Pharma Gains from Rule On Health Insurance Benefits

Recent change likely to boost drug coverage by plans, but with variation in formularies.

Health plans offering coverage to individuals and small companies are more likely to cover multiple drugs in each class or category under revised regulations proposed by the Department of Health and Human Services in November. A key change in rules to implement the Affordable Care Act (ACA) is regarded as a big win for pharma, as some 20 million Americans are expected to enroll in plans sold through exchanges, greatly expanding the market for prescription drugs.

The revision affects prescription drug coverage under the ten essential health benefits (EHBs) that must be offered beneficiaries in plans sold through new insurance exchanges or offered in the individual and small group market. In its initial proposal several months ago, HHS said that plans must cover at least one prescription drug per USP category or class. That policy drew heavy fire from patient advocates and disease groups, as well as pharmaceutical companies, as likely to block access to necessary medicines for many individuals, especially those with special health needs.

HHS responded by changing the rule so that plans now will have to cover the range of drugs offered through the “benchmark” insurance plan selected by the state, which generally is the largest commercial plan offered to small businesses in that market. And most small group plans, according to research by Avalere Health, cover more than one drug per class. Although the specific coverage policy will vary among the states, the one-drug-per-class standard becomes a minimum for setting drug coverage – not the norm. The HHS proposal includes a guide for insurers to calculate the drug list count of the applicable benchmark plan, with an eye to achieving an accurate assessment of chemically-distinct drug entities.

At the same time, HHS does not establish “protected drug classes,” as found in the Medicare Part D drug benefit. Insurers and pharmacy benefit managers (PBMs) strongly opposed a requirement to cover “substantially all” approved drugs in a class, arguing that such an approach would hinder their ability to negotiate price concessions from manufacturers. The Pharmaceutical Care Management Association noted that giving plans “more flexibility to design clinically based formularies” would allow them to offer “more affordable, generous prescription drug benefits.”

The bottom line is that most health plans marketed to individuals and small groups, sold through exchanges and in the general market, will offer several drugs per class or category. Formularies will vary, though, and insurers will have more leverage negotiating prices than with Medicare drug plans.