What’s California’s Prescription for Rising Drug Cost?

In a small room at a neighborhood clinic in Sacramento, a handful of hepatitis C patients wait to see their physician, hoping they’ll be found sick enough to be approved for a cure.

The low-income patients hope to be prescribed new breakthrough drugs, such as Sovaldi or Harvoni, which offer cures with almost no side effects. But treating the virus comes with a high price tag: at least $84,000 for a course of treatment. Getting Medi-Cal to pay for such drugs can involve a long, arduous process of tests and paperwork to prove infection has progressed to liver damage.

“If you’re practically dead … they’ll approve you,” said Laura Castillo, 54, who has been navigating the Medi-Cal system for four months to get Sovaldi. The former legal clerk said she contracted the virus from a blood transfusion in the early 1980s. Patients can live for years symptom free with hepatitis C, but left untreated, it can eventually lead to liver disease and death. Castillo has waited for treatment with substantial liver damage, which burdens her with overwhelming fatigue, depression and what she describes as a “brain fog.”

“It’s very, very frustrating, knowing that you have an illness and there is a cure, and you can’t do anything about it,” Castillo said.

Castillo’s physician, Dr. Catherine Moizeau, says she treats hundreds of Medi-Cal patients who wait months to get approval for the hepatitis C drugs. Moizeau says health plans, under state guidelines, are rationing the drugs because of the high cost. But Medi-Cal officials say patients receive the treatments based on medical necessity, not on cost.

Hepatitis C drugs are not the only part of California’s troubling drug spending picture. Despite recent cost-cutting measures, such as putting tighter controls on which patients get coverage for which drugs and when, California’s spending on pharmaceuticals has gone up, and so has the number of pricey drugs it is covering. It’s not clear state agencies have the means to balance drug cost pressures in a way that serves the best interests of patients, taxpayers and public health.

“There are very few tools in our toolbox” to control pharmaceutical spending, said Diana Dooley, secretary of California’s Health and Human Services. She says high prescription drug costs are a problem across California’s public and private health insurance, and should be addressed on a national level.

Dooley’s agency convened a working group, called for in Gov. Jerry Brown’s January 2015 budget proposal, “to address the state’s approach regarding high‑cost drug utilization policies and payment structures.” High-level discussions continue behind closed doors.

Drug price concerns will also be a matter of public policy debate this year. California voters are expected to decide in November on a measure to put a ceiling on what the state pays for drugs, and lawmakers have proposed drug price transparency requirements on pharmaceutical manufacturers and health insurers.

“We all have to do everything we can to try to control these drug costs,” Dooley said.

CALmatters analysis found that state prisons, a California public pension system, and a subset of the Medi-Cal program spent $600 million more on pharmaceuticals in 2014 than in 2012. That does not include the Medi-Cal population in a health plan, nor does it account for discounts the state may have received from drugmakers.

Over the past decade, Medi-Cal has seen a 57 percent increase in the drugs it covers that cost $600 or more per prescription. And when it comes to hepatitis C drugs alone, Medi-Cal estimates it will spend almost $482 million over this fiscal year and last. As of September 2015, only 4,200 Medi-Cal patients had received the drugs in that time period, out of 237,000 who are estimated to have the disease.

These cost trends exist despite new protocols various state agencies have introduced to tamp down on pharmaceutical spending.

In 2012, the California Public Employees’ Retirement System started requiring members to pay the difference for brand name drugs when a generic is available. Members now also experience more “step therapy,” where they must try cheaper drugs first before getting covered for more expensive drugs.

More drugs — about a 38 percent increase between 2012 and 2015 in one portion of the program — were placed on a list of drugs where a doctor had to get approval from a pharmacy benefits manager before a prescription is covered. Tens of thousands more people in CalPERS faced more controls on prescribed treatments because of the new policies.

“No one has (an) unlimited budget … not even in America,” says Melissa Mantong, a pharmaceutical consultant who makes recommendations to CalPERS management. “At some point, the resources we have, it’s not going to be able to take care of all the people that we need to take care of if we don’t use our resources wisely.”

Other California health programs are also cutting costs by getting stricter about which patients get which prescription drugs and how. In 2010, the California Department of Corrections and Rehabilitation introduced a computer system to steer providers to pre-authorized health care decisions, with anything outside of the standards needing approval. The prison system introduced tighter management of painkiller use, and patients taking 10 or more drugs. While the Department of Corrections says it has saved tens of million of dollars this way, drug prices are driving spending back up.

Medi-Cal says pharmaceutical costs are kept under control by a strong push toward generic drug use for the 10 million enrollees who get health services through health plans. Up to 95 percent of the prescriptions dispensed by these plans are lower-cost generics.

The Department of Health Care Services, which manages Medi-Cal, says it has a 20-year practice of controlling drug costs by negotiating deep discounts with drugmakers.

“We are negotiating as hard as we ever have been,” said Jennifer Kent, director of the Department of Health Care Services.

When Medi-Cal does not get a state-negotiated discount on a particular drug, medical providers have to request approval for coverage for the treatment.

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