NOTE: this post is the first of three assessing $ESRX’s new INSIDERX programme. To read more, click here.
According to the Kaiser Family Foundation, 28.9 million people in the USA under the age of 65 lack health insurance coverage. The underinsured, who represent individuals who have insurance, but suffer from an inability to pay premiums or deductibles for sufficiently comprehensive healthcare, hover around 31 million according to the Commonwealth Fund’s latest analysis in 2014, – a value that may have actually increased since the ACA launched due to rising premiums associated with the programme. Those most likely to be underinsured typically come from working class households, with incomes hovering around the federal poverty level, and are therefore unable to afford the cost-sharing responsibilities associated with either baseline (premiums) or use-based coverage (deductibles and provider or prescription fulfilment copays). These individuals tend to have high-deductible health plans, which, while associated with lower monthly premiums, rarely cover health care services at a comprehensive enough level to address serious illness or disability.
It is worth noting that this year’s Congressional Budget Office’s assessment of the Republican party’s current proposal to repeal and replace the ACA will likely lead to a significant increase from today’s record low of the uninsured at 28m to 52m in 2026. Given the Republicans’ control over the White House and both houses of Congress, some version of this proposal stands a fair probability of passing and realising a substantial shift of the access landscape in the USA.
FIGURE 1. Ability for the Underinsured to Afford a Prescription Relative to the Uninsured and Insured
The underinsured are not an unimportant part of the healthcare landscape. Indeed, they are often overlooked because they technically have health insurance. However, as FIGURE 1 demonstrates, when it comes to economical inability to afford the fulfilment of a prescription, they have historically had more in common with the uninsured than the insured.
Due to lack of adequate coverage, the uninsured and underinsured both incur higher health care costs which result in worse health outcomes relative to insured Americans. The reasons for this are several. First, these individuals often do not seek preventative care due to the cost-sharing requirements associated with seeing providers or fulfilling prescriptions for early signs of chronic disease (e.g. diabetes, heart disease, etc.). These conditions go untreated, resulting in downstream complications which require medical attention and carry far more significant cost for the insurers and patients. Further, studies indicate that uninsured and underinsured Americans pay 60% more on average for prescription drugs than what the federal government pays due to the negotiating power and best price policies in place for government purchasing. Hence, many have difficulty fulfilling prescriptions (or opt out of fulfilling them altogether), which ultimately contributes to worse health outcomes.
A recent article in The New York Times addresses, in detail, some of the specific challenges faced by the uninsured and underinsured when paying for prescription drugs. It also highlights an approach to lowering drug costs for the uninsured population that has been recently suggested by $ESRX (Express Scripts Holding Company), one of the country’s largest pharmacy benefit managers (PBMs).
In the USA, PBMs act as middlemen between pharmaceutical manufacturers and health insurers, helping to negotiate contracts for the latter at a fee that is typically equivalent to a percentage of the savings they create. For example, $ESRX previously had a relationship with $AET (Aetna, Inc.) to secure lower prices for many pharmaceutical benefit therapies by leveraging its multitude of health plan relationships to summon substantially greater negotiating leverage to achieve a greater negotiated discount with the manufacturer. While the manufacturer settles for a lower net price, they are compensated through increased volume guarantees or preferential access for formularies used by health plans. Additionally, some of the health plan’s savings could theoretically then be transferred to enrollees in the form of lower premiums to gain access to those formularies. Although these savings are rarely fully transferred to direct savings for the patient, they do provide a foundation for lower premiums and total annual costs to the individual enrollee relative to costs likely undertaken by the patient with no coverage.
$ESRX has decided to further leverage its purchasing power by creating INSIDERX, a subsidiary of the company which will focus on providing access to certain chronic disease therapies at the negotiated price they are able to achieve (similar to those net prices associated with pharmaceutical products accessible through lower copays by health plan enrollees) for people without insurance, or for the underinsured. Users of this programme would still pay out of pocket, but their payment would be significantly lower than ‘cash-pay’ or what is technically known as the U&C (usual and customary) price. There is no additional cost to the patients using the service, and $ESRX claims that they would make a small transaction fee from pharmacies involved with the service.
FIGURE 2. ESRX’s INSIDERX Formulary by Therapeutic Area Address Only Some of the Highest PMPY Items
As FIGURE 2 indicates, the INSIDERX formulary is focussed, for the most part, on chronic disease – most of which include therapeutic areas that only five years ago made up the top five by PMPY. These areas include cardiovascular disease, diabetes, and asthma. Curiously, among the PBM’s top 5 therapeutic areas by PMPY, diabetes is the only one which has therapeutic options included within the INSIDERX formulary. The other four that are not on the INSIDERX formulary are inflammatory conditions, oncology, multiple sclerosis, and pain / inflammation.
In fairness, many of the therapies in these specialty areas unaddressed by the INSIDERX formulary would still be unaffordable if offered for out-of-pocket payment. However, a deeper analysis is being undertaken by the authors of this post to understand the drivers for INSIDERX formulary selection, and will soon be published as a follow-up post.
Other critics of the INSIDERX approach by $ESRX argue that the programme does not do much in the way of sustainably addressing pharmaceutical pricing in the USA, noting that the only long-term solution is for the manufacturers to lower the drug prices themselves. It is undeniable that in addition to the ‘small transaction fee’, $ESRX’s motivation is centered on expanding its share of covered lives to increase negotiating power with pharmaceutical manufacturers – and not necessarily on ‘sustainably addressing pharmaceutical pricing’.
Pharmaceutical manufacturers will need to analyse the degree to which they increase volume through INSIDERX and what are likely to be other copy-cat versions of the business relative to the loss in per-patient profitability among a far smaller group of uninsured and underinsured patients who actually pay out of pocket at list price. As will be demonstrated through the next analysis performed by the authors, being involved in this INSIDERX programme is unarguably a benefit for the manufacturers of these products. The increase in volume is likely worth it for manufacturers, and almost certainly gives $ESRX a competitive advantage by increasing its share of ‘covered lives’ for these chronic diseases and while casting a positive light on the PBM in a corporate social responsibility move. On the surface, at least some patients who could not before afford access to therapy for chronic disease, now can fulfil their prescriptions for the specific therapy in question. The net effect on the overall healthcare system is likely to be positive as these patients avoid higher-cost interventions in the future due to uncontrolled disease.
Pushing aside cynical views of corporate motivations, the simple fact is that the offering ostensibly has a net positive effect on access to medicine in the USA among a vulnerable segment of the population – the poor and under- or uninsured. INSIDERX does not directly address the pricing conundrum in the USA, but it does provide an interim solution to directly address access issues.