Specialty Drug Spending After State-Mandated Out-of-Pocket Caps

August 6, 2020
Laura Joszt, MA
Laura Joszt, MA

Laura is the editorial director of The American Journal of Managed Care® (AJMC®) and all its brands, including The American Journal of Accountable Care®, Evidence-Based Oncology™, and The Center for Biosimilars®. She has been working on AJMC® since 2014 and has been with AJMC®'s parent company, MJH Life Sciences, since 2011. She has an MA in business and economic reporting from New York University.

Despite concerns, legislation to cap out-of-pocket payments for specialty drugs has not been shown to shift costs to health plans, thereby increasing insurance premiums, according to a study published in New England Journal of Medicine.

Despite concerns, legislation to cap out-of-pocket payments for specialty drugs has not been shown to shift costs to health plans, thereby increasing insurance premiums, according to a study published in New England Journal of Medicine.

Researchers analyzed 27,161 people with rheumatoid arthritis, multiple sclerosis, hepatitis C, psoriasis, psoriatic arthritis, Crohn disease, or ulcerative colitis, who were under the age of 65 and in commercial health plans from 2011 to 2016. Since 2018, there have been 11 states that have introduced specialty drug spending-cap legislation, but there has been little evidence about the effect state-mandated cost-sharing caps have on patient and health plan spending.

“Addressing this gap will help to inform state and federal policies that aim to balance patient and plan spending for these important treatments,” the authors explained.

Specialty drugs are good candidates for generous coverage, they argued, because these therapies are usually clinically important and experience limited price sensitivity because they are so clinically important. Treatments for hepatitis C are curative, whereas treatments for multiple sclerosis, rheumatoid arthritis, or Crohn disease improve quality of life. Usually, there is a lack of appropriate substitutes for these treatments.

The study period included the 3 years before and 1 to 3 years after the specialty drug spending-cap legislation was enacted in Delaware (2014), Louisiana (2015), and Maryland (2016). All 3 states capped out-of-pocket payments for specialty drugs at $150 per prescription. These states were compared with neighboring states that did not enact caps: New Jersey as a control for Delaware, Arkansas as a control for Louisiana, and Virginia as a control for Maryland.

Among users in the 95th percentile of spending on specialty drugs, there was a 32% reduction in spending (–$351) per user per month (95% CI, –$554 to –$148). The caps were not associated with changes in other out-of-pocket spending, health plan spending, or, for the most part, specialty drug utilization. The only exception was that there was an increase in specialty drug utilization in Delaware in the third year post policy change. Delaware is the only state with 3 years of postpolicy observation.

As for the concern that specialty drug caps could increase health plan spending, the authors noted that the caps actually strengthen the risk-spreading function of insurance without increasing spending for the broader population.

There were a number of limitations that the authors noted, including that confounding is a possibility with any observational study and that the data set did not separate deductibles, which were not subject to the caps, from co-payments and coinsurance. Analyzing total out-of-pocket payments could have reduced the precision of the estimates, they explained. They also suggested evaluating the caps in the longer term.

“Many states and the federal government have considered out-of-pocket caps to reduce the spending burden on patients, but a concern is that these caps could increase insurance premiums,” the authors concluded. “The results we obtained with a quasi-experimental approach suggest that caps targeting out-of-pocket spending on specialty drugs can reduce the financial burden on the patients with the highest levels of spending without increasing spending on drugs or other care for the larger population.”

Reference

Yeung K, Barthold D, Dusetzina SB, Basu A. Patient and plan spending after state specialty-drug out-of-pocket spending caps. N Engl J Med. 2020;383:558-66. doi:10.1056/NEJMsa1910366