Covered California to Cap Patient Costs for High-Priced Specialty Drugs

Covered California board members voted Thursday to become the first state health care exchange in the nation to impose price caps on high-cost specialty drugs to treat conditions such as hepatitis C and HIV.

The four board members unanimously agreed to impose $250 monthly limits on out-of-pocket prescription costs for most patients, creating a precedent that other government health exchanges could follow.

“I think Covered California’s going to set the model for the rest of the country now,” said Liz Helms, chief executive officer of the California Chronic Care Coalition, a patient advocacy group that lobbied for Thursday’s rule changes.

Helms said a number of health insurers participated in negotiating the caps and were agreeable in the end.

“Today I said, ‘Thank you’ to them, which is not something I normally do,” she said.

The California Association of Health Plans, a trade group based in Sacramento, did not take an official position on the changes. The group has expressed concerns that capping patient expenses shifts costs but doesn’t lower high drug prices.

“I think for us we were encouraged to hear board members voice concerns about the unsustainable increase in specialty drugs costs, and that ultimately, if the trend doesn’t stop, it’s going to increase premiums,” said Nicole Kasabian Evans, the group’s spokeswoman.

Programs such as Medi-Care and Medi-Cal have struggled with burgeoning health costs in recent years from drugs such as Harvoni, a potential cure for many patients with hepatitis C. The drug has a shelf price of $1,125 a pill, with a typical treatment cost that approaches $95,000.

Under Covered California’s current rules, enrollees could face a bill of more than $6,000 – their total yearly deductible – for the first bottle of Harvoni. The newly adopted rules, which apply in 2016, spread the cost over time.

After the vote, Covered California Executive Director Peter Lee called the board’s decision “aggressive action … putting consumers first.”

While most people enrolled in private insurance through Covered California will see their prescription costs capped at $250 monthly, others will have caps that range from $150 to $500 depending on the plan they’ve chosen. The plans are arranged in tiers from bronze to platinum, with the names of more precious metals reflecting plans with higher costs and greater benefits.

The board also adopted changes for 2016 that include prohibiting health insurers from placing all drugs to treat certain conditions, such as HIV, in their highest price category.

Some plans have placed all treatments for HIV and hepatitis C into a category that requires patients to pay up to 20 percent of the drug’s cost rather than a copay of $10 or $20.

The changes will apply to the approximately 1.4 million people enrolled in Covered California, though patient advocates are trying to extend similar protections to all state residents.

A proposal before the Legislature, Assembly Bill 339, mirrors changes adopted by Covered California. The bill, by Assemblyman Rich Gordon, D-Menlo Park, addresses the issue of how the costs of expensive treatments are split between patients and health plans.

A handful of other states have imposed cost restrictions legislatively, advocates said.

The cost of high-priced specialty drugs is one of the most pressing issues in health care.

Medical advances are expected to produce a series of blockbuster prescription treatments in coming years to treat cancer, Alzheimer’s disease and other severe and commonplace afflictions, said Anthony Wright, executive director of Health Access California. Patient advocates worry that pharmaceutical firms will charge high prices for each new drug while their patents on a product exclude competitors.

Gilead Sciences of Foster City, which manufactures Harvoni and a sister drug called Sovaldi, has earned billions of dollars in the past two years, while its drugs dominated the market.

The company has said its pricing reflects the costs of developing the treatments and the value they provide to patients and health insurers. Drug makers also typically negotiate significantly lower prices with government agencies and large group health plans.

A bill that would have required pharmaceutical companies to disclose their development costs and profits failed to clear the Assembly Health Committee late last month. The measure, Assembly Bill 463, by Assemblyman David Chiu, D-San Francisco, was put on hold until next year.

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