In late May, the Institute for Clinical and Economic Review (ICER) announced it will evaluate the coverage policies of 15 of the largest commercial payers in the US. The new initiative is built on “Cornerstones of ‘Fair’ Drug Coverage”, a whitepaper published by the institute last September analyzing the ethical and practical dimensions of insurance coverage policy, while presenting a list of criteria for drug benefit design that deliver “fair” patient access.
In this first iteration, ICER will examine tiering, step therapy requirements, and elements of the prior authorization criteria for 28 specific drugs that ICER previously found to be cost effective to determine whether coverage policies are “fair.” The institute expects to publish its first annual “An Assessment of Barriers to Fair Access” report in October.
The new initiative signals ICER’s ambition to broker a grand bargain: fairly priced pharmaceuticals should be rewarded with fair patient access by the healthcare system. To understand how ICER determines “what’s fair”, we first need to understand drug benefit design particularly relating to cost-sharing and utilization management, the two areas ICER focuses on.
Background on US Health Plan Drug Benefit Design
Cost Sharing
The first consideration in drug coverage is the overall benefit design, which determines categories of covered benefits and the level of cost sharing for all members of an insurance plan. Most elements of cost sharing for drug coverage are determined by statute for patients in Medicaid, Medicare, and state health exchanges under the Affordable Care Act (ACA). In the commercial market, except for certain limits to cost sharing that are governed by the ACA, cost sharing is largely determined by employers and other plan sponsors.
Cost sharing is integrated into the structure of formularies. There are two fundamental types of formularies: open and closed. Open formularies (rare) generally cover all FDA-approved drugs, whereas a closed formulary allows for the exclusion of certain drugs and gives preferential formulary placement, thus, greater ability to drive market share, for “preferred” drugs that the manufacture offers a lower list price and/or greater rebates. It is important to note that closed formularies always have some process for patients and/or providers to request exceptions to a drug not on the formulary if there is demonstrable medical necessity.
For drugs in the formulary, nearly all insurance plans except Medicaid use tiers with differential cost sharing. The first, or lowest tier -- associated with the lowest level of cost sharing—is often designated for lower cost generic drugs. Branded drugs are typically placed in one or more higher tiers with varied levels of cost sharing. When there are multiple brand name drugs available, one of them is often designated as “preferred” and placed on a lower tier, often the 2nd tier, the others are allocated to a higher tier. Brand name drugs can be preferred due to superior efficacy, lower net cost to the plan sponsor, or lack of available alternative/generic equivalents.
An increasing number of commercial plan sponsors and insurers now have expanded formulary tiers to include special tiers for the highest cost specialty drugs. For these drugs, some benefit designs shift from copayments used in lower tiers to coinsurance (often 20-50%) that is almost always linked not to the lower negotiated price but the list price of the therapy.
Across all commercial insurance plans, out-of-pocket limits for all services, including prescription drugs, are set each year by the ACA. Medicare Part D does not have a cap on out-of-pocket spending.
Formulary Development
At its heart, formulary development can be summarized as following:
Assessment of clinical trial evidence by payer staff, focusing on safety and effectiveness
Consideration of relevant specialty society guidelines and formal evidence reviews
Deliberation on this evidence, with key evidence votes or judgments on formulary status delegated to an independent Pharmacy and Therapeutics (P&T) Committee
Integration of economic considerations, often performed by a “financial/contracting” group including payer staff involved in negotiating drug prices and tiering, and in some cases, provider contracts.
There are three key elements of formulary design:
1. Timing of Coverage Following FDA Approval.
Immediately following approval by the FDA, “new-to-market” drugs are not formally covered by insurers until the internal evidence review and formulary placement process have completed. Centers for Medicare and Medicaid (CMS) guidance stipulates that payers must make a “reasonable effort to review a new chemical entity within 90 days, and will make a decision on each new chemical entity within 180 days of its release onto the market, or a clinical justification will be provided if this timeframe is not met….”
2. Prior Authorization Protocols and Step Therapy
Prior authorization protocols require that the clinician or the patient demonstrate that certaicriteria have been met before coverage is granted. These protocols frequently include clinical eligibility criteria (e.g., method of diagnosis, level of severity) that must be met by patients in order to receive coverage of a drug. Confirmation for eligibility may require documentation from simple provider “attestation” to the submission of extensive medical records.
“Step therapy” is the sequential use of therapies. There are two different types of step therapy in drug coverage with completely different rationales. The first, a “regulatory” step therapy, is when the prior authorization protocol requires prior unsuccessful treatment with another treatment because the FDA label includes this same requirement.
The second, an “economic” step therapy, is not linked to FDA label requirements and instead, is intended to favor less expensive treatments when there is a clinically appropriate choice among two or more options. It is often used among drugs with the same mechanism of action and raises the greatest questions about appropriate drug benefit design and implementation.
Related to economic step therapy but distinct in other respects is a coverage requirement to switch from current treatment to a different treatment that is deemed to be equivalent in effectiveness and less expensive to the payer. This required “non-medical switching” has been used in the past primarily when a generic becomes available for an existing branded drug. Today, in the US, some plan sponsors have adopted payer formularies that allow for required switching from one brand drug to another (usually in the same drug class) in order to favor the drug with lowest net cost to the plan sponsor.
For patients, required switching from a drug on which they are satisfied represents an even greater perceived risk than economic step therapy that limits their first choice when beginning therapy.
3. Restrictions on Prescriber Qualifications
Coverage for some drugs may be restricted to certain clinicians with specialty training in the relevant field or who have access to regular consultation with specialists. These restrictions may be put in place when drugs have important risks or known side effects that require specialist clinician management. In addition, specialty prescriber restrictions may be used when the diagnosis of the condition or its overall management require a high level of experience and expertise.
Though the approach can address some concerns about overuse or misuse of a new drug, prescriber restrictions may create important barriers to gaining coverage, particularly in areas underserved by specialty clinicians.
ICER’s “Cornerstones of ‘Fair’ Drug Coverage”
ICER’s “Cornerstones of ‘Fair’ Drug Coverage” focus on cost-sharing and utilization management and include the following five areas:
Cost-sharing provisions and tier placement as part of the drug benefit design
Timing of development of prior authorization protocols following FDA approval
Clinical eligibility criteria
Step therapy and coverage requirements to switch medications
Restrictions on prescriber qualifications
ICER has prominently factored “drug pricing” into the assessment of formulary tier placement and related patient cost sharing for a drug. Its fair design criteria for cost-sharing require payers to place at least one drug in every class on the tier with the lowest applicable cost sharing when the net price of the drug represents “good value for money” based on a payer’s assessment. Conversely, if the drug is priced above an established value threshold, payers may use tiering and higher cost sharing to create negotiating leverage with the drug maker to achieve a lower price. The criteria also call for cost-sharing for patients to be based on the net price to the payer not the list price.
Overall, the agency believes the goal of differential cost sharing for drugs should be to incentivize patients and clinicians to select higher value treatment options, but not to be used to primarily shift health care costs to patients.
One key benefit design issue concerning clinical eligibility criteria is how the criteria can be used to narrow coverage from that implied or explicitly included in the FDA label. ICER has identified three scenarios where a narrower coverage policy may be justified:
to clarify certain terms in FDA label (e.g., “moderate to severe”, or to require a specific form of diagnosis when it is critical to select appropriate patient for the treatment), or
to triage patients by clinical acuity when anticipated demand for the treatment is so high that healthcare infrastructure will be severely constrained, or
to add requirements for specific clinical characteristics consistent with the patient eligibility criteria used in the pivotal trials underpinning FDA approval.
Except for these three scenarios, for drugs that with prices or price increases that have not been formally deemed unreasonable, ICER’s fair design criteria require clinical eligibility criteria not to deviate from the FDA label in a manner that would narrow coverage. Additionally, confirmation for eligibility should represent a light administrative burden.
In contrast, for drugs with prices or price increases that have been formally deemed unreasonable, clinical eligibility criteria may be used to narrow coverage by applying specific eligibility criteria from the pivotal trials underpinning the drug’s FDA approval. Confirmation for eligibility may represent a modest administrative burden.
Given the rationales behind “economic” step therapy and “non-medical switching” and the potential risks they pose to patients, ICER’s fair design criteria require among other things that the use of step therapy and required switching reduce overall healthcare costs not just drug spending. And the first-step therapy and required switching should be clinically appropriate and do not pose a greater risk of any significant side effect or harm. As related to cost sharing, higher cost-sharing should not always apply for patients who try the first-step therapy but must advance to the second-line agent due to side effects or lack of effectiveness.
To ensure timely access for new-to-market drugs, ICER’s fair design criteria require payers to evaluate new treatments expeditiously to minimize delays in access. Treatment evaluation should not be used as an indirect method to reduce utilization or to divert clinicians and patients to other insurers.
To maintain adequate access, ICER’s fair design criteria require that restrictive qualifications for prescribers be designed not to reduce utilization but be used only when necessary to ensure appropriate patient selection, adherence to evidence-based guidelines, dosing, monitoring for side effects, and overall care coordination.
What’s Not Covered
In the first iteration of the barriers to fair access report, ICER, however, will not review whether step therapy saves overall healthcare costs or whether patients who progress to a higher-tier drug as part of step therapy be subject to cost-sharing of the lower-tier drug. ICER’s Work Group, which guides ICER on the project composed of multi-stakeholders from patient advocacy group, clinical societies, private payers, PBMs and life sciences firms, will also not consider whether cost-sharing should be based on the list price or the "net price."
References:
CORNERSTONES OF “FAIR” DRUG COVERAGE: APPROPRIATE COST-SHARING AND UTILIZATION MANAGEMENT POLICIES FOR PHARMACEUTICALS, ICER, 8/28/2020
Barriers to Fair Access Assessment, Final Protocol, ICER, May 12, 2021
ICER, vocal critic of drug company pricing, turns scrutiny to insurers, PharmaDrive, 5/25/21, https://www.biopharmadive.com/news/icer-insurers-scrutiny-drug-plan-design/600767/ (Accessed 6/13/21)