In his article “How to Manage Pharmacy Costs in an ACO”, Arcadia chief medical officer Rich Parker, MD contends that healthcare organizations need to control rising drug costs as a strategic priority. Health plans pay for thousands of drugs each year – including some that have been in the news lately like EpiPen, an epinephrine injection used to treat allergic emergencies (anaphylaxis). We analyzed Epipen prescription data to further understand the impact of rising costs to health plans as well as to consumers.
This article explores cost data; a subsequent post will look at the factors driving cost variability for health plans and health systems.
Increased scrutiny on an important drug
Epipen is an injection prescribed to people with allergies. There are two dosage types, 0.3 mg and 0.15mg1. Patients are typically advised to carry two pens, in case one dose is insufficient.
Mylan, the manufacturer of the EpiPen, has recently come under scrutiny for increased pricing. A recent New York Times article on Epipen drug costs noted that the wholesale price of Epipen increased from $109 in 2009 to $461 in May 2015. Much of the extensive coverage of this cost increase has focused on the impact to the consumer, but we were interested in the impact on health plans.
We analyzed two sets of Epipen drug cost data:
- Health Plan: Data from a health plan with 7,355 distinct members, mainly covered by Medicare and Medicaid.
- Health System: Data from a health system that takes on risk, with 5,276 distinct patients. About 14% of those patients have an HMO plan, and about 80% have a plan that offers a higher level of coverage for in-network, authorized services. The remaining 6% have other coverage.
EpiPen Costs for Healthcare Organizations and Consumers
Findings: almost exponential year-over-year cost increases
We first looked at trends in Epipen drug costs over time, from 2010 to the present day for the Health Plan, and from 2013 to the present day for the Health System. As expected, the healthcare organizations have expereinced a steady increase in drug costs – almost exponentially for the Health Plan.
These trends are consistent with recent coverage about Epipen drug cost increases.
Finding: average total cost is higher for the commercially insured group
The New York Times had quoted a mother who said, “The difference in insurance coverage means being able to afford them or not,” so we wanted to explore the costs for members and plans under different insurance programs.
As a reminder, EpiPens are available in two dosages, 0.3 mg and 0.15mg. For each dosage, we looked at the average total cost, which means the sum of the amount paid by the member out-of-pocket and the amount paid by the healthcare organization via a claim from the pharmacy. We compared the results for each healthcare organizations and its members.
Between January 2013 and February 2016, the average total cost for both EpiPen dosages was higher for the Health System with the commercial population – around $315 for the EpiPen 2-Pak, 0.3mg injectable kit and approximately $340 for the EpiPen JR 2-Pak, 0.15mg injectable kit.
Finding: more cost variability under commercial insurance
We broke down the total cost into the insurance cost and the out-of-pocket cost.
- Insurance cost is the amount paid by the health planand
- Out-of-pocket cost is the sum of the co-pay, co-insurance and deductible amounts, paid by the member
Looking at the insurance cost trends for all three plan types, we can see why controlling drug costs is an important strategic priority for health plans and health systems taking on risk.
For the Health Plan with the mostly Medicare and Medicaid population, the insurance cost trend closely resemebles the total costs trend, indicating that Medicare and Medicaid programs are footing the higher share of the Epipen drug costs.
For the Health System with the mostly commercially insured population, the resemblance between total cost and insurance cost is not quite as tight. This could be because some members bear higher out-of-pocket costs, which decreases the cost burden on the insurance payer.
The graphs below shows the trends in out-of-pocket costs for each plan. As expected, the Health System shows wider out-of-pocket cost spread when compared to the Health Plan with Medicare and Medicaid populations. Even though we see more spread in the out-of-pocket costs for the Health System, we do not see a clear trend.
The New York Times described families switching from high deductible plans to be able to afford the drug out-of-pocket costs. Even though the out-of-pocket costs for our mostly commercial population are higher than those paid by our mostly Medicare and Medicaid population, it might be the case that the majority of these commercial plan members are not in high deductible plans, which would keep the out-of-pocket costs steady while increasing the insurance costs. Given the type of commercial coverage, it is likely that there are negotiated annual contract rates that would hold out-of-pocket costs steady if the members shop at in-network pharmacies.
In our next post on EpiPen costs for healthcare organizations, we will look at cost variability and the drivers of that variability.