One of our clients recently got a 30% rate increase for their health insurance renewal, so I asked the insurance company to explain how they came up with that number. With 60 eligible employees, we rarely get much information that’s useful, but in this case, I was told that the prescription drug costs for the first 8 months of the plan year have exceeded the expected annual premium.
Let me say that again. The drug costs ALONE for 8 months have exceeded the expected annual premium.
I pushed for any additional information they were willing to share, particularly the drug or drugs that are driving this cost. They sent me a report that shows the top 10 drugs contributing to the cost. One is a specialty drug, which costs well over $100,000 per year.
A bit of history about this medication might be interesting. Turns out that it has been around for years. It used to be used to treat glaucoma. Over the years, it was sold to different pharmaceutical companies. The most recent owner found out that it could be used to treat a rare form of temporary paralysis, and got approval to use it for this purpose. The approval came with 7 years of exclusive marketing rights. In short order, the drug went from about $50 for 100 pills to over $12,000. There is no generic equivalent, and there is apparently no other drug that does the same thing.
The drug company’s website mentioned a free medication program, so I called them. The woman on the other end of the phone was fairly cheery until she realized the reason for my call.
I explained the impact that this medication was having…not on the people taking it, but on the rest of the employees at our client’s company. You see, this is the second 30% rate increase in 2 years (we were able to mitigate that by about half last year). If this latest rate increase goes through, the employees will be looking at huge jump in their portion of the health plan costs. Last year’s rate increase was hard for them, but this year, it might put the health plan out of reach for many.
I asked if there was any way that we could get the drug cheaper. She said no, not if the insurance plan covers the medication. The obvious next question was, “Ok, so what if we carve specialty drugs, or this one in particular, out of the formulary?” I was told that if the insurance plan doesn’t cover the drug, then the individual employee or family member can apply to get it free. She was not willing to share the factors that would be considered in the decision about allowing the free medication, but she did tell me there is an income test. She would not tell me what the income threshold was.
The bottom line for me is this: as long as there is an insurance company that’s covering the medication and there is no competition, then the drug company can charge whatever they want. I’m all for a free market economy, but there are 2 things that bother me about this:
- If a gas station owner jacks up their price to $10/gallon during a gas shortage, he would be on the front page of every newspaper within 100 miles. There’s no way he could maintain that price and stay in business because the public wouldn’t stand for it. Prescription drug prices are not often public knowledge, so there’s usually no uproar when prices are increased dramatically.
- The notion that it’s the insurance companies paying for the drug doesn’t tell the whole story. The insurance companies facilitate the payment, but in the end, they have to increase premiums to cover their costs. Who pays for that? We do.
In the end, I think we’ve found a pretty creative solution to this problem, but it’s taken some WAY outside the box thinking. Stay tuned…
If you’d like to discuss creative ways to control your health care costs, give us a call at (866) 724-0008 or click the link below.
Note: Some of the information in this post came from articles written in The Chicago Tribune, The Washington Post, BioSpace.com, and StatNews.com.