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California Caps What Patients Pay For Pricey Drugs. Will Other States Follow?

Expensive specialty medicines used to treat cancer and chronic illnesses have forced some very ill Americans to choose between getting proper treatment and paying their rent.

To ease the financial burden, the California agency that governs the state’s Affordable Care Act marketplace issued landmark rules recently that will limit the amount anyone enrolled in one of those plans can be charged each month for high-end medicine.

Retired California school teacher Mikkel Lawrence has hepatitis C and has struggled to afford the medicine he needs to treat it. (Photo by April Dembosky/KQED)

Retired California school teacher Mikkel Lawrence has hepatitis C and has struggled to afford the medicine he needs to treat it. (Photo by April Dembosky/KQED)

The agency said its rules, set to take effect in 2016, “strike a balance between ensuring Covered California consumers can afford the medication they need to treat chronic and life-threatening conditions while keeping premiums affordable for all.”

Mikkel Lawrence, a retired middle school teacher in California, is the kind of patient lawmakers had in mind when they designed the new policy.

Lawrence has hepatitis C, a virus that can damage the liver. Most people who have the virus don’t have any symptoms, sometimes for decades. But for some people like Lawrence, waves of intense fatigue hit several times a day.

Lawrence said he sometimes gets up in the morning, eats breakfast, and then heads straight back to bed for a nap. “I get really bad tired spells. It’s like you have to go to sleep,” he said. “It takes away probably three or four hours of my waking day.”

There’s also an increased risk of liver cancer or liver failure. So when Lawrence heard last year that there was a new drug regimen that could cure his disease, he went straight to his insurance company.

“The first thing they did, of course, was deny it,” Lawrence said.

But the real problem, once he did get approval, was the price tag. Each pill costs $1,000.

“The first quote I got was $140,000 — and I would be responsible for $14,000 of it,” he remembered.

Lawrence, 71, lives on Social Security. There was no way he could come up with $14,000 on his own.

“I went to everybody I knew of and fussed and fumed and all that stuff,” he said.

Eventually, Lawrence got financial aid from a nonprofit to help him cover his out-of-pocket costs. Every morning at 10 a.m., he stood over his bathroom sink and swallowed two capsules.

“I’d go, ‘There’s one thousand. And there’s another thousand,’” he said.

Health advocates hear scenarios like this all the time from patients with a range of chronic conditions, including hepatitis C, HIV, multiple sclerosis, and rheumatoid arthritis.

Last year, more than a half-million patients in the U.S. had medication costs that exceeded $50,000, according to a recent report from Express Scripts, a company that manages prescription benefits.

“We’ve heard stories of people who’ve emptied their retirement savings to cover their drug needs,” said Betsy Imholz, special projects director at Consumers Union, an advocacy group. “It’s a really frightening, wild west situation for people who need these specialty drugs.”

She and other advocates took their concerns to Covered California, the agency that implements the Affordable Care Act in the state. In May, the health exchange became the first in the country to put a cap on how much consumers pay for these drugs.

Starting in 2016, most people will pay a maximum of $150 or $250 per prescription, per month. These caps are for Covered California’s so-called silver and platinum plans. Bronze plans will have caps of $500.

This policy will apply only to the 2.2 million people who buy coverage on the individual market. A bill under consideration in the California legislature would extend that protection to many people with employer-based plans, as well.

Several other state legislatures are considering similar specialty drug price caps, some as low as $100.

Covered California board member Marty Morgenstern said the agency should do even more by going to the root of the problem: the pharmaceutical companies.

“They charge irrational prices,” Morgenstern said, “on specialty drugs, and on all drugs, as a matter of fact.”

He said the health exchange should band together with other agencies in the state to negotiate lower drug prices.

“Medi-Cal, Covered California, Calpers [the benefit group for state employees], workers comp, the prison system, the state mental hospital system — we buy a hell of a lot of drugs,” he said. “I’m just wondering if there’s some way we can leverage that, to have some impact on the drug companies.”

Gov. Jerry Brown called for a task force earlier this year to do just this, after realizing the new hepatitis C drugs alone would cost the state more than $200 million in the next fiscal year.

Insurance companies in California have also been calling for lower drug prices.

“This is unsustainable, and it’s going to have a major impact on the price of health care,” said Nicole Kasabian Evans of the California Association of Health Plans.

Insurers see a correlation between the cost of a drug and adherence, she said. Patients who can’t afford what they’re prescribed will sometimes split pills or not take them at all.

“If you ultimately have to go back and take a second round, because you didn’t take it right the first time, or you never took it and you develop a more serious health condition, it’s not good for the consumer,” Kasabian Evans said. “And it costs the health care system more money.”

Insurers say it’s only a matter of time before the costs of specialty drugs will force them to raise monthly premiums for everyone in the health plan.

The pharmaceutical industry adamantly defends its prices.

“The cost and time it takes to bring new medicines to the marketplace is increasing, as biopharmaceutical companies go after harder and harder to treat diseases,” said Robert Zirkelbach of the Pharmaceutical Research and Manufacturers of America, the drugmakers’ trade group known as PhRMA.

He said you have to put drug prices in context. Hepatitis C drugs, like the ones Mikkel Lawrence takes, are expensive. But the cost of treating the complications of Hep C is much higher.

“The average annual cost of a patient with liver cancer today is over $110,000. If that patient needs to get a liver transplant, the cost is over $500,000,” Zirkelbach said. “We’re talking about a medicine here that cures the disease.”

In most people, but not Mikkel Lawrence. Turns out that $140,000 hep C regimen he took last year didn’t work. He fell into the 5 percent of patients who don’t respond.

But now he’s caught wind of a new drug that’s coming through the pipeline. And he’s already drafting a series of emails and letters to get it approved by his insurance plan.

“As soon as they’re out, I’m taking them,” he says.

This story is part of a reporting partnership that includes KQED, NPR and Kaiser Health News.

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