Access To Cancer Drugs In Medicare Part D: Formulary Placement And Beneficiary Cost Sharing In 2006

Transcription

1 Access To Cancer Drugs In Medicare Part D: Formulary Placement And eneficiary Cost Sharing In 2006 Medicare Part D beneficiaries have access to many more cancer drugs than ever before, with low cost sharing. by Jennifer owman, Amy Rousseau, David Silk, and Catherine Harrison ASTRACT: The Medicare Part D benefit expands the universe of cancer drugs and biologics that Medicare may cover. Individual Part D plans have discretion to determine their formularies and cost sharing for drugs within federal guidelines. This paper analyzes differences in coverage and cost sharing for cancer drugs among these plans. We find that many cancer drugs, including brand-name products, are covered by almost all plans, although prior authorization might limit access to some. In addition, many plans charge a relatively low copayment for most cancer drugs. These findings suggest that Part D could greatly expand beneficiaries access to cancer treatments. [Health Affairs 2, no. (2006): ; /hlthaff ] Cancer is the second leading cause of death in the United States, and its prevalence increases with age. 1 Cancer s burden is particularly high in the Medicare population; more than 700,000 beneficiaries are newly diagnosed with some form of cancer every year. 2 Medicare spent $7.3 billion on medical oncology services, including chemotherapy drugs, in Various drugs and biologics are used to treat cancer, including chemotherapy regimens that attempt to destroy cancer cells, hormone-derived agents, and supportive-care regimens that treat associated side effects. Although many generic cancer drugs are available, some newer therapies are available only as single-source, brandname drugs. eneric versions of biological products used in cancer treatment do not exist in the market. Chemotherapy regimens are individualized, often combining multiple therapies that physicians choose based on patients responses. Medicare coverage history. From 196 through 200, Medicare Part covered outpatient drugs and biological products when administered as part of a physi- The authors are all affiliated with Avalere Health LLC in Washington, D.C. Jennifer owman (jbowman@ avalerehealth.net) is a director; Amy Rousseau is a manager; and David Silk and Catherine Harrison are senior associates. 120 September/October 2006 DOI /hlthaff Project HOPE The People-to-People Health Foundation, Inc.

2 Cancer Drugs cian s service (typically infusions or injections) and certain oral anticancer drugs and oral anti-emetic drugs. In 2003 about 7 percent of the Medicare-allowed charges for physician-administered drugs were billed by oncologists. 6 Medicare Part D, the outpatient drug benefit that began 1 January 2006, expands the universe of Medicare-covered drugs to include cancer medications not administered by physicians and in additional formulations, including oral and self-injectible. Part D coverage is determined by individual private plans, of which there are nearly 3,000 for the 2006 benefit year. 7 Each prescription drug plan (PDP) offering drug-only coverage and each Medicare Advantage prescription drug (MA-PD) plan offering medical and drug coverage may use a formulary and utilization management (UM) tools such as prior authorization, step therapy, and quantity limits. 8 As a result, research has shown that plans differ greatly in which drugstheycoverandhowtheyapplyutilizationlimits.onerecentstudyexamined formulary comprehensiveness, cost sharing, tier structure, and use of UM tools for antidepressants, beta-blockers, tumor necrosis factor inhibitors, hormonalagentsusedintreatingosteoporosis,andprotonpumpinhibitors. 9 Formulary protections. The Centers for Medicare and Medicaid Services (CMS) reviews Part D plans formularies to ensure that they do not discriminate against beneficiaries with certain health conditions. 10 One of the formulary protections instituted by the CMS in 2006 was a requirement that plans cover all or substantially all drugs in certain therapeutic classes, including the anti-neoplastics class, which is composed of anticancer drugs. Specifically, the CMS checked that each plan formulary included at least one version (brand or generic) of all Food and Drug Administration (FDA) approved active ingredients in the class. The CMS s stated rationale for the policy was that access to a choice of therapies is more therapeutically important in those classes than in others. 11 This policy may reduce the variation in Part D formulary coverage of cancer drugs, but as of this writing, no published study has examined this question. Variationincostsharing.PartDplansalsomayvaryconsiderablyintheir beneficiary cost-sharing requirements. The standard 2006 Part D benefit includes a $20 deductible; beneficiary coinsurance of 2 percent until total drug spending equals $2,20; 100 percent cost sharing until the beneficiary has spent $3,600 out of pocket (the so-called doughnut hole); and percent beneficiary coinsurance for all additional spending (catastrophic protection). In 2006, many plans are offering a modified version of the standard benefit with changes such as a reduced deductible or flat copayments for drugs instead of coinsurance. Plans also commonly construct several tiers within their formularies, each with a corresponding copayment or coinsurance requirement. enerally, generic drugs appear on lower tiers with lower cost sharing than that required for brand-name drugs. Subsidies. In 2006, about one-third of Medicare beneficiaries qualify for a low-income subsidy that greatly reduces their cost-sharing burden, regardless of which plan they choose. Under the subsidy, Medicare pays about 96 percent of low- HEALTH AFFAIRS ~ Volume 2, Number 121

3 income beneficiaries annual drug costs. 12 All Part D plans must charge these beneficiaries the same fixed copayment amounts, determined in law. Among higherincome beneficiaries, however, one plan s cost sharing for a given drug might not match that of another, and a beneficiary might pay very different amounts for the same drug as he or she accrues additional drug spending during the year. This paper analyzes Part D plans formularies to assess variation in their coverage of and beneficiary cost-sharing requirements for oral and self-injected cancer drugs. We explore the extent and significance of that variation and discuss the implications for beneficiaries access to cancer therapies. Study Methods We defined a universe of Part D covered cancer drugs by reviewing listings in a drug compendium in the anti-neoplastics and hormonal agents classes. 13 The universe includes products that are approved by the FDA to treat cancer and whose route of administration is oral, subcutaneous injection, topical, elixir, or suspension. We excluded infused chemotherapy drugs, drugs used primarily in cancer supportive care, and oral cancer drugs covered under Medicare Part. 1 We analyzed Part D plans coverage of our universe of drugs using the 1 February2006extractoftheCMSPrescriptionDrugPlanFormularyandPharmacy Network Files. Data on plan characteristics and cost-sharing amounts were merged with variables from the formulary file to include contract identifier, plan identifier, formulary identifier, National Drug Code (NDC) for each drug, formulary tier, and copayment or coinsurance amounts for a thirty-day supply of drugs purchased from preferred pharmacies. We combined multiple NDCs at the drugname level and coded them as brand-name or generic based on the FDA Orange ook. 1 When NDCs within a drug name appeared on multiple cost-sharing tiers withinoneplanformulary,weassignedthedrugtothelowertier.whensome NDCs within a drug name had applications of UM tools and others did not, we counted the drug as being subject to the tool. We stratified the universe of cancer drugs covered by each Part D plan by contract type (local MA-PD, regional MA-PD, and PDP) and calculated the mean tier position and median coinsurance or copayment amounts in the initial coverage phase. We also identified the cancer drugs that appear most and least frequently on plans formularies, to illustrate both the variation in coverage across plans and the corresponding coinsurance or copayment amounts for these drugs. Study Results Part D coverage of cancer drugs. Analysis of Part D plan formularies shows that many cancer drugs are covered by almost all plans (Exhibit 1). oth PDPs and local MA-PD plans cover 7 percent of the cancer drugs in the selected universe, while regional MA-PDs cover significantly more (8 percent, p <.01). eneric cancer drugs are covered more frequently by Part D plans than brand-name cancer drugs. 122 September/October 2006

4 Cancer Drugs EXHIIT 1 Cancer Drugs And Part D Plans Formularies: Formulary Presence, Use Of Prior Authorization, And Use Of Quantity Limits, 2006 Type of plan PDPs (n = 1,6) Regional MA-PD plans (n = 1) Local MA-PD plans (n = 1,96) Percent of cancer drugs on formulary All drugs rand-name eneric 7% % 100 7% Percent of cancer drugs covered with prior authorization All drugs rand-name eneric Percent of cancer drugs covered with quantity limit All drugs rand-name eneric SOURCE: Authors analysis of Centers for Medicare and Medicaid Services (CMS) Prescription Drug Plan Formulary and Pharmacy Network Files, 1 February 2006 data transfer. NOTES: PDP is prescription drug plan (stand-alone). MA-PD is Medicare Advantage prescription drug plan. Similar results were observed for local MA-PD plans, while regional MA-PD plans more frequently cover both generic and brand-name cancer drugs. Use of UM tools. Prior authorization is applied more frequently to brand-name drugs than to generic drugs (Exhibit 1, p <.01). oth PDPs and local MA-PD plans use prior authorization more frequently than regional MA-PD plans (p <.01). And across all types of Part D plans, less than percent of the cancer drugs we examined are subject to quantity limits. No plans apply step-therapy restrictions to cancer drugs (data not shown). Most frequently covered drugs. Fifteen of the twenty cancer drugs most frequently listed on Part D formularies are brand-name drugs (Exhibit 2). Each of the twenty drugsappearsonpartdformulariesin100percentofpdpsandmorethan99percent of MA-PD plans. Several newly approved drugs, such as leevec (imatinib) and Tarceva (erlotinib), are covered nearly universally by Part D plans. Least frequently covered cancer drugs. We also examined the ten cancer drugs that appear least frequently on Part D plan formularies (Exhibit 3). All ten are brandname drugs. Three of the ten are different brand-name versions of a single active ingredient, methyltestosterone. Another four active ingredients flutamide, dexamethasone, tamoxifen, and megestrol acetate appear as brand-name drugs on less than 0 percent of Part D plan formularies, but their generic counterparts are found on 100 percent of PDP formularies and more than 99 percent of MA-PD HEALTH AFFAIRS ~ Volume 2, Number 123

5 EXHIIT 2 Formulary Presence Of Twenty Cancer Drugs Most Frequently Found On Medicare Part D Plan Formularies, In Order Of Most Frequent To Least Frequent, 2006 Percent on formulary Ingredient name rand name rand/generic PDPs (n = 1,6 plans) MA-PDs a (n = 1,7 plans Lomustine Prednisone Thioguanine exarotene Erlotinib Ceenu Prednisone Thioguanine Targretin Tarceva Exemestane Altretamine Letrozole Mitotane Anastrozole Aromasin Hexalen Femara Lysodren Arimidex 99.1 Testolactone icalutamide Dexamethasone Estramustine Flutamide Teslac Casodex Dexamethasone Emcyt Flutamide Procarbazine Chlorambucil Tamoxifen citrate Imatinib Megestrol acetate Matulane Leukeran Tamoxifen citrate leevec Megestrol acetate SOURCE: Authors analysis of Centers for Medicare and Medicaid Services (CMS) Prescription Drug Plan Formulary and Pharmacy Network Files, 1 February 2006 data transfer. NOTE: PDP is prescription drug plan (stand-alone). a Combined local and regional Medicare Advantage prescription drug (MA-PD) plans. plan formularies. Cost sharing for cancer drugs on Part D formularies. rand-name cancer drugs are covered on higher cost-sharing tiers than generic cancer drugs are (mean tier, for brand drugs versus mean tier, for generics, Exhibit ). oth PDPs and MA-PD plans use fixed-dollar copayments more often than percentage coinsurance for cancer drugs, with a few exceptions. PDPs use coinsurance more often for leevec (imatinib) and Tarceva (erlotinib); MA-PD plans apply copayments and coinsurance for those drugs at roughly equal rates. PDPs with copayment structures have median copayments of $ $0 for a thirty-day supply, depending on the drug. MA-PD plans with copayment structures have median copayments of $ $3 for a thirty-day supply. oth PDPs and MA-PD plans using coinsurance structures have median coinsurance rates of 2 percent for each drug listed in Exhibit (data not shown). 12 September/October 2006

6 Cancer Drugs EXHIIT 3 Formulary Presence Of Ten Cancer Drugs Least Frequently Found On Medicare Part D Plan Formularies, In Order Of Least Frequent To Most Frequent, 2006 Percent on formulary Ingredient name rand name rand/generic PDPs (n = 1,6 plans) MA-PDs a (n = 1,7 plans) Methyltestosterone Flutamide Hydroxyurea Dexamethasone Toremifene Virilon Eulexin Hydrea Decadron Fareston Mercaptopurine Tamoxifen Megestrol acetate Methyltestosterone Methyltestosterone Purinethol Nolvadex Megace Android Testred SOURCE: Authors analysis of Centers for Medicare and Medicaid Services (CMS) Prescription Drug Plan Formulary and Pharmacy Network Files, 1 February 2006 data transfer. NOTE: PDP is prescription drug plan (stand-alone). a Combined local and regional Medicare Advantage prescription drug (MA-PD) plans. Policy Implications Expanded access to cancer drugs. Medicare was designed to insure some of the most vulnerable Americans: the elderly and disabled. That protection might be most valuable to beneficiaries who face life-threatening illnesses such as cancer. In practice, the Part D drug benefit greatly expands the range of cancer treatments covered by Medicare. Twenty of the cancer drugs we analyzed, including several newly approved drugs, are covered by virtually all Part D plans. Among the ten drugs least often covered by Part D plans, many are brand-name versions of generic ingredients that plans cover nearly universally. These findings are consistent with the CMS s policy of requiring coverage of all or substantially all drugs in the anti-neoplastics class, described earlier. There are also several hormonal agents represented in Exhibit (for example, exemestane, letrozole, and bicalutimide) that are classified separately from antineoplastics. This indicates that Part D plans cover a wide range of cancer therapies, not just anti-neoplastics. Pros and cons of prior authorization. Formularypresenceisnottheonlyindicator of beneficiaries access, however; the application of UM controls must also be considered. We found that Part D plans apply prior authorization significantly more often to brand-name cancer drugs than to generics. Prior authorization has been widely used by state Medicaid programs and commercial health plans and has proved to be an effective cost containment tool. While the current literature is inconclusive about whether prior authorization affects patient outcomes, several HEALTH AFFAIRS ~ Volume 2, Number 12

7 EXHIIT Tiering And Cost Sharing For Twenty Cancer Drugs Most Frequently Found On Medicare Part D Plan Formularies, y Ingredient Name, In Order Of Most Frequency To Least Frequency, 2006 PDPs MA-PDs a Ingredient name rand/ generic Mean tier Percent of plans using copay for the drug Median copay among plans with copay ($) Mean tier Percent of plans using copay for the drug Median copay among plans with copay ($) Lomustine Prednisone Thioguanine exarotene Erlotinib Exemestane Altretamine Letrozole Mitotane Anastrozole Testolactone icalutamide Dexamethasone Estramustine Flutamide Procarbazine Chlorambucil Tamoxifen citrate Imatinib Megestrol acetate SOURCE: Authors analysis of Centers for Medicare and Medicaid Services (CMS) Prescription Drug Plan Formulary and Pharmacy Network Files, 1 February 2006 data transfer. NOTE: rand names are listed in Exhibit 2. PDP is prescription drug plan (stand-alone). a Combined local and regional Medicare Advantage prescription drug (MA-PD) plans. studies have suggested that it could cause delays in beneficiaries obtaining needed prescriptions. 16 This could be particularly detrimental for patients with diseases such as cancer. Copayments versus coinsurance. Our findings on beneficiaries cost sharing suggest that Part D plans use copayments more often than coinsurance for cancer drugs and that these copayments are often relatively low. Most plans charge copayments of $ $0 for a thirty-day supply. For the five most costly drugs listed in Exhibit, the median Part D copayments represent less than 10 percent of the total negotiated price of the drug. Our findings on cost sharing for cancer drugs are similar to other studies findings regarding drug cost-sharing in commercial health plans. The Henry J. Kaiser Family Foundation s 200 annual employer health benefits survey found that most workers in plans with tiered benefits are assessed copayments rather than coinsurance and that drug copayments average $10 for generics, $22 for preferred 126 September/October 2006

8 Cancer Drugs brand-name drugs, $3 for nonpreferred brands, and $7 for fourth-tier drugs. 17 When plans apply coinsurance of 2 percent instead of copayments, the resulting out-of-pocket cost to the beneficiary is usually higher. We compared the outof-pocket spending that beneficiaries would incur for a given drug with 2 percent coinsurance to the median copayment for that drug shown in Exhibit. Of the top twenty drugs most frequently covered by Part D plans, thirteen would be less expensive for beneficiaries paying the median copayment; five drugs (three brand-name and two generic) would be less expensive for beneficiaries charged 2 percent coinsurance (data not shown). 18 Notably, the copayment and coinsurance figures discussed above are what beneficiaries pay in the Part D initial coverage period, before they incur $2,20 in total drug spending and reach the doughnut hole. For beneficiaries with cancer, particularly those taking the more costly drugs, this period might last only a few months beforethecoveragegapbegins.theimpactofthedoughnutholeonbeneficiaries use of medications has not been studied but is an important area for future research. Study limitations. There are several limitations to our analysis. Data on enrollment in each of the nearly 3,000 Part D plans were not available at this writing; they ultimately will provide insight into population-level access to cancer drugs in Part D.Inaddition,sincepremiumsforeachplanwerenotavailableinthedata,wedid not analyze whether plans with higher premiums offer better coverage of cancer therapies. Our study examines only formulary coverage and cost sharing for cancer drugs; it does not examine the use of those drugs, because those data are not available. Part d represents a new benefit model in Medicare. Unlike traditional Medicare, Part D allows the use of cost containment and utilization management controls such as formularies and varying copayment structures. Assuring choice and affordability of a wide array of drug therapies was an important goal for policymakers in designing the program and will be an enduring concern for patients with chronic conditions such as cancer. Our analysis suggests that in 2006, a combination of government regulation and market forces has meant that beneficiaries with cancer have access to nearly all of the cancer drugs we identified, with relatively low cost sharing. Examining the impact of future changes to the CMS s formulary policies and shifting market dynamics on beneficiaries access to cancer therapies will be important areas for additional research. This research was funded by Avalere Health LLC. The authors thank Dan Mendelson and ob Atlas for their support and guidance, and Valerie arton and Lauren arnes for helpful comments on the manuscript. HEALTH AFFAIRS ~ Volume 2, Number 127

9 NOTES 1. A.M. Miniño, M. Heron, and.l. Smith, Table 2: Deaths and Death Rates for 200 and Age-Adjusted Death Rates and Percent Changes in Age-Adjusted Rates from 2003 to 200 for the Fifteen Leading Causes of Death: United States, Final 2003 and Preliminary 200, in Deaths: Preliminary Data for 200, 200, (accessed 13 June 2006); and National Cancer Institute, Estimated Number of Persons Alive in the U.S. Diagnosed with Cancer by Current Age (pie chart), in Estimated U.S. Cancer Prevalence, prevalence/prevalence.html#age (accessed 13 June 2006). 2. Authors calculations, based on data from CDC, All Cancer Sites Combined, Invasive Cancer Incidence Counts by Primary Site and Race and Ethnicity, United States, Male and Female, Incidence Counts, Table D.7.1MF (table available by clicking o in the navigational box), in United States Cancer Statistics: Incidence and Mortality Web-based Report, 200, Year=2002&Display=n (accessed 13 June 2006). 3. Medicare Payment Advisory Commission, ReporttotheCongress:EffectsofMedicarePaymentChangesonOncology Services, January 2006, mandated_report.pdf (accessed 1 May 2006).. Whereas traditional pharmaceuticals are chemically synthesized, biologics are derived from living sources such as humans, animals, and microorganisms. There is a defined FDA approval process for generic versions of pharmaceuticals, but no such process currently exists for biologics.. 2 U.S. Code, sec. 139x (s)(2)(q) (200). 6. Centers for Medicare and Medicare Services, 2 CFR Part 1; Medicare Program; Competitive Acquisition of Outpatient Drugs and iologicals under Part ; Interim Rule, Federal Register 70, no. 128 (200): J. Hoadley et al., The Medicare Drug enefit:an In-Depth Examination of Formularies and Other Features of Medicare Drug Plans, April 2006, (accessed 12 June 2006) U.S. Code, sec. 139w-10(b)(3) (200); and CMS, 2 CFR Parts 00, 03, 11, 17, and 23 Medicare Program; Medicare Prescription Drug enefit; Final Rule, Federal Register 70, no. 18 (200): Hoadley et al., TheMedicareDrugenefit CFR, sec (b)(2) (200). 11. CMS, Medicare Modernization Act Final uidelines Formularies: uidelines for Reviewing Prescription Drug Plan Formularies and Procedures, Downloads/Formularyuidance.pdf (accessed 12 June 2006); and CMS, Why Is CMS Requiring All or Substantially All of the Drugs in the Antidepressant, Antipsychotic, Anticonvulsant, Anticancer, Immunosuppressant, and HIV/AIDS Categories? Downloads/FormularyuidanceAllorSubAll.pdf (accessed 12 June 2006). 12. J.lum,J.owman,andC.White,TheImpactofEnrollmentintheMedicarePrescriptionDrugenefitonPremiums, October 200, (accessed 13 June 2006). 13. American Society of Health-System Pharmacists, AHFS Drug Information 200 (ethesda, Md.: ASHSP, 200). 1. See Note. Medicare Part carriers commonly interpret the statute as requiring coverage of the following drugs: busulfan, cyclophosphamide, capecitabine, etoposide, melphalan, temozolomide, and methotrexate. 1. Food and Drug Administration, ElectronicOrangeook: ApprovedDrugProductswith TherapeuticEquivalenceEvaluations, March 2006, (accessed 2 April 2006). Searched by active ingredient to map active ingredients to proprietary names. 16. J. Hoadley, Cost Containment Strategies for Prescription Drugs: Assessing the Evidence in the Literature, 1 March 200, (accessed 13 June 2006) Claxton et al., Employer Health enefits: 200 Annual Survey, September 200, 731/index.cfm (accessed 13 June 2006). 18. For two generic drugs, tamoxifen and dexamethasone, there was no discernible trend beneficiaries may pay more or less in a plan with coinsurance, depending upon their plan s specific cost-sharing requirements and the dosage of the drug. 128 September/October 2006