My son Benjamin has a serious growth hormone deficiency. He’ll be 13 years old in May but could easily pass for a boy of 8 or 9. In fact, many 8- and 9-year-olds are taller than him. He’s a full head shorter than all of his pals in seventh grade.
Although his mother and I don’t have medical degrees, we had Benjamin’s diagnosis pegged when he was 3 years old and still wearing clothing for an 18-month-old.
Several trips to his pediatrician along with a couple simple tests to assess Benjamin’s bone age confirmed with data what we could see with our own eyes. Our boy wasn’t just in the bottom percentile in average height for kids his age – he was in the sub-basement.
In 2013, our doctor referred us to an excellent pediatric endocrinologist at Loma Linda University Medical Center. We only had to wait eight months to see him. More tests followed, including a particularly nasty one that required a half-dozen blood draws over three hours.
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Again the outcome was predictable: Benjamin wasn’t producing enough growth hormone on his own. He’d need help.
The good news, the specialist informed us, is that treatment would be easy. Benjamin would need daily growth hormone injections for the next six to seven years. Without those injections, he would likely end up not more than 5 feet tall at maturity – about my wife’s height. With treatment, Benjamin could easily reach 5 feet, 7 inches – almost as tall as me.
As it turns out, getting a prescription for human growth hormone and filling it are two very different things.
Human growth hormone is a specialty drug, a category of pharmaceuticals that includes medications for cancer, rheumatoid arthritis, hemophilia and HIV. As the name would suggest, specialty drugs aren’t cheap. There are no generic alternatives.
As such, insurance companies treat specialty drugs differently. Instead of having a flat co-payment, consumers pay co-insurance, which is a percentage of the price the insurer has negotiated with the drug’s manufacturer. Our co-insurance is 30 percent.
So specialty drugs have always been expensive, and co-insurance is not new. But the Patient Protection and Affordable Care Act turned a cost problem into a bona fide cost crisis – pricing middle-class families out of an already heavily regulated market, sometimes forcing people to seek alternatives in Canada or Mexico, and leaving many patients to suffer.
Obamacare’s critics – many on the left as well as the right – weren’t wrong when they complained that the law would be a gift to insurance companies. Although the law capped out-of-pocket medical expenses, specialty drugs were exempt. But that only perverted an already distorted marketplace, encouraging insurers to raise consumer costs while narrowing their choices.
Much less understood, however, was how the law would protect and foster the growth of “pharmacy benefit managers,” or PBMs.
PBMs are prescription drug insurers and predate Obamacare. They act as middlemen between pharmaceutical companies and consumers. No other country in the world has pharmacy benefit managers. They are unique in America’s highly regulated health care market.
Our pharmacy benefit manager is CVS Caremark, which is the second largest in the United States and the source of unending frustration to 65 million customers.
Negotiating the health care bureaucracy isn’t easy even when the ailment is straightforward. But when you’re dealing with a chronic condition, it’s not much of an exaggeration to say the inner workings of Disneyland, the Council on Foreign Relations and the National Security Agency are the platonic ideal of transparency compared to those of our insurer.
My son is covered under my wife’s insurance. As with tens of millions of other Americans, her employer changed its benefit plans at the beginning of 2014 to comply with Obamacare’s coverage mandates.
We started the approval process for our son’s first growth hormone drug in November 2013, but we didn’t receive approval until Jan. 1. Even if the approval had arrived in time, we wouldn’t have been able to stay with that medication for very long. Under my wife’s old insurance – which had a fairly high deductible – we could have had a three-month supply of the drug for $150. Under the new benefits, a 25-day supply would eventually cost $525.21.
Before that, Caremark denied three growth hormone drugs our doctor prescribed. The insurer finally approved a drug called Norditropin, only to tell us this past November that it would no longer cover it this year. Instead, we would need our doctor to prescribe Humatrope – one of the three drugs Caremark had denied us nine months before.
Why did Caremark drop coverage of one drug and pick up coverage of another? Nobody could quite explain that, either, although the reasons became a bit clearer a few weeks ago.
In theory, pharmacy benefit managers are supposed to negotiate the best prices for drugs. In reality, the insurer and the drug company work out the best deal they can under the existing regulatory regime. That’s why Caremark will only cover one growth hormone treatment, instead of four or five.
That’s also why our co-insurance for Humatrope is $1,039.63 for a 30-day supply – roughly double what we paid last year for Norditropin.
We’re not alone, obviously. An analysis published in December by Avelere Health, a consulting firm, found that insurance plans charging co-insurance of 30 percent or greater for specialty medications have increased from 27 percent of popular mid-priced “silver” plans in 2014 to 41 percent in 2015.
“Co-insurance may make medication costs unpredictable,” the Avelere study notes. “Changes in cost-sharing requirements from year to year may surprise some medication-dependent patients.”
No kidding. I would compare it to playing the lottery without the thrill. You never know what numbers will pop up, and your odds of winning are infinitesimally small.
Over the past three weeks, my wife and I have spent hours on the phone with our son’s specialist, two pharmaceutical companies, and our pharmacy benefit managers, trying to figure out some way to manage our costs. The drugmaker offered $200 in “co-pay assistance,” which isn’t bad. But we learned something new and contradictory with every call to Caremark.
One rep told us Caremark’s various divisions – the insurance side, the specialty pharmacy side, the shipping side, the management side – all “work hand in hand.” The very next rep explained she couldn’t give my wife the information she requested because “we all work independently.”
Two weeks ago, Caremark’s rep quoted a retail price of $7,262.90 for Humatrope, with an insurer-negotiated price of $3,465.44 for a 30-day supply, which with our 30 percent co-insurance put our cost at $1,039.64.
On Wednesday, another rep gave us last week’s negotiated price of $3,465.44 as the retail price, with a new negotiated price of $2,425.21, which made our co-insurance cost $727.74. My wife followed up with another call 20 minutes later and received yet another answer from yet another rep.
It’s been infuriating for the both of us. “I just want to get this medicine for my son,” my exasperated wife said. “And I just want to know what we’re going to pay, or if it’s going to change tomorrow.”
If specialty drug costs continue to rise, then why not just cap those costs the way Obamacare does for other out-of-pocket medical expenses?
Because price controls don’t work. Fixed costs tend to waste resources and encourage producers to limit supplies. Price caps also discourage innovation. Why pour hundreds of millions into developing new drugs if you may not see much of a return on investment?
Through all of this, we consider ourselves lucky that our out-of-pocket cost will only be $839.63 a month with the co-pay assistance. Not that we can afford it. Benjamin is out of medicine for the moment until we can figure out how to make it work through the end of this year – when Caremark will no doubt switch medications on us again and this nightmare can begin anew.
But what we’re dealing with is small compared to what many other chronically ill patients face. Some rheumatoid arthritis treatments cost $5,000 a week. The new cure for hepatitis C costs roughly $150,000 for a course of treatment that runs up to 12 weeks. Gene therapies are even more expensive. Who can afford that? Either very wealthy people or people who qualify for Medi-Cal.
That leaves the middle class with fewer affordable options under the Affordable Care Act, which has succeeded only in piling regulation atop regulation to protect pharmaceutical makers and insurers, not patients.
For any reform to succeed, Congress needs to unravel the rules that subsidize insurers and insulate drug companies from competition at the expense of taxpayers and consumers. That isn’t socialism – that would be a free market working as it should.
Ben Boychuk is associate editor of the Manhattan Institute’s City Journal. Contact him at firstname.lastname@example.org.