Pulling Back the Curtains on Obamacare Rx Usage

It’s fall and the 2015 Obamacare Exchange Rx insurance offerings will be presented to patients on November 15th. But at this point, what insights do American Rx brand managers and marketers actually have on the results of the Obamacare Rx experience in 2014?

Up until now, very little publicly available information on what Obamacare Rx utilization has been available. We’ve known next to nothing about the demographics of patients who used the program, and most importantly, the costs associated with various Rx therapeutic groups were unclear. All of this changed this past week.

On October 7, 2014 the New York Times published a story detailing the first six months of Rx experience with the Obamacare exchanges as reported by two of Obamacare’s major public exchange pharmacy benefit managers: Express Scripts and Prime Therapeutics.

As highlights, here are a few of the common experiences that both firms presented:

1. Seeking Serious Disease Treatment

Those who signed up for the Obamacare Rx offerings of these companies tended to seek treatment for serious diseases like HIV, Hep C and cancer more than those who are signed up for the private insurance offerings these firms sell.

2. Confirmed: “Sicker Population”

Based on the above point, six months into this Obamacare Rx program, one key concern is definitely confirmed: “What I can tell you officially today is that this (Obamacare patients) really is a sicker population,” said a spokesperson for Prime Therapeutics.

3. Overall, Older Population Signing Up

Those who signed up for Obamacare under these two companies tended to be older versus those signing up in the private offerings of the firms (approximately 44 years old for Obamacare v. approximately 37 years old in the private Rx insurance plans).

4. Substantial Rx Utilization

Both PBM programs are reporting that the Obamacare Rx patients are “eagerly using their new Rx benefits”.

5. Generic Utilization Very High

Express Scripts reported that 87% of the prescriptions being written and dispensed under these plans are for generics, which Express Scripts says is 6% higher than their private Rx plan utilization.     

So, now that curtains have been pulled back a bit on Obamacare Rx utilization, let’s think through this information.

Serious Disease Treatment

First, given the information in points #1 & #2, it is not surprising to learn from Express Scripts that, “Exchange enrollees fill 59% more prescriptions for ‘specialty medications’ than other (privately) insured individuals.”  That is, since they are “sicker” and reflecting higher levels of “serious” illness, they are utilizing drugs to manage these illnesses. Generally, this means more use of expensive “specialty drugs”. 

That “specialty drug” statistic that has gotten everyone’s attention – and it should. It means, according to Express Scripts, that, “Despite accounting for only 1.3% of total pharmacy claims, ‘specialty medications’ in the Express Scripts Obamacare exchanges consume 38% of the total pharmacy spend for the public exchange plans.”

Overall, Older Population Signing Up

Setting aside HHS’ claims that Obamacare succeeded in attracting a younger population during the initial sign ups, the Express Scripts and Prime Therapeutics reports seem quietly to dispute that notion. The average age of those signing up in the public exchange plans was 44 years old versus the 37 year old average of those using private plans offered by the firms.

What does this mean?  Well, going back to the “They-are-sicker” statement, dealing with older, “sicker” patients, normally translates into higher medical costs.

Substantial Drug Utilization

Playing off of the above point, you could predict then, that utilization of the Rx offerings that these patients now have available would be robust. That’s just what’s happened according to both programs. That’s good, since access to and proper use of drugs will cut overall medical costs.

High Generic Substitution Rate

Perhaps dampening the brand name industry’s possible enthusiasm regarding this last point, however, is the clear indication that Obamacare patients are big consumers of generic drugs. The reported 87% rate of generic utilization in the first six months of the program is high; as noted earlier, actually 6% higher than private pay patients, according to ExpressScripts. However, given that most of the Obamacare patients are obtaining Rx care under Silver Plan programs which offer low buy in premiums, but very high copays, it should not surprise us that these Silver Obamacare patients are opting for inexpensive generic scripts.

“Specialty Drug” Cost

That said, what does fly into the face of the remarkable generic utilization rates is the reported high cost of “specialty care” products.  Somehow, those who are sickest with cancer, HIV, and Hep C in Obamacare are getting access to a lot of very expensive “specialty” Rxs. And this is apparently occurring in the face of high copays, four tier step care, and several other access “dampeners”.

These statements from the Times article starkly portrays what is happening at both of these large Obamacare PBM players:

“Prime’s study…found that drugs to treat H.I.V. and hepatitis C made up about 18.5% of total drug spending for members with exchange plans, and that spending on H.I.V. was 228% higher than those with (private) employer plans. Spending on hepatitis C drugs, which includes the expensive new treatment Sovaldi, was 160% higher than in employer plans.”

“Express Scripts reached similar conclusions. H.I.V. medications were the most costly treatment category in the exchange plans, accounting for 11.3% of total spending. But H.I.V. drugs did not even appear in the top 10 costliest treatment categories for employer plans.”

Another category that is not mentioned directly in the Times story is cancer care. One would think that if all these newly insured, older, and previously not well cared for Obamacare patients are not doing well with Hep C and HIV, that you could also anticipate substantial cancer issues appearing, too. In fact, that is the case.

In the Express Scripts graphic on Rx utilization, included in the Times report, the cancer category, while not larger than the HIV utilizations - was still higher that the Hep C utilization. What does that tell us?

Again, if we look at the literature on the recent cost profiles for cancer treatment, as well as the large number of new “specialty drug” cancer treatments that are coming on line shortly, it has to have Obamacare PBM formulary managers sweating bullets. Consider this October 3, 2014 story from JAMA:

“In 2013, spending on specialty drugs, a category dominated by drugs used to treat cancer, totaled $73 billion. That year, 8 new cancer drugs were approved by the US Food and Drug Administration (FDA). The Medicare “price,” which includes patient co-insurance, for these 8 drugs ranged from $7,000 to $12,000 per month, with some products showing overall survival improvements of nearly 6 months and others showing no improvement in overall survival.”

So where does this growing number of older, sicker patients, making robust use of generics, and also utilizing hyper expensive “specialty drugs” lead the Obamacare Rx program?

Some argue that once the “bulge” of the initially under cared for patients gets through the start-up of the Obamacare Rx programs that everything will settle down and all will be well.

Maybe so…But here’s another take.

These utilization numbers are only for the first six months of the program. Today, about a year into this experience, around 7 to 8 million patients are accessing some form of Obamacare Rx programming. Let’s just say these trends continue and that longer term, the 30 to 40 million other “uninsured” patients that the President used to talk about needing Obamacare eventually find their way into the Obamacare Rx drug plans.  What can we anticipate?

Well, based on the limited, experiential data the Times has reported…here’s a guess:

First, this “sicker patients” factor will not abate.  No matter if they get into the system now or later, these patients are very likely going to be “sicker”. Yes, they have been denied care and discriminated against in the past. But that does not negate their underlying issue: Folks signing up for Obamacare, by and large, will need of lots of Rx medical care, and much of it, according to this initial data, will be very expensive.

Second, it’s likely the younger Obamacare patient that the Administration continues to bank on to keep the actuarial costs down, will eventually show up, and maybe in large numbers.

But here’s a surprise reported with young Obamacare Rx users: One clear message from both the Express Scripts and Prime Therapeutics six month Rx data is that HIV Rx care costs expended on the younger Obamacare patients who appeared later in the sign up, was high – unsettlingly high – 228% higher in Prime Therapeutics Obamacare offerings versus their private Rx offerings; and over 11% of total spending for Express Scripts Obamacare Rx programs versus not even making the top ten of utilized drugs in private care plans.  So, the “young invincibles” may not be so invincible?

And finally, are these “specialty drugs” for cancer, HIV and Hep C really the ticking time bombs for all of the public exchange Rx formularies? What if the nearly 40% of Express Scripts drug budgets consumed by “specialty drugs” in the first six month ends up being the norm, longer term? Will use of these products overwhelm access to other Rx’s?  Based on the potential for millions of new sign ups, this projected utilization rate would seem unsustainable.

In short, the curtains are finally being pulled back on Obamacare Rx use…and there’s a lot for Rx product managers to see.