Rx Minute: Insurance Coverage for Chronically Ill Less Generous

Insurance Coverage for Chronically Ill Less Generous

recent study found that insurance coverage for chronically ill patients is less generous than those without a chronic condition, primarily due to higher cost sharing for prescription drugs. 

To assess generosity of coverage, the researchers - economists at the University of Minnesota, University of Wisconsin-Madison, and Indiana University - measured total out-of-pocket spending compared with total health spending and found that for households spending more than $8,000 per year, out of pocket spending was significantly higher in chronic disease households. 
 
This difference was not due to the two groups having different types of plans but to the different use of services within their plans. Controlling for total medical spending, households with a chronically ill member spend substantially more on prescription drugs. For example, households with chronically ill members with annual total spending between $4,750 and $5,000 spend almost 76% more on prescription drugs than other households. 
 
The findings also show that average cost sharing for prescription drugs is higher than for other health care services. As an example, the researchers note that across all households with annual total spending between $1,750 and $2,000, patients paid an average of about 46% out of pocket for prescription drugs, compared to 17% for outpatient services and 18-21% for an emergency room visit. For most other services, average coinsurance rates do not differ significantly between groups. 
 
The researchers conclude that "it is benefit design, not differences in the types of plans covering the [chronically ill and non-chronically ill], that explains the difference we observe in insurance generosity....the specific services used most by the chronically ill-prescription drugs-are, by design, reimbursed at a lower rate." Therefore, "the weight of the evidence suggests that the current standard in insurance design of higher coinsurance for prescription drugs is worth reassessing." 
 
Orphan Drug Development Strong 25 Years after the Orphan Drug Act 
 
study recently reprinted by Nature Reviews Drug Discovery reported that since the passage of the U.S. Orphan Drug Act (ODA) of 1983, 1,892 drugs have received orphan drug-designation and 326 have received marketing approval, representing more than 200 rare diseases. Since the mid-1990s there has been a nearly tripling in the annual number of orphan drug designations from 57 in 1996 to 165 in 2008. Orphan drugs represent a growing proportion of approvals, accounting for 30% in the most recent 5-year period. 
 
The ODA was intended to encourage the development of drugs for rare diseases, defined as affecting fewer than 200,000 people in the United States. Medicines designated as orphan drugs by the Food and Drug Administration, gain seven additional years of protection from competition with generic drugs, as well as additional tax credits to aid in the clinical development cost. 
 
The study, which examined data between 1983 and 2008, found that the average population size for orphan designations was about 39,000 patients, indicating substantial activity on the rarest diseases. In addition, there was a strong inverse relationship between disease population size and the number of orphan drug designations and approvals granted. 
 
Although no longer considered an orphan disease, HIV/AIDS had the most designations and second most approvals of any disease, "highlighting that the Orphan Drug Act can provide key early impetus to the development of interventions for a major epidemic disease while still rare and in its early stages of spread." 
 
The study concluded that the ODA "may have contributed to a large number of drugs being developed for a wide variety of diseases". In comparison to the ten years prior to the passage of the act, only ten orphan drugs received FDA approval, while in the twenty-five years following the act, more than 300 orphan drugs have been approved by the FDA.

 

More On PhRMA — powered by PhRMApedia