Tier 4 Drugs: An Industry Response

April 14, 2008

Ezra Klein spoke with Robert Zirkelbach of America’s Health Insurance Plans regarding Tier 4 medications. Mr. Zirkelbach’s response hits a few points:

National Conversation

That we need a “national conversation” about “whether drugs that cost ten or a hundred times as much as current treatment options are producing better outcomes.” (Whatever your opinion of Hillary Clinton, I’m not particularly grateful for the insertion of the phrase “national conversation” into the political lexicon. A little less talk, a little more action, as Elvis would say.)

In this case, I would say we don’t need a “conversation” about better outcomes. We need data. It’s a research question, not a political one. If these therapies are better than the alternative, then we need a conversation – but it has to be about our level of willingness to provide insurance that pays for the best available treatment. That’s a debate worth having, and it’s also where we need some of that transparency Jonathan Cohn calls for.

Generic Alternatives

Mr. Zirkelbach says we should encourage “generic versions” of Tier 4 drugs. But, as Ezra points out, they’re not likely to be available.

Comparing New and Current Treatment Options

Lastly, Zirkelbach suggests “we need a national system in this country that compares new drugs with the treatment options currently available in the marketplace.” That’s a good point. Even under single-payer coverage, we would still need to do cost/benefit analyses on very expensive therapies – and not just for pharmaceuticals. The more information that’s made publicly available, and the more education and debate that ensues, the better.

I still say there is a point at which insurance” becomes a misnomer. What that point may be is somewhat subjective, but in theory it’s this: When the coverage being provided no longer protects individuals from severe financial harm as a result of loss.

And I’d add this thought to the “national conversation”: When plan designs are no longer made to change behavior, but simply to transfer high-cost items back to the insured party, that’s risk transfer and not benefit design. As a result, the insurance concept is being subtly modified – and arguably undermined.

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4 Responses to “Tier 4 Drugs: An Industry Response”

  1. Dan Says:

    The Price of Innovation

    Recently, you may have heard or read in mass media sources about the issue of pharmacy benefit managers who have clients that are prescribed biologic medications and then are required to pay a great deal of money for such meds due to the placement of these meds on their PBMs. This is due to their status on the PBM, which is known as Tier 4 status, which requires patients to pay higher co-pays for these meds. Tier 4, which also includes lifestyle meds, is determined by the PBM based on variables such as rebates and discounts from the manufacturer, which are intended to be passed on to the PBM clients. However, in some cases, the PBMs fail to do this, and have been penalized for their self-interest above patient interest as required when this activity is discovered. Regardless, because of the tier 4 status of biologics, very sick patients have to pay a great deal of money for these meds. PBMs, by the way, are pharmacy benefit managers, which were created for the pharmaceutical needs of employees normally and is a benefit along with their insurance through their employer.
    First of all, biologic meds are specialty meds created differently than other typical meds, and therefore are have a unique molecular complexity that are designed for serious illnesses such as anemia or multiple sclerosis. Because of their uniqueness and exclusivity, they are very expensive- costing thousands a month for the payers. In addition, generics are not authorized to be produced as of yet for these types of meds. Their cost of these biological meds is contributed more for the complex process of their creation, as the material costs are typically less expensive than traditional molecular medications.
    Biologics began to be used primarily in the 1980s and now presently make over 60 billion a year, with about 20 percent growth in this market annually. With anemia patients, oncology and dialysis clinics are targets for such meds in this category, as anemia is associated with their treatment and conditions for such diseases.
    Yet, some claim that biologic meds benefit patients to only a certain degree, as they extend life of such patients, such as those on chemotherapy or dialysis, by only a few months, so the high cost of the meds is questionable and has been analyzed by others, yet no substitutes exist for biologics, so that’s why the producers of these drugs can charge so much for these products. Efficacy of these biologic meds have also been questioned as well in other treatment aspects aside from life extension.
    Then there is the issue of fraud with kickbacks and overuse of some of the biologic meds used to treat anemia in dialysis clinics in particular. On a few occasions, doctors and clinics have been penalized for overusing the meds and for kickbacks in the form of discounts of the manufacturers. Ironically, the dialysis process was never patented, yet the many centers that exist have proven to be very profitable, more for some than others. An example is the situations where dialysis doctors, called nephrologists, have been accused of over-dosing patients with biologic meds to increase their income through their discount arrangement through the manufacturer of such meds, such as those biologics for anemia, and this arrangement is being investigated by regulators and encouraged by the representatives of such meds.
    Presently, there are many that approach the FDA to aggressively insist that generic biologics be allowed into the market for the benefit of these critically ill patients, and this would be of great benefit for such patients, and this can be done, as far as the generic creation of these meds. And this situation illustrates one of many flaws in the U.S. Health Care System- when the sickest have to complicate their illnesses by possible financial stress, such as the case with biologic meds. Relief is needed, and should be demanded by the public. After all, why be so sick, and then be financially burdened?
    “A little learning is a dangerous thing.” —- Alexander Pope

    Dan Abshear


  2. [...] Critics of tier 4 pricing say society in general needs to encourage the production of generic drugs to compete with the brand-name “Tier 4” medications. In addition, we need to create a national system that will compare new specialty drugs with treatment options that are already running and cost less. If we don’t do something, “Tier 5” may soon become a reality. [...]


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