provision of more coverage for high cost drugs, the payer budget would likely be strained further. Therefore, would implementation of this policy potentially result in commercial insurers withdrawing from California’s health insurance exchange? Would the plans that remain part of the Covered California network seek to balance the monthly copayment cap from the exchange benefit side by increasing the cost-share on other non-exchange benefit designs, and is there a risk for payers to become selective of which specialty drugs are included in their formulary? The likely impact is unknown for now, but payers, providers, and patient advocacy organisations will need to continue engaging in discussions in order to ensure that the goals of expanding patient access as well as addressing medication compliance and adherence come to fruition.