The shrinking drug formulary
Insurance companies have several ways to cut their costs.
We are all familiar with higher premiums, higher co-pays, increased deductibles, and narrower provider networks. These will all be apparent when we look at our policies for 2017.
A lesser-known strategy is to remove high-cost drugs from the drug formulary—the list of medications that insurance will cover.
Insurance companies typically work with a pharmacy benefits manager, or PBM, which acts as the middleman to negotiate drug prices with drugmakers.
Exploding drug costs
The Affordable Care Act made it mandatory that health insurance plans offer prescription drug coverage of some kind. Before 2010, most individual policies didn’t offer drug coverage because it made the premiums too high.
Well, now premiums are high for several reasons, not least of which is the skyrocketing cost of prescription drugs. I’ve posted many times about the rising costs of not only new, but old drugs.
- Why are Epi-Pens so expensive?
- Another drug skyrockets in price
- Praluent—Treating cholesterol just got more expensive
I cynically believe this is because of that mandatory drug coverage. Drug companies were big backers of the ACA and are thrilled to be able to collect more money from the insurance companies.
But the insurance companies just pass along the costs to the consumer in the form of higher premiums, higher drug cost-sharing, and smaller drug formularies.
Know your drug sharing costs and drug formulary
I just received a notice from my insurance company that explains the drug cost-sharing changes for 2017.
Typically, drug co-pays are organized into “tiers,” with low-cost generics at the bottom (Tier 1) and higher-cost brands at the top (Tier 3). There is also a special tier for the highest cost or “specialty” drugs.
With my insurance, in 2106 a specialty drug required a 20% co-pay. In 2017, the cost sharing for a specialty drug will be 50%.
“Non-preferred generics” will be Tier 3, with a higher co-pay.
Many generics as well as brand name drugs will just be dropped from formularies altogether.
In August, the two largest PBMs, Express Scripts and CVS Health, released lists of the drugs they will exclude, or not cover, in 2017. For example, Express Scripts excludes the Hepatitis C drug Solvadi. CVS Health won’t cover the high cholesterol drug Crestor, or Nexium, the famous “Purple Pill” for acid reflux disease.
(The CVS Health list only lists changes from 2016; here is a link to the 2016 exclusion list.)
As CVS Health says in preface to its list:
CVS Health is taking a stand against egregious drug price increases that unnecessarily add costs for clients and their members. On a quarterly basis, products with egregious cost inflation that have readily-available, clinically-appropriate and more cost-effective alternatives may be evaluated and potentially removed from the formulary.
Don’t be caught by surprise. If you take one or more high-cost drugs, especially for chronic conditions such as diabetes, MS, rheumatoid arthritis or asthma, check with your insurance company to find out which drugs will or won’t be covered in 2017. Or what drugs will be substituted with cheaper brands/generics.
I know many people who would rather change insurance companies than brand-name medications.
Also, remember to choose an insurance plan based not only on the upfront cost of the premium, but also the cost of drug co-pays or cost sharing, which can significantly add to your out-of-pocket costs.