An Update on Specialty Drug Tiers

Prior to the Medicare Modernization Act of 2003 and the development of the Medicare Part D drug benefit plan, specialty therapies were covered under the traditional drug tiers: Tier I for generic drugs, Tier II for preferred brand-name drugs and Tier III for non-preferred brand-name drugs. But, the Part D drug benefit plan created two new drug tiers: Tier IV, which is now found in most insurers’ plans, and Tier V, which is found in just a few. Depending upon the plan, specialty drugs that cost more than $600 per year can now be classified under Tier IV or Tier V. These lifesaving therapies tend to be infusibles/injectables to treat autoimmune/inflammatory diseases (Crohn’s disease, lupus, multiple sclerosis, psoriasis, rheumatoid arthritis, etc.), HIV/AIDS, cancer, hepatitis C, anemia, enzyme disorders (Gaucher disease), pulmonary arterial hypertension, immune disorders other than primary immune deficiency disease (PIDD) that rely on intravenous immune globulin (IVIG), osteoporosis, and the list continues to grow.

As of 2011, 90 percent of Part D plans will classify IVIG as a Tier IV drug, requiring beneficiaries to pay, on average, 33 percent of the cost of the drug until they reach the doughnut hole.* After that, beneficiaries will be required to pay 5 percent of the cost of year. And, according to a report by Avalere Health (www.avalerehealth.net), it is estimated that 50 percent of private medical plans will have a Tier IV plan in place in 2011.

While tier pricing can be a moneysaver for patients when paying premiums, these new tiers, instituted by either private insurers or Medicare, are pricing patients out of treatments. As a result, some states are reforming the way insurance companies can do business to ensure patients still have access to needed therapies. In 2010, the governor of New York signed into law legislation that prohibits private health insurers from creating specialty tiers with their prescription drug formularies in the state (see the related story in the October 2010 issue of BioSupply Trend Quarterly’s Washington Report.) The state of New York found that specialty tiering is contrary to the original purpose of insurance, which is to spread the costs; instead, it creates a structure in which those who are most sick pay more, and the insurance companies pay less.

On Oct. 14, 2010, the Senate Banking, Commerce and Insurance Committee held an interim study review on insurers’ prescription fee practices with the goal to work on a revised version of LB1017, the specialty tier legislation introduced in 2010 in Nebraska to eliminate specialty tiers and coinsurance, and cap out-ofpocket expenses for prescription medications at $1,000 for an individual policy and $2,000 for a group policy. The goal is to reintroduce LB1017 in 2011 with no opposition. Progress has been made in Arizona, California, Florida, Maryland and Minnesota, and at least another dozen states are getting ready to introduce legislation modeled after Nebraska’s legislation.

*Hargrave, E, Hoadley, J, and Merrell, K. Drugs on Specialty Tiers. MedPAC, February 2009, No. 09-1.