Instructs the superintendent of insurance to deny policies imposing drug tiers and cost-sharing for prescription medication

Section 3 and 4 adds new paragraph to section 3216 and 4303 of the insurance law stating that every policy which provides coverage for prescription drugs can not categorize prescription medications based on specific disease or cost and charge based on a cost-sharing percentage.

Justification

HMOs and Pharmacy Benefit Managers (PBMs) are instituting a new "Tier 4" pricing system for some high-cost drugs that adds another tier of co-payment above the three-tier system ($5 generic, $10 preferred brand, $25 or more for non-preferred brand) familiar to most people who use private insurance. Tier 4 pricing requires beneficiaries to pay a percentage of the total cost of high-priced medications, causing monthly co-pays to jump from $25 per prescription up to $325 or even $4000.

The current health insurance system is increasingly unaffordable, regularly adding new barriers to access. According to the Kaiser Foundation, health insurance premiums rose 6.1% in 2007, faster than wages rising at 3.7% and inflation rising at 2.6%. Annual premiums for family coverage averages $12,106, with workers paying $3,281. Since 2001, premiums for family coverage have increased 78%, while wages have gone up 19% and inflation has gone up 17%. Furthermore, between 2000 and 2003, annual out-of-pocket spending rose $900 or 30% for employees with family coverage including insurance premiums, deductibles and drug co-payments, increasing from $1,890 to $2,790.

Multi-tiered formularies have undoubtedly transformed the pharmacy benefit landscape. By 2005, most workers with employer-sponsored coverage (74%) were enrolled in plans with 3 or more tiers, nearly 3 times the rate in 2000 (27%). While cost containment measures are necessary, certain cost-sharing policies, such as tier four measures, have exacerbated costs and created new barriers to access. Tier four policies charge a percentage of the total cost of high-priced specialty medications (20-33%) rather than a fixed co-pay, resulting in a rise in cost-sharing from average co-pays of $25 per prescription up to $325 or even $4000 in some instances. These policies often target vulnerable populations by driving prices up for extremely sick patients in order to reduce costs for healthy patients and/or to improve profit margins for Heal th Maintenance Organizations or Pharmacy Benefit Manager's. Families and individuals struggling with diagnoses of anemia, cancer, multiple sclerosis and hepatitis C who depend on cutting-edge medications for functioning or survival, have been severely burdened by a new pricing system implemented in 86% of the Medicare plans and 10% of private plans.

Several studies reveal that various cost-sharing policies create negative health outcomes by reducing utilization and increasing hospitalization. One report cited in the Journal of the American Medical Association identified 132 articles which examined the association between prescription drug plans cost-containment measures and salient outcomes. The results revealed that in the short-term, increased cost-sharing is associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy. Policies which worsen health outcomes must be prevented or halted in order to avoid costly long-term consequences, but more importantly to maintain high-quality healthcare for all New Yorkers.

Legislative history

S.7794 of 2008 04/28/08 Referred to Insurance

Fiscal implications for state and local governments

None.

Effective date

This act shall take effect on the 120th day with provisions.