Vrushabh P. Ladage, BS

Medicare Part D specialty drug users not qualifying for low-income subsidies (non-LIS beneficiaries) face high and variable cost sharing during the calendar year. We examined their out-of-pocket (OOP) cost patterns under the existing Part D cost-sharing policies and proposed changes to these policies.

Using 100% Medicare claims data from 2012, we examined mean annual and monthly OOP drug costs for Medicare Part D patients who were full-year users of Part D specialty drugs for rheumatoid arthritis (RA) (n = 1063), multiple sclerosis (MS) (n = 2256), or chronic myeloid leukemia (CML) (n = 1135) under existing policy. Using the same data, we simulated costs under both proposed Medicare Payment Advisory Commission (MedPAC) policy recommendations and our own recommendations.

 In 2012, our sample faced mean annual cumulative OOP drug costs (for all medications) of $3949 (RA), $5238 (MS), and $6322 (CML). Mean OOP costs were $977 (RA), $1613 (MS), and $2456 (CML) in January alone. A substantial proportion of total annual OOP prescription spending also occurred during the catastrophic coverage phase (RA: $1229 [31%]; MS: $2456 [47%]; CML: $3546 [56%]). Under proposed MedPAC changes, patients would have faced maximum annual OOP spending of $4700, but mean OOP costs in January and February would have been higher compared with the existing policy. Under our proposed strategy, OOP costs would have been spread evenly over 12 months (≤$392 per month). The potential incremental costs of our proposed strategy would have been $23.55 per non-LIS Part D beneficiary per year.

The existing Part D cost-sharing structure creates a substantial financial burden for specialty drug users, especially early in the year. Implementing both annual and monthly OOP maximum spending limits would result in lower, more consistent OOP costs, potentially increasing patients’ ability to access treatments for life-threatening, chronic, and rare diseases.

Am J Manag Care. 2017;23(3 Suppl):S39-S45

Recent pharmaceutical advances hold the promise of transforming the medical care of serious life-threatening, chronic, and/or rare diseases and significantly improving the lives of those afflicted. Yet, these advances may be out of reach for many Americans because of high out-of-pocket (OOP) costs.

 Financial barriers to treatment access are particularly acute for Medicare Part D patients requiring specialty drug treatments. Since Part D’s creation in 2006, patients who do not receive low-income subsidies (non-LIS beneficiaries) have been subject to highcoinsurance requirements for specialty drugs, which are placed on a “specialty tier.” Unlike co-payments of a fixed dollar amount, coinsurance payments vary based on the cost of the medication. Furthermore, under Part D, the required coinsurance percentage fluctuates across the coverage year (

), with the highest costs concentrated at the beginning of the year. The cycle resets on January 1 of the following year.

 In addition, because Medicare Part D plans are not required to have an annual maximum OOP spending limit, patients who are prescribed continuous specialty drug treatment continue to face substantial OOP costs, even during the catastrophic coverage phase.

 These fluctuating costs have been characterized as a “cost-sharing rollercoaster.”

A growing body of evidence links higher cost sharing with reduced utilization of specialty drugs.

 In the Medicare population, studies of several specialty drug classes have documented that beneficiaries not receiving LIS (ie, those responsible for high cost sharing) have lower rates of treatment initiation, greater incidence of gaps in treatment, and more frequent interruptions in treatment compared with counterparts who receive full LIS (and thus face low, relatively stable costs across the coverage year).

 Although further research is needed, it is likely that the high cost sharing for specialty drugs under Medicare Part D may place patients at risk for compromised treatment outcomes due to reduced or delayed initiation, poor adherence, and higher discontinuation rates.

Strategies to address financial barriers must balance access to treatment with very real financial constraints. Based on the accumulating data, and in keeping with our prior recommendations,

 we propose the introduction of 2 key changes to the Part D cost-sharing requirements that would provide additional protection for Medicare beneficiaries. First, the introduction of an annual OOP maximum spending limit—which is commonplace in private insurance plans and in health insurance exchange plans&mdash;would protect beneficiaries from unmanageable cumulative OOP costs .Indeed, the Medicare Payment Advisory Commission (MedPAC) recently recommended policy changes that would effectively establish an annual OOP maximum for Medicare Part D beneficiaries.

 Second, more stable and consistent timing of OOP spending requirements—effectively introducing a monthly OOP maximum as well&mdash;would avoid the major fluctuations in monthly expenses that characterize the current cost-sharing structure and would be more appropriate for seniors, many of whom are on a fixed income. Previously, we have cited programs that offset the burden of high winter heating bills by distributing energy costs across the calendar year as a model for this approach.

In order to test the impact of our proposed strategies on real-world OOP costs for non-LIS Medicare Part D beneficiaries, we undertook a 3-part investigation. First, using actual 100% Medicare claims from 2012, we illustrated the real-world OOP cost patterns and burden under the existing Part D cost-sharing structure for continuous users of specialty drugs for 3 chronic conditions that rank among the top spending categories for specialty drugs.

 Second, we used the same Medicare claims data on drug utilization and costs to simulate the OOP cost patterns that these specialty drug users would face if recent MedPAC recommendations related to Part D cost sharing were to be implemented. Third, we simulated OOP costs for these patients under our proposed strategies and compared them with those under existing policy and the MedPAC recommendations. Finally, we discuss the incremental costs of our proposed strategies and how they could be funded.

Estimation of OOP Cost Patterns Under the Existing Part D Cost-Sharing Structure

To estimate the impact of current policy, we used a data extract from the 2012 Chronic Conditions Data Warehouse 100% Medicare claims files, which contain data on all fee-for-service (FFS) Medicare beneficiaries. (Part D’s cost-sharing structure has not changed since 2012.) We included non-LIS beneficiaries who had: 1) continuous FFS Medicare and stand-alone Part D plan coverage throughout 2012; 2) a diagnosis of rheumatoid arthritis (RA), multiple sclerosis (MS), or chronic myeloid leukemia (CML); and 3) prescription claims reflecting continuous use of a disease-specific Part D-covered specialty drug (listed in the 

]) over the course of the coverage year (ie, a prescription fill for the specialty drug in January and total days’ supply for any disease-specific specialty drug ≥360 days in 2012). For example, if an individual switched from one disease-specific specialty drug to another but had no gap in treatment (eg, a CML patient had 180 days’ supply of bosutinib and 180 days’ supply of dasatinib), then he or she was classified as a continuous user. After these criteria were applied, the resulting sample consisted of 1063 patients with RA, 2256 patients with MS, and 1135 patients with CML. Using actual 2012 claims data for these disease samples, we calculated annual cumulative OOP drug costs and OOP costs by calendar month and benefit phase for patients in each disease group.

We opted to restrict our sample to continuous users for several reasons. First, in the absence of specific reasons for discontinuation (eg, intolerable side effects, poor response), consistent treatment is typically recommended for each of the conditions we examined.

 Thus, we wished to examine the OOP costs associated with optimal treatment patterns. Second, inclusion of individuals who used the specialty drugs during only part of the year could have artificially depressed our mean estimates of annual and monthly costs. Third, high OOP costs are associated with interruptions in treatment and discontinuation of treatment; thus, including individuals who may have used medications inconsistently due to financial burden would have led to further underestimation of the true OOP costs associated with optimal use of these treatments.

Simulation of OOP Cost Patterns Under Proposed MedPAC Changes to Part D Cost Sharing

Next, using the same drug utilization and cost information from the 2012 Medicare claims data, we simulated the OOP cost patterns for the 3 disease samples if recent MedPAC recommendations were to be applied to the 2012 Part D benefit. This involved simulating the impact of 2 key changes proposed by MedPAC.

 The first involved the elimination of the 5% cost-sharing requirement during the catastrophic coverage phase, resulting in an effective annual OOP maximum equal to the annual true OOP (TrOOP) spending limit that triggers catastrophic coverage. In 2012, the TrOOP was $4700. Second, under existing Part D policies, brand name prescription drugs purchased by Part D beneficiaries during the coverage gap phase include a 50% manufacturer discount that is credited toward beneficiaries’ TrOOP spending. Under the MedPAC proposal, these manufacturer discounts would no longer be credited toward patients’ TrOOP spending. Given that movement through the coverage gap is based on TrOOP costs, elimination of the manufacturer discount credit under the MedPAC proposal would effectively extend the time patients spend in the coverage gap and increase the amount they must spend OOP before reaching catastrophic coverage. Then, only patients whose spending was sufficient to trigger entry into the catastrophic coverage phase would benefit from the elimination of cost sharing during that phase.

Simulation of OOP Cost Patterns Under Our Proposed Changes to Part D Cost Sharing

We estimated OOP costs under our proposed policy changes following the same procedure used for the MedPAC simulation, with 2 key differences. First, our proposal does not include a change to the current policy of crediting manufacturer discounts toward patients’ TrOOP spending; we maintained the $4700 spending threshold that triggers catastrophic coverage as our proposed annual OOP spending limit, counting both beneficiary OOP spending and manufacturer discounts. (As in the MedPAC proposal, this spending limit would mean elimination of 5% cost sharing during Part D’s catastrophic coverage phase.) Second, to spread the OOP costs more evenly across the year, we divided the annual OOP maximum spending limit number (ie, $4700) by 12 months to derive a maximum monthly OOP spending limit. This monthly limit also includes both beneficiary OOP spending and manufacturer discounts, meaning that actual beneficiary spending may be lower than the monthly OOP spending limit during the month(s) of the coverage gap.

Estimating the Incremental Cost of Our Proposed Changes and Financing Strategies

To estimate the incremental costs of our proposed policy changes, we identified publicly available data from the year closest to our 2012 utilization data (ie, 2013) to identify: 1) estimates of the total number of non-LIS beneficiaries who entered catastrophic coverage during that year and 2) the average OOP spending among these beneficiaries during the catastrophic coverage period.

 The product of the 2 estimates provides the total OOP costs borne by these beneficiaries that would be foregone (ie, the incremental costs of our proposed policy of instituting an annual OOP spending maximum at the catastrophic coverage threshold level). We then divided the incremental cost of our proposed changes by the total number of non-LIS beneficiaries enrolled in the Part D program in 2013 to identify the per-beneficiary cost of the proposed policy change.

 The per-beneficiary cost is approximate because, whereas the additional cost would be priced out through the Part D plan bidding process, our proposed financing strategy estimates the cost as if it were passed through to beneficiaries directly.

OOP Cost Patterns Under the Existing Part D Cost-Sharing Structure

In 2012, specialty drug users in the RA group faced mean annual cumulative OOP drug costs of $3949 for all their Part D medications, whereas those in the MS and CML groups paid an average of $5238 and $6322, respectively. The majority of these costs were due to specialty drug spending (ie, 88% for the RA group, 91% for the MS group, and 95% for the CML group) (

). A significant proportion of the MS (84%) and CML (87%) groups had annual specialty drug OOP costs of $5000 or more (data not shown). Because OOP spending pushed specialty drug users through the deductible, initial coverage phase, and coverage gap quite quickly in 2012, patients continued to have substantial OOP spending requirements during the catastrophic coverage phase, despite the fact that their coinsurance obligation dropped to 5%. Across disease areas, a substantial proportion of total annual OOP prescription spending occurred during the catastrophic coverage phase (RA: $1229 [31% of annual OOP costs]; MS: $2456 [47%]; CML: $3546 [56%]) (

). At the same time, specialty drug users had to bear large mean OOP costs in January alone (RA: $977; MS: $1613; CML: $2456). Once again, specialty drug costs were driving this OOP spending (see 

). These January OOP costs represented a substantial portion of spending for the entire year (RA: 25% of annual spending; MS: 31%; CML: 40%) (

), and about half of total OOP costs were paid out by February.

OOP Cost Patterns Under Proposed MedPAC Changes to Part D Cost Sharing and Under Our Proposed Strategies

Simulated analyses examining the impact of proposed MedPAC recommendations showed that the policy changes would have mixed effects on beneficiaries' OOP burden (

). Because manufacturer discounts for brand name drugs during the coverage gap phase would no longer be credited toward patients’ TrOOP spending, patients using brand name specialty drugs would have taken longer to reach the TrOOP spending limit, leading them to remain in the coverage gap phase for a greater period of time. Because of this widened coverage gap, they would have been subject to 50% cost sharing until they reached the TrOOP spending limit that triggers entry into the catastrophic coverage phase. As such, only patients whose cumulative annual spending (excluding manufacturer discounts) would have exceeded the designated spending limit ($4700 in 2012) would have seen overall savings from the elimination of 5% cost sharing during the catastrophic coverage phase. Under current policy, manufacturer discounts can effectively reduce OOP spending in the coverage gap by up to half, depending on an individual beneficiary’s drug utilization patterns. This differential impact was apparent across our 3 diagnostic subgroups. Although patients in the MS and CML groups would have seen a decrease in cumulative mean annual OOP costs under the proposed changes, the RA group would have experienced an increase in costs ($4540 under MedPAC vs $3949 in 2012; data not shown) due to fewer beneficiaries reaching the OOP limit.

Given that patients in all disease samples had OOP costs that pushed them into the coverage gap early in the coverage year (often with the first fill of their disease-specific specialty drug), and they would have faced a higher threshold to exit the coverage gap under the MedPAC recommendations, the proposed policy changes would ultimately subject patients to even higher, more concentrated OOP costs during these early months (Figure 5). Patients would have faced maximum annual OOP spending of $4700 in 2012, but this entire OOP cost burden would have to be borne by most patients in the first 3 to 4 months of the calendar year. Furthermore, under the MedPAC changes, the mean OOP costs in January and February would be even higher than under existing policy (eg, $994 under MedPAC vs $977 in January 2012 for RA; $1685 under MedPAC vs $1613 for MS; $2814 under MedPAC vs $2452 for CML) (Figures 4 and 5).

Instituting a monthly OOP maximum based on an annual OOP maximum of $4700—which also counts the 50% manufacturer discounts for brand name drugs in the coverage gap&mdash;under our proposed strategies, in contrast, would result in a maximum of $392 in OOP costs to be borne by the patient in any given calendar month, as indicated by the dotted line in Figure 5.

Incremental Cost of Our Proposed Changes and Financing Strategies

Based on Medicare utilization numbers,18 approximately 700,000 (2.8%) of the 24.2 million non-LIS beneficiaries enrolled in Part D plans reached the catastrophic coverage phase in 2013. They paid mean OOP costs of approximately $814 during that phase, for a total of approximately $569.8 million in patient OOP spending during the catastrophic coverage phase. Dividing that cost among all non-LIS beneficiaries, implementation of our proposal would have cost an additional $23.55 for each non-LIS beneficiary per year (ie, $1.96 per month).

 In practice, the increased costs of $23.55 per beneficiary per year would not be straight pass-through costs via premiums, but would instead be borne out through the Part D plan bidding process, ultimately reducing the amount by which beneficiaries are directly impacted. Nevertheless, the incremental costs of our proposed changes are minimal when averaged over all non-LIS beneficiaries, regardless of the ultimate financing mechanism.

Our analyses demonstrate that Medicare beneficiaries using high-cost specialty drugs face variable and high OOP cost obligations under the existing Part D cost-sharing structure, with a majority of these expenditures concentrated at the beginning of the calendar year. In 2 of our 3 disease samples (MS and CML), the average OOP cost of the first disease-specific specialty drug fill for the calendar year nearly equaled or exceeded the average monthly Social Security benefit.

 This benefit provides a substantial portion of income for many Medicare beneficiaries.

 In all 3 disease areas we examined—RA, MS, and CML&mdash;the required 5% coinsurance payments during the catastrophic coverage phase also resulted in considerable cumulative OOP spending during the remainder of the year, consistent with findings reported elsewhere.

 Our simulation found that changes proposed by MedPAC, which effectively introduce an annual OOP spending maximum via elimination of cost sharing during the catastrophic coverage phase, would provide some relief later in the year for patients facing the highest specialty drug costs. Yet, the changes would actually exacerbate the problem of front-loaded costs at the beginning of the coverage year and fewer beneficiaries would likely benefit from the annual OOP spending limit, as many patients would remain in the coverage gap longer under the proposal to exclude manufacturer discounts for brand name drugs from TrOOP spending. This would exacerbate their total OOP costs and the timing of these costs. Excluding the discounts would also effectively double OOP costs paid by these beneficiaries in the coverage gap by widening the gap; this undermines the goal of better managing the timing and magnitude of OOP costs and ensuring appropriate access to care.

Such high and variable spending requirements are disruptive to monthly budgets, and our data highlight the fact that evaluation of the financial burden related to OOP spending should pay attention to both the magnitude and the timing of OOP expenditures. Our proposed strategies would institute both an annual and a monthly OOP maximum spending limit, which would spread OOP costs more evenly across the year. This would have resulted in OOP costs closer to $400 per month in our 2012 sample (inclusive of manufacturer discounts in the coverage gap); although the amount would increase slightly in 2017 due to an increase in the TrOOP spending limit, it would remain more manageable than existing OOP obligations. This would most likely improve patients’ ability to meet their OOP cost-sharing obligations, especially early in the year. In addition, maintaining the current policy to count manufacturer discounts toward TrOOP would effectively lower overall OOP spending below the $4700 limit for beneficiaries requiring brand name medications. The proposed OOP spending limit would also increase the predictability of monthly OOP obligations, much like how payment options provided by energy companies enable more consistent budgeting despite seasonal variability in consumption. In light of a growing body of evidence that links high cost sharing among Medicare Part D beneficiaries with delayed initiation of treatment, increased gaps in treatment, and reduced adherence (compared with beneficiaries who receive LIS and face more stable, low cost sharing), reducing the OOP burden associated with specialty drug use would likely improve access to and optimal use of these treatments.

It should be noted that our analyses provide a snapshot of the impact of both existing and proposed policies utilizing a sample year of prescription fill data from 2012. This is in line with MedPAC’s own analysis of their proposed changes, which also used a single year of data (from 2013). However, the Part D benefit is dynamic; each year, there are changes to the designated spending limits that trigger entry into each benefit phase, and additional changes related to provisions of the Affordable Care Act (ACA) are scheduled to be implemented over the next 5 years, further impacting OOP costs. Most importantly, the catastrophic coverage threshold is scheduled to increase significantly by 2020, and 2 main factors will lead to additional widening of the coverage gap phase, making it harder for beneficiaries to reach the OOP threshold for catastrophic coverage (and thus, the proposed annual OOP spending maximum).

First, Part D plans will offer more generous plan coverage, which will displace previous beneficiary OOP spending during the coverage gap with payments that will not count toward patients’ TrOOP—thereby indirectly widening the gap. Second, the growth rate of the TrOOP threshold that triggers catastrophic coverage was slowed from 2014 through 2019 under the ACA. As the coverage gap closes, however, the TrOOP threshold for 2020 will be set as if growth had not been artificially slowed.

 This will lead to a $1200 increase in the TrOOP threshold from 2019 to 2020, a phenomenon known as the “OOP cliff.”

 Consequently, the beneficiary OOP burden documented in our analyses will intensify over time. Furthermore, a larger number of beneficiaries are likely to be affected over time. Ongoing developments in pharmaceutical treatments are likely to increase the number of non-LIS beneficiaries who are prescribed medications associated with the highest levels of OOP spending; for example, the past few years have seen a dramatic increase in the use of new treatments for hepatitis C, a trend that began after our 2012 data. This underscores the urgent need for strategies to alleviate OOP costs and burden.

Our analysis had several limitations. First, as with all administrative databases, Medicare claims may be subject to errors or omissions. Second, we examined 2012 data and applied policy changes that took effect under the ACA in that year. As noted above, if the ACA remains in effect, the coverage gap will be phased out by 2020 and the catastrophic coverage limit will be higher; thus, the catastrophic coverage limit (and our proposed annual OOP spending maximum) will increase and the figures presented here will represent an underestimate of patient OOP spending. Our analysis is not able to account for future changes to the ACA that may impact Medicare policy. Third, given the availability of claims data, we limited our sample to FFS Medicare Part D beneficiaries; to illustrate the real-world OOP cost burden in patients prescribed continual treatment throughout the year, we further limited our sample to full-year users of specialty drugs. However, our proposed strategies are recommended for, and our incremental cost and financing calculations apply to, all Medicare Part D beneficiaries (FFS and Medicare Advantage) regardless of whether they were full- or part-year users of specialty drugs. Our calculations do not account for any increases in specialty drug utilization and spending that would occur among part-year users in response to lower and more stable monthly cost sharing under our proposed strategies. Similarly, as the number of beneficiaries eligible for and requiring specialty drug treatments increases over the years, the incremental cost of our proposed strategies would further increase. It is notable that our estimated costs begin at a relatively modest amount (less than $2 per month per beneficiary), however.

As with most aspects of healthcare, the fine-grained logistical details of implementing our proposed strategies will be straightforward in some cases and more complex in others. Redistribution of annual OOP costs in the form of a stable monthly payment is least complicated for individuals who are prescribed medications for continuous use throughout the coverage year (as in our sample), whereas protocols would have to be developed for those who initiate treatment later in the year. For example, if a patient fills a prescription in September that would have carried a $1500 coinsurance payment, he or she may need to continue to pay the remaining balance on that prescription into the following year. Although this does increase the complexity somewhat, much of the rest of the healthcare system bills patients for remaining OOP costs after a service is rendered (eg, imaging tests, surgeries, hospitalizations). Developing adjustments in pharmacy and insurance procedures that are more in step with the advances in pharmaceutical treatments is a worthwhile goal.

Indeed, the expanding role of self-administered pharmaceutical treatments in the management of serious life-threatening, chronic, and/or rare diseases also argues for a less siloed approach and greater attention to overall OOP costs for patients. Our analysis addresses prescription drug OOP costs only, yet patients are also responsible for OOP costs related to premiums, medical deductibles, and medical co-pays and coinsurance. Unlike most employer and health insurance exchange plans, which integrate medical and prescription drug expenses into a combined annual OOP maximum spending limit,

 all Medicare beneficiaries currently lack an annual OOP maximum limit for their Part D prescription drug spending and the majority have no annual maximum for other OOP medical spending. Our proposal represents an important first step toward addressing these issues.

Division of General Internal Medicine, Department of Medicine, Perelman School of Medicine (JAD, PL, VPL), Leonard Davis Institute of Health Economics (JAD, PL), Center for Public Health Initiatives (ARP), University of Pennsylvania, Philadelphia, PA; PhRMA (JSD, AF), Washington, DC.

At the time of the study, Dr Doshi reported serving as a consultant for Alkermes, Inc, Forest Laboratories (now Allergan), Ironwood Pharmaceuticals, Shire, and Vertex Pharmaceuticals; and had received research funding from AbbVie Inc, Biogen, Humana, Inc, Janssen, PhRMA, Pfizer Inc, Regeneron, Sanofi, and the National Pharmaceutical

Council. Dr Doshi’s spouse holds stock in Merck & Co, Inc, and Pfizer Inc. Dr Dougherty and Ms Flint are employees of PhRMA. Drs Li and Pettit and Mr Ladage have no conflicts to report.

Concept and design (JAD, PL, ARP, JSD, AF); acquisition of data (JAD, PL, VPL); analysis and interpretation of data (JAD, PL, ARP, VPL); drafting of the manuscript (JAD, PL, ARP, JSD, AF); critical revision of the manuscript for important intellectual content (JAD, PL, ARP, JSD, AF, VPL); statistical analysis (PL); obtaining funding (JAD); administrative, technical, or logistic support (VPL); and supervision (JAD, PL).

Jalpa A. Doshi, PhD, University of Pennsylvania, 1223 Blockley Hall, Philadelphia, PA 19104. E-mail: jdoshi@mail.med.upenn.edu.

Specialty drugs represent vital treatments for patients who often have few or no effective alternatives available, and consistent use can often help to prevent disease progression and other costly complications. Yet, these treatments can only be effective if patients can afford to utilize them. Thus, Medicare Part D policies that support access and adherence are critically important. Our analyses indicate that efforts to alleviate financial barriers to specialty drug adherence should include attention to both the amount and timing of OOP costs.

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2. Stuart B, Briesacher BA, Shea DG, Cooper B, Baysac FS, Limcangco MR. Riding the rollercoaster: the ups and downs in out-of-pocket spending under the standard Medicare drug benefit. 

3. Hoadley J, Cubanski J, Neuman T. It pays to shop: variation in out-of-pocket costs for Medicare Part D enrollees in 2016. Kaiser Family Foundation website. http://kff.org/report-section/it-pays-to-shop-variationin-out-of-pocket-costs-for-medicare-part-d-enrollees-in-2016-findings/. Published December 2, 2015. Accessed December 16, 2016.

4. Winn AN, Keating NL, Dusetzina SB. Factors associated with tyrosine kinase inhibitor initiation and adherence among Medicare beneficiaries with chronic myeloid leukemia. 

. 2016;34(36):4323-4328. doi: 10.1200/JCO.2016.67.4184.

5. Doshi JA, Li P, Huo H, et al. High cost sharing and specialty drug initiation under Medicare Part D: a case study in patients with newly diagnosed chronic myeloid leukemia. 

6. Streeter SB, Schwartzberg L, Husain N, Johnsrud M. Patient and plan characteristics affecting abandonment of oral oncolytic prescriptions. 

. 2011;7(suppl 3):46s-51s. doi: 10.1200/JOP.2011.000316.

7. Shen C, Zhao B, Zhou S, et al. Low income subsidy status outweighs insurance cost-sharing in predicting adherence to tyrosine kinase inhibitors among Medicare Part D beneficiaries with chronic myeloid leukemia [abstract #6531]. Presented at: 2016 ASCO Annual Meeting; June 4, 2016; Chicago, IL. http://www.ashclinicalnews.org/in-chronic-myeloid-leukemia-subsidies-and-out-of-pocket-costs-predict-adherence-totki-inhibitors/. Accessed January 31, 2017.

8. Kaisaeng N, Harpe SE, Carroll NV. Out-of-pocket costs and oral cancer medication discontinuation in the elderly. 

9. Doshi JA, Hu T, Li P, Pettit AR, Yu X, Blum M. Specialty tier-level cost sharing and biologic agent use in the Medicare Part D initial coverage period among beneficiaries with rheumatoid arthritis. 

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10. Doshi JA, Takeshita J, Pinto L, et al. Biologic therapy adherence, discontinuation, switching, and restarting among patients with psoriasis in the US Medicare population. 

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Articles

Medicare claims analyses offer insight into how proposed policy changes would affect out-of-pocket prescription costs for Part D beneficiaries requiring specialty drugs.

Reducing Out-of-Pocket Cost Barriers to Specialty Drug Use Under Medicare Part D: Addressing the Problem of "Too Much Too Soon"

Specialty drugs often represent major medical advances for patients with few other effective options available, but high costs have attracted the attention of both payers and policy makers. We reviewed the evidence regarding the impact of cost sharing on utilization of specialty drugs indicated for rheumatoid arthritis (RA), multiple sclerosis (MS), and cancer, and on the use of nondrug medical services, health outcomes, and spending. 

Systematic review of Medline-indexed studies identified via an OVID search for articles published in English from 1995 to 2014, using combinations of terms for cost sharing and specialty drugs, and/or our 3 conditions of interest. We identified additional studies from reference lists.   

We identified 19 articles focusing on specialty drugs indicated for MS (n = 9), cancer (n = 8), and RA (n = 8). Studies examined prescription abandonment (n = 3), initiation or any utilization (n = 8), adherence (n = 9), persistence/discontinuation (n = 7), number of claims (n = 1), and drug spending (n = 1). Findings varied by disease, but generally indicated stronger effects for noninitiation or abandonment of a prescription at the pharmacy and somewhat smaller effects for refill behavior and drug spending once patients initiated therapy. Studies have not examined specialty tier cost sharing seen under Medicare Part D or health insurance exchanges, nor effects on medical utilization, spending, or health outcomes. 

Evidence to date generally indicates reductions in specialty drug utilization associated with higher cost sharing; effects have varied by type of disease and specialty drug use outcome. We draw upon our findings and the gaps in evidence to summarize future directions for research and policy.

	Current evidence indicates that higher specialty drug cost sharing is associated with reduced specialty drug utilization. Research examining broader health outcomes and spending is unavailable. 

		Cost-sharing effects varied by type of disease and specialty drug utilization outcome examined. 

		There is a critical need for methodologically rigorous research to further evaluate whether the aggressive cost-sharing arrangements found in the current marketplace may cause patients to forego, delay, or decrease adherence to specialty drugs, and whether that results in poor health outcomes and higher total spending.

Specialty drugs typically represent significant medical advances, either in the form of novel approaches for the treatment of complex chronic conditions (eg, rheumatoid arthritis [RA], multiple sclerosis [MS]) or because they target diseases with few prior treatment options (eg, rare diseases or advanced cancers). Although the definition of specialty drug varies by payer, these medications share certain key characteristics.

 Typically, they are complex molecules and may be derived from biologic sources; require highly involved manufacturing processes; require special distribution and handling, such as refrigeration; involve intensive patient education and/or follow-up monitoring to ensure appropriate use; and are high cost. Many specialty medications require injection or infusion in clinical settings and are usually covered under the medical benefit. The remainder are administered at home by self-injection, or oral or inhaled administration, and are almost always covered under the pharmacy benefit.

Despite the therapeutic advances offered by many of these agents, specialty drugs have attracted payer attention because they are often accompanied by higher costs than traditional medications. Although the percentage of patients using specialty drugs is quite small—ranging from 1% to 5%

—a recent report estimated specialty drug spending in the United States at $95 billion in 2013, or about 29% of total prescription drug spending.

 Although published estimates vary depending on which agents are included, about two-thirds of specialty drug spending growth in 2013 was accounted for by agents to treat cancers, autoimmune conditions like RA, and MS.

Since about half of specialty drug spending is on self-administered agents covered by pharmacy benefits, these have been the focus of payer efforts to control spending.

 Insurers and pharmacy benefit managers seeking to manage costs have been unable to use the traditional 3-tiered cost-sharing design to encourage utilization of lower-cost drugs, however, given the fact that specialty drugs often have few close, less-expensive substitutes. As a result, utilization management (UM) tools, such as prior authorization and quantity limits, have been applied instead.

 Nevertheless, growing pressure to control spending has led insurers to increasingly place self-administered specialty drugs on new, separate “specialty tiers.” Whereas tiered cost-sharing designs typically have fixed co-payments of increasing amounts for generics, preferred brands, and nonpreferred brands, respectively, newer specialty tiers usually impose a coinsurance requirement which can be as high as 30% to 50% of the cost of the drug. Although specialty tiers were first broadly implemented with Medicare Part D, use of this strategy (and associated high cost sharing) has grown significantly in other markets, including the employer-sponsored insurance market and the new health insurance exchange plans created under the Affordable Care Act.

 Further, many plans—particularly those under Medicare Part D&mdash;place medications meeting a designated cost threshold (eg, $600 a month or more) on the specialty tier, regardless of whether those medications meet other common criteria for the specialty drug designation.

Despite the market trends in increasing patient out-of-pocket (OOP) costs for specialty drugs, the impact of patient cost sharing on specialty drug utilization and outcomes is unclear. Numerous reviews have summarized the relationship between cost sharing and utilization of traditional oral drugs, but none have evaluated the evidence as it relates to specialty pharmaceuticals.

 Such a review is needed for several reasons. First, patients may have strong demand for specialty drugs if they do not have other treatment options or if they perceive alternative, less expensive treatments to be ineffective or undesirable. In this context, they may be willing to pay a much higher cost share compared with traditional pharmaceuticals. On the other hand, the magnitude of OOP costs may exceed patients’ ability to pay, particularly in the context of overall medical expenses and other basic needs. More information is needed to determine the degree to which patient cost sharing is associated with changes in specialty drug utilization, as well as with health outcomes, use of nondrug medical services, and overall healthcare spending.

We sought to address this gap with a systematic review of the published evidence. In light of the highly variable definitions of specialty drugs across insurers, we focused our review on cost-sharing studies of specialty drug classes with indications for 3 key disease areas: RA, MS, and cancer. These represented the top 3 drivers of specialty drug spending in the United States at the time of our review.

 We examined associations between cost sharing and specialty drug utilization for these indications and draw upon our findings, including the gaps in evidence in light of current market trends, to highlight future directions for specialty drug research and policy.

We conducted an OVID search for all Medline-indexed articles published in English between 1995 and 2014. The primary search was based on various combinations of 2 sets of search terms. The first set included cost sharing and related terms: co-pay, coinsurance, benefit design, tiered benefit, specialty tier, and out-of-pocket cost. The second set included terms for specialty medications and our indications of interest: specialty drug, specialty pharmaceutical, biologic, rheumatoid arthritis, multiple sclerosis, cancer, oncology, carcinoma, leukemia, oncolytics, myeloma, and tumor. Additional studies were obtained from reference lists of identified studies. Identified articles were then independently screened and reviewed by 2 members of the research team to determine whether they met our criteria for inclusion (

These inclusion criteria, applied in the following order, were: 1) published as a peer-reviewed original research article (ie, review articles, editorials, and letters were not eligible), 2) examined the effects of cost sharing (co-payments, coinsurance, or OOP costs) for specialty drugs on at least 1 of our chosen outcomes (specialty drug utilization or spending, medical utilization or spending, or health outcomes), and 3) examined drugs or drug classes that were indicated for RA, MS, or cancer and met the aforementioned high cost criterion for specialty drugs, along with at least 1 additional specialty drug criterion (eg, complex molecule or dispensed through specialty pharmacy). Because anti-inflammatory biologics used to treat RA are also approved for other indications (eg, psoriatic arthritis, ankylosing spondylitis), we did not exclude studies that sampled patients based on use of such drugs rather than diagnosis, even though they may have included patents with conditions other than RA. In light of the limited number of studies available, we also did not impose additional restrictions based on study quality. Nineteen articles met our criteria.

We extracted relevant information from each eligible study, including whether they reported cost sharing to have evidence of effects (ie, statistically significant nonzero effect) or no evidence of effects (ie, no statistically significant effect). When price elasticity of demand estimates were reported or could be derived, we captured this information as the expected relative change in the studied outcome if cost sharing were to double (ie, increase by 100%). Given the heterogeneity present in the cost-sharing measures, reported outcomes, study designs, and analytic approaches employed across the identified studies, our summary of the findings and conclusions are largely qualitative in nature.

Detailed characteristics of the 19 studies included in this review are available in the 

). Several studies examined 1 or more of our indications of interest, resulting in 8 studies for RA, 9 studies for MS, and 8 studies for cancer.

 More than half of the studies (n = 10) examined the effect of cost sharing on specialty drugs covered under the pharmacy benefit only, whereas the remainder examined agents covered under either the pharmacy or medical benefit. The specific specialty drugs examined in each study varied, particularly for cancer. All studies were observational, and a majority (n = 13) used cross-sectional study designs to examine specialty drug use among patients in plans with lower cost sharing compared with patients in plans with higher cost sharing for the specialty drug(s) being studied.

Two studies examined data from individuals enrolled in Medicare Part D,

 whereas all other studies used administrative claims data on privately insured patients in commercial plans or employer-sponsored health plans for current or retired employees. No study directly examined the effect of specialty tier—related cost sharing. In fact, databases used in the vast majority (84%) of these studies were from 2009 or earlier, during which time few private insurers were employing the use of specialty tiers and aggressive cost sharing for specialty drugs.

Studies used heterogeneous methods to measure specialty drug cost sharing; some used continuous measures of either co-payments or coinsurance, or an overall plan cost-sharing generosity index, whereas others created categories of cost-sharing groups based on either arbitrary cutoffs, medians, or quartiles for OOP payments observed in the data. A majority of patients were facing relatively low cost sharing, in keeping with the time frame of the data sources. For instance, 7 (64%) of 11 studies with information on mean OOP costs per month had mean co-payments less than $110 per month, and all 7 studies with median OOP information had median co-payments less than $50 per month. The OOP costs were substantially higher in the 2 studies examining Medicare Part D patients, yet these data are difficult to interpret due to a lack of detail. Medicare beneficiaries faced different levels of cost sharing during the calendar year (eg, 25%-33% coinsurance during an initial coverage phase vs 100% cost sharing during the “donut hole” coverage gap), but the studies did not examine changes during or between specific coverage phases. 

A wide variety of specialty drug use outcomes were reported across the studies, including prescription abandonment (n = 3), initiation or any utilization (n = 8), adherence (n = 9), persistence/discontinuation (n = 7), number of claims (n = 1), and drug spending (n = 1). We found no studies examining the impact of specialty drug cost sharing on medical utilization, spending, or health outcomes. The 

 summarizes key study findings by the type of outcome and indication(s) examined.

 In the 3 eligible studies, prescription abandonment was defined as a reversal of an adjudicated claim for a newly prescribed specialty drug (ie, the prescription was submitted and approved by the insurer but not obtained by the patient, so the pharmacy withdrew [reversed] the claim), with no subsequent paid claim within 90 days of the reversed claim.

 Prescription abandonment may be thought of as a subcategory of primary nonadherence, which is when a physician prescribes a medication but the patient does not submit, or does not pick up, the prescription from the pharmacy.

All studies reported a strong association of higher cost sharing with abandonment (vs initiation) of specialty drug prescriptions, for all indications examined. In one study among privately insured patients, approximately 25% abandoned their specialty medication when the OOP cost on the claim was greater than $200 for MS specialty drugs and greater than $500 for anti-inflammatory biologics, compared with less than 5% to 6% abandonment rates when OOP  costs on the claim were less than $100.

 A follow-up study using similar, but more recent, data reported that 50% to 60% of privately insured patients abandoned anti-inflammatory biologics and MS specialty drugs when faced with $2000 or more in monthly OOP costs (ie, due to high deductibles) compared with 5% to 6% abandonment rates among patients facing less than $50 in monthly costs; however, it should be noted that only a small percentage (2%-4%) of patients were subject to such high cost-sharing levels.

 Even for oral cancer agents, approximately one-fourth of privately insured and Medicare patients abandoned their specialty medication when OOP cost on the claim was greater than $500 compared with less than 5% to 6% abandonment rates with less than $100 in OOP costs.

 Notably, the cost-sharing burden in this study was higher for Medicare patients relative to privately insured patients (46% vs 11% facing greater than $500 OOP costs), but subgroup analyses were not conducted.

Initiation was typically defined as the first-time use of a specialty drug within a study period, among patients with a given disease. We grouped studies that examined any utilization (first time or repeated use) during the study period into this category as well. All studies examining initiation in patients with RA and MS reported a negative association with higher cost sharing. The magnitude of the effect varied across studies, with demand elasticities ranging from —0.03 to –0.33. For example, a 100% increase (ie, doubling) in cost sharing for MS drugs was associated with a 3% to 4% reduction in the probability of initiating these agents in 2 studies,

 but was associated with a 33% reduction in initiation in another study.

 Similarly, doubling of cost sharing for RA biologics was reported to reduce initiation by 5%

 A recent study reported that drug benefit generosity was associated with initiation of RA biologics among the subgroup of patients deemed to have mild-to-moderate disease activity, but not among the subgroup defined as having moderate-or-high disease activity with features of poor prognosis,

 suggesting that disease severity may have been influencing initiation decisions.

Initiation of specialty drugs for cancer, on the other hand, was largely reported to be insensitive to cost sharing in the 3 studies examining this outcome.

 One study found that cancer patients were 26% less likely to initiate the drug rituximab if cost sharing was doubled (ie, elasticity estimate of —0.26); yet, the same study did not find significant effects for the other cancer drugs it examined.

Treatment adherence was commonly measured by proportion of days covered (PDC), or the proportion of total days in a period that the patient had a supply of medication available. Some studies used a continuous measure of adherence, whereas others classified patients as being adherent (or nonadherent) based on whether ≥80% of the observation days were covered with a specialty drug supply (or not).

The evidence on the relationship between cost sharing and adherence was mixed across all 3 indications. As shown in the Table and eAppendix, findings varied based on the disease condition/drug class, the measure of adherence, and the level and type of cost sharing.

 One study of cancer drugs, for example, measured adherence as both a dichotomous variable (PDC ≥0.80) and a continuous variable (PDC), and found effects for the former but not the latter.

 A longitudinal study examining the effects of co-payment increases in an integrated HMO setting reported no relationship between cost sharing and adherence to MS, biologic anti-inflammatory, and cancer drugs.

This may have been related to the fact that 84% of the sample faced increases of only $25 to $50. Another study found that higher cost sharing was associated with significantly lower adherence to MS drugs in a subgroup of patients facing coinsurance, but not in a subgroup of patients facing co-payments.

Discontinuation was generally defined as having a continuous gap of time between prescription fills, during which the individual’s specialty drug supply has run out. The number of days used to define a continuous gap varied across studies (30, 45, 60, 90, and 135 days). Persistence was generally characterized as the duration of time between treatment initiation and treatment discontinuation.

Six of the 7 studies reported a statistically significant increase in discontinuation (or decrease in persistence) associated with increased cost sharing for at least 1 of the indications examined. Although the evidence was mixed for MS and cancer drugs, with 2 studies reporting absence of effects, all 3 studies examining biologics indicated for RA showed associations with cost sharing. However, the magnitude of the effects appeared small even among RA biologic users. For example, one study of employer-sponsored plans reported demand elasticity of —0.04 on the probability of continuation of newly initiated RA biologics (doubling the cost sharing was associated with a 3.8% relative reduction in the probability of continuation of the RA biologics, from 0.80 to 0.77), with continuation defined as use in the subsequent year.

Only 1 study examined the association between higher cost sharing and the number of specialty drug claims,

 which is an additional proxy for utilization. Among those patients who initiated therapy, demand elasticity on the number of claims was —0.04 for rituximab (a doubling in cost sharing was associated with approximately a 4% reduction in the number of claims) and –0.11 for other cancer drugs (bevacizumab, trastuzumab, imatinib mesylate, erlotinib).

One study captured spending on specialty drugs via both medical and pharmacy claims and reported varying effects of cost sharing based on the condition examined.

 The demand elasticities ranged from —0.07 to –0.21 (doubling of cost sharing for MS and RA specialty drugs was associated with 7% and 21% reductions in total spending on specialty drugs for those conditions, respectively). However, a similar change in cost sharing was not associated with spending on specialty drugs for cancer. At the same time, the study found that once patients initiated the specialty drugs, cost sharing had no impact on total drug spending among patients with any of the 3 conditions.

Although numerous studies have examined the effects of cost sharing on traditional pharmaceuticals,

 comparatively few have examined this issue for specialty drugs. Nevertheless, the literature on this topic is growing, with over half of the 19 studies included in this review published in the last 5 years. In general, findings from these studies revealed that higher cost sharing is associated with reductions in utilization of specialty drugs indicated for RA, MS, and cancer. Yet, the evidence is not consistent; the magnitude and/or statistical significance of the associations varied by type of specialty drug use outcome and by disease.

Higher cost sharing appears to have a stronger association with noninitiation or abandonment of a prescription at the pharmacy, and a somewhat smaller association—or no association&mdash;with refill behavior (eg, adherence, number of claims) and with specialty drug spending once patients have initiated therapy. Patients who have already chosen to fill specialty drug prescriptions may be less sensitive to costs because they have a more established understanding of the potential benefits of treatment and/or have already committed to treatment.

Overall, associations between cost sharing and specialty drug utilization outcomes were not as strong as those found for traditional pharmaceuticals.

 Based on the few studies in our review where price elasticity of demand estimates were available, price sensitivity for specialty drugs was lower than the —0.20 to –0.60 range reported in a 2007 review of cost sharing for traditional pharmaceuticals.

By comparison, the studies we reviewed reported elasticities of —0.03 to –0.33 for initiation, –0.04 for discontinuation, –0.04 to –0.11 for number of claims, and –0.07 to –0.21 for drug spending. On the one hand, higher prices for specialty drugs, combined with higher patient cost-sharing levels, may substantially reduce utilization for these medications. On the other hand, the lack of availability of close substitutes at lower OOP costs and the fact that these drugs are often used to treat complex chronic and life-threatening conditions means that patients have few alternatives; therefore, they may decide to pay the cost-sharing amount regardless of its magnitude.

In our review, cost sharing was more likely to show mixed or no associations with many specialty drug utilization outcomes for a life-threatening condition like cancer, as opposed to the relatively more consistent associations for RA. Costs may play a different role in patients’ treatment decisions when a medication is perceived to be a life-saving option. Nevertheless, no matter how high the demand, some patients may be unable to pay in the context of competing obligations and others may purchase medications but subsequently have problems paying for other necessities, face depletion of their financial savings, or even face bankruptcy.

 Such information is not captured in administrative claims, the data source typically used for examining the effects of cost sharing. 

As with any review, our conclusions should be interpreted in the context of our methodological choices. We opted to focus on only 3 disease areas—RA, MS, and cancer&mdash;because of their relevance to specialty drug spending and also because they have been the focus of most available studies. A handful of singleton studies have examined specialty drugs indicated for serious infections, HIV, osteoporosis, kidney disease, and transplants, but it is difficult to draw conclusions about such conditions from such a limited research base.

Limitations of the Evidence Base and Future Directions

In addition to summarizing the evidence, our review identified a number of important limitations in the existing literature that have implications for future research and policy:

Cross-sectional versus longitudinal study designs.

 The majority of available studies were cross-sectional, meaning they could not account for unmeasured differences between patients across plans. Thus, differences in characteristics that may be correlated with specialty drug use may have biased estimates of the effects of cost sharing. Although randomized designs are rarely feasible, there is a critical need for more quasi-experimental research studies using longitudinal data to evaluate outcomes before and after a specialty drug cost-sharing change, relative to a contemporaneous control group.   

UM policies and other specialty drug management approaches. 

None of the cost-sharing studies in our review considered the confounding, interactive, and/or individual effect of UM policies on specialty drug use. Specialty drugs covered under the pharmacy benefit are increasingly subject to more stringent UM tools, such as prior authorization, quantity limits, and, more recently, step therapy.

 If plans that required lower cost sharing were more likely to use UM tools as a substitute to help manage specialty drug costs, then the results from cross-sectional studies would underestimate the true effect of specialty drug cost sharing. Alternatively, if the plans that require higher cost sharing also use UM tools to further control costs, then the results from cross-sectional studies would potentially overestimate the true effect of cost sharing. Similar issues are pervasive if cost-sharing studies do not account for the presence or absence of other specialty drug management approaches, such as clinical care management, use of specialty pharmacies, and clinical pathway programs.

 Understanding the individual and interactive effect of all these approaches on specialty drug use and outcomes is crucial for payers who are using them, or considering them, as a substitute or complement to higher cost sharing.  

Specialty tier level or extremely high cost sharing. 

All but 2 studies in our review focused exclusively on private or employer-sponsored insurance data from 2009 or earlier, when lower cost sharing was more typical

; no studies examined the impact of a specialty tier benefit design.

 As a result, the generalizability of findings is limited. Over 90% of Medicare Part D plans now have a specialty tier wherein cost sharing ranges from 25% to 33%.

 Similarly, a recent analysis of exchange formularies found that approximately 60% of the Silver- and Bronze-level health insurance exchange plans offered in 19 states also contain specialty tiers with coinsurance.

 By 2013, almost one-fourth of workers with employer-sponsored coverage also faced a specialty tier.

 This highlights the need for future research to examine the effects of the higher cost-sharing levels common in today’s marketplace. In the meantime, it may be appropriate to establish policies that provide additional protection for patients against extremely high cost sharing for specialty drugs. This is of particular concern under Medicare Part D, where beneficiaries who do not qualify for low-income subsidies will need to spend up to $4850 out of pocket in 2016 before catastrophic coverage kicks in.

 Similarly, the widespread use of high deductibles coupled with high OOP maximums under exchange plans also raises concern for the health and/or financial well-being of patients with serious chronic conditions.

The authors review published evidence regarding associations between high cost sharing for specialty pharmaceuticals indicated for rheumatoid arthritis, multiple sclerosis, and cancer, and their utilization.

Vrushabh P. Ladage, BS

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