DEFINING contrast A closer look at how cost-share subsidized members use prescription drugs and what plan sponsors can do to manage risk and costs The public exchange has dominated health care headlines since its inception in 2014. Enrollment for 2017 is underway and it s top of mind for many health plans. Though the future of the public exchange is unclear, one thing is certain it has offered a novel opportunity to analyze a new type of health care consumer. Serving more than 1 in 6 members who purchase benefits through the public exchange, Prime Therapeutics (Prime) has unique insight into this population s use of prescription drugs. In this report, we analyze 18 months of data from an average of 1.9 million public exchange members to explore one distinct subset of the population, members who receive cost-share subsidies. As the most recent data illustrates, drug utilization and spend deviate for this population opening the door for targeted strategies to mitigate risk, optimize outcomes and manage costs. Cost-share subsidies and the lower-income members receiving these subsidies haven t received as much attention as premium subsidies. Our analysis shows that this population uses drugs differently, and with their significant cost impact, they merit careful examination from plan sponsors. In this report, we delve into data from 1.9 million of Prime s public exchange members receiving cost-share subsidies, from January 2015 to June 2016, to explore: How lower-income members use prescription medicine How this use varies from public exchange members without cost-share subsidies and commercial members How risk management programs are changing, and how health plans can start to plan for including prescription drugs into risk
DEFINING cost-share subsidies As of March, more than 85 percent of the 11 million people with coverage through the public exchanges were receiving premium subsidies. 1 But premiums aren t the only health care costs subsidized through the Affordable Care Act (ACA). More than 60 percent of Prime s members receiving coverage through the public exchanges also receive cost-share subsidies. Cost-share subsidies help to reduce individuals out-of-pocket costs for covered health plan services, including prescription drugs. To receive cost-share subsidies, an individual s income must be less than 250 percent of the federal poverty level (FPL). 2 For 2017 plans, this translates to $29,700 for a single person and $60,750 for a family of four. The actuarial value (the percent of total costs the health plan pays) for cost-share subsidized plans can reach as high as 100 percent for certain individuals. 2 Cost-share subsidies are only available for silver plans. Figure 1: Public exchange cost-share subsidy requirements and actuarial values (2017) 2 Income level (% of FPL) Actuarial level (average % of plan-paid costs) Out-of-pocket maximum (individual/family) 250%+ (no benefit subsidy) 70% $7,150/$14,300 39.7% 200% to 250% 73% (AV73) $5,700/$11,400 33.6% 150% to 200% 87% (AV87) $2,350/$4,700 18.9% 100% to 150% 94% (AV94) $2,350/$4,700 7.8% Total % of public exchange members receiving cost-share subsidies 60.3% % of total Prime public exchange membership members receiving cost-share subsidies 60.3% More than 60 percent of public exchange members receive cost-share subsidies that decrease out-of-pocket costs. 2
DEFINING demographics Members receiving cost-share subsides are, on average, 3.5 percent (1.4 years) older than public exchange members not receiving cost-share subsidies. They re also nearly 9 percent more likely to be female. From 2014, (the first full year of exchange data), like the rest of the public exchange population, age for this group has trended downward more than one year. However, the high proportion of female enrollees has remained roughly the same. Figure 2a: Cost-share subsidized public exchange member demographics Member group Average age % female Public exchange* 40.5 52.5% Cost-share subsidized public exchange members 41.9 57.2% *Excluding members receiving benefit subsidies Figure 2b: Cost-share subsidized public exchange member demographics by actuarial value Member group Average age % female AV73 40.9 54.5% AV84 42.3 55.9% AV94 41.9 58.5% AV = Actuarial value 9% 1.4 Public exchange members receiving cost-share subsidies are 9% more likely to be female than those not receiving cost-share subsidies. Public exchange members receiving cost-share subsidies are 1.4 years older, on average than those not receiving cost-share subsidies. 3
DEFINING key prescription drug metrics and comparison Public exchanges members receiving cost-share subsidies use more prescription than those who do not, but fewer of these are specialty medicines. Despite this lower use of specialty drugs, benefit-subsidized members drove higher overall drug spend 13 percent greater than those without cost-share subsidies. This spend results from a higher prevalence of chronic conditions such as high blood pressure and diabetes. Despite a decline in utilization nearly 10 percent from 2014, per member per month (PMPM) spend was up more than 40 percent. Use and spend by actuarial value Use and spend patterns vary further when analyzed plan actuarial value (AV). While all levels drove higher spend than public exchange members without cost-share subsidies, utilization for AV73 plan members was slightly lower at 4.7 percent. However, higher specialty utilization from AV73 members drove higher overall PMPM spend compared to other cost-share subsidized groups. As actuarial values rose, we saw a slight increase in 90-day supply utilization, which helped drive higher per member per year utilization but kept PMPM spend, comparatively speaking, in check. Use and spend compared to commercial membership Although the drugs and categories varied, overall use and spend for cost-share subsidized members for the first half of 2016 followed a trend cycle typical to Prime s commercial and non-cost-share subsidized populations. Both started lower than 2015 in January of 2016, then climbed upward. When each month of 2016 was compared to the same month in 2015, utilization and spend were both trending higher. Figure 3a: Utilization, channels and spend Despite lower use of specialty drugs, cost-share subsidized members drove 13% higher overall drug spend. Cost-share subsidized public exchange Gross PMPM spend $111.25 13.0% Utilization (per member per year) 13.8 4.6% Specialty utilization 0.0047 6.4% Specialty spend as a % of total spend 28% 12.6% 90-day supply utilization 34.5% 1.2% Cost-share subsidized vs. public exchange* *Excluding members receiving cost-share subsidies 4
Figure 3b: Utilization, channels and spend for cost-share subsidized public exchange members by AV AV73 AV84 AV94 Gross PMPM spend $111.83 $113.65 $102.97 Utilization (per member per year) 12.6 13.7 14.2 Specialty spend as a % of total spend 30.1% 29.5% 27.6% 90-day supply utilization 33.9% 34.1% 35.2% As AV increased, so did utilization. AV94 members used nearly 13% more prescriptions than AV73 members, due in part to higher 90-day utilization. Specialty vs. traditional Members receiving cost-share subsidies used fewer specialty medicines and spent less on them (as a percent of total spend) than public exchange members without subsidized cost-share. But that doesn t mean spend for expensive specialty medicines was low. Drug costs for conditions such as hepatitis C, HIV and autoimmune diseases still drastically outpaced utilization, with a specialty spend ratio nearly 60 times that of specialty drug utilization. Specialty use and spend varied greatly within AV groups. As AV increased, specialty utilization and spend as percent of overall spend declined. This may be partially due to the higher percentage of females in the population along with economic factors limiting specialty drug availability. HIV was the third-highest spend category for this group, and according to the Centers for Diseases Control and Prevention, men account for more than 76 percent of people living with HIV. 3 Traditional medicine use was higher for members receiving cost-share subsidies, particularly for diabetes drugs. 40% increased Despite a decline in utilization from 2014, PMPY spend for cost-share subsidized members more than 40%. 5
DEFINING trends in utilization High blood pressure medicines were the highest utilized both inside and outside of the public exchange. But the similarities paused there. Ranking of the next six categories varied. Pain, diabetes and seizure medicines ranked higher for cost-share subsidized members than other public exchange members and commercial members. Depression, high cholesterol, and estrogens and osteoporosis medicines ranked lower. Gastrointestinal disorders, respiratory and ADHD mirrored other populations. Utilization of the most expensive drugs (as measured by PMPM spend) looked very different for cost-share subsidized exchange members. This subgroup outpaced commercial members by at least 100 percent for all of the top 10 drugs. The mostly drastic utilization differences were seen on a PMPM basis in hepatitis C blockbusters Harvoni and Sovaldi, at 200 and 400 percent, respectively. Top HIV drug utilization also surpassed commercial use by more than 200 percent for Atripla, Stribild and Truvada. When compared with other public exchange members, cost-share subsidized members had moderately higher use of Harvoni (hepatitis C), Humira Pen (autoimmune), and Lantus Solostar and Novolog FlexPen (diabetes). Use of HIV drugs Truvada and Atripla was lower. Figure 4: Top categories by utilization High blood pressure medicines was the top therapeutic category for utilization inside and outside the public exchange. 6 Therapeutic categories Cost-share subsidized public exchange utilization PMPY Public exchange* drug category utilization ranking 1. High blood pressure 3.16 1 1 2. Pain 1.58 4 3 3. Depression 1.39 2 2 4. Diabetes 1.37 5 5 5. High cholesterol 1.20 3 4 6. Seizure 0.67 7 7 7. Estrogens and osteoporosis 8. Gastrointestinal disorders 0.65 6 6 0.58 8 8 9. Respiratory 0.45 9 9 10. Attention deficit hyperactivity disorder (ADHD) *Excluding members receiving cost-share subsidies **Excluding public exchange members 0.24 10 10 Commercial** drug category utilization ranking
Figure 5: Utilization of top drugs by spend Drugs Cost-share subsidized public exchange utilization PMPM Cost-share subsidized vs. public exchange* 1. Harvoni (HCV) 0.003 50% 200% 2. Humira Pen (auto) 0.011 10% 120% 3. Sovaldi (HCV) 0.001 = 400% 4. Atripla (HIV) 0.010 23% 233% 5. Enbrel Sureclick (auto) 0.006 = 100% 6. Stribild (HIV) 0.008 = 300% 7. Truvada (HIV) 0.013 19% 225% 8. Lantus Solostar (diabetes) 0.052 40% 205% 9. Novolog Flexpen (diabetes) 0.035 30% 192% 10. Crestor (cholesterol) 0.062 3% 100% Cost-share subsidized vs. commercial** *Excluding members receiving cost-share subsidies **Excluding public exchange members Cost-share subsidized public exchange member PMPM utilization for the top 10 highest-spend drugs outpaced commercial members 100 400%. 7
DEFINING trends in spend The top 10 drug categories for cost-share subsidized public exchange, public exchange not receiving cost-share subsidies and commercial members by spend were identical, with four being specialty drug categories. The rankings, however, varied. For cost-share subsidized members, diabetes topped the list. Hepatitis C was second, two places higher than other public exchange and commercial members. While first for other public exchange members, HIV came in third for members receiving cost-share subsidies. Diabetes: Driving disproportionately higher costs Research has proven the correlation between lower incomes and higher diabetes prevalence. A CDC study showed that diabetes rates are 50 to 65 percent higher for poor or near-poor adults (those earning less than two times the FPL), when compared to those earning a high income (defined as four times the FPL or higher). 4 Prime s analysis confirmed the CDC s finding diabetes spend for the cost-share subsidized public exchange membership was 33 percent higher than any other drug category, and higher than any category for any other population analyzed. Both diabetes utilization and spend trended upward over the 18-month analysis period. More than 70 percent of diabetes spend came from members over 50 years of age. Hepatitis C: Spend trending downward, but still high Although hepatitis C spend showed a decline, it still ranked second in spend by category for the period studied. Harvoni spend, though also trending downward, accounted for the highest cost of any drug at $7.71 PMPM, despite use by just 292 in every 100,000 members. Diabetes spend for Prime s cost share subsidized public exchange membership was 33% higher than any other drug category. 8
Figure 6: Top drug categories by PMPM spend Therapeutic categories Cost-share subsidized public exchange PMPM Public exchange* drug category spend ranking 1. Diabetes $14.17 2 1 2. Hepatitis C $10.67 4 4 3. HIV $10.14 1 3 4. Autoimmune $8.82 3 2 5. Pain $6.84 6 5 6. Cancer (pills) $5.12 5 6 7. Respiratory $3.83 8 9 8. Multiple sclerosis $3.52 7 7 9. Cholesterol $3.12 9 10 10. ADHD $2.72 10 8 Commercial** drug category spend ranking More than 70% of diabetes drug spend, the top drug category by spend, came from members ages 50 and older. *Excluding members receiving benefit subsidies **Excluding public exchange members Figure 7: Top drugs by PMPM spend Drugs Cost-share subsidized public exchange Cost-share subsidized vs. public exchange* Cost-share subsidized vs. commercial** 1. Harvoni (HCV) $7.71 50% 200% 2. Humira Pen (Auto) $3.30 10% 120% 3. Sovaldi (HCV) $2.30 = 400% 4. Atripla (HIV) $1.91 23% 233% 5. Enbrel Sureclick (Auto) $1.91 = 100% 6. Stribild (HIV) $1.71 = 300% 7. Truvada (HIV) $1.51 19% 225% 8. Lantus Solostar (Diabetes) $1.47 40% 205% 9. Novolog Flexpen (Diabetes) $1.29 30% 192% 10. Crestor (Cholesterol) $1.14 3% 100% HIV was the top category by spend for members under 50 years of age. *Excluding members receiving cost-share subsidies **Excluding public exchange members 9
DEFINING risk adjustment Risk adjustment is one of three ACA-related programs that the U.S. Department of Health and Human Services (HHS) employs to prevent adverse selection and risk selection. The program works by redistributing funds from plans with a disproportionate amount of lower-risk enrollees to plans with greater proportion of higher-risk enrollees. The goal is to encourage health insurers to compete based on plan value and efficiency, instead of competing to attract healthier enrollees. Risk adjustment extends beyond the public exchange. All non-grandfathered plans in the individual and small group insurance markets, inside and outside of the exchanges, participate. Unlike reinsurance and risk corridors, which were in place from 2014 to 2016, risk adjustment is a permanent program. As of 2017, the federal government will administer the program for all states. Risk scores Each plan enrollee is assigned a risk score based on their age, sex, diagnosis and the relative expenditures a plan is likely to incur for that individual. A plan s risk score, and the resulting adjustment payment transfers, are based on the average risk score of individuals with a plan across a defined geographic rating area. In the 2018 benefit year, the HHS model used to calculate risk adjustment will expand to include information about prescription drug utilization. The addition of prescription information brings a whole new level of complexity for the Centers for Medicare & Medicaid Services (CMS). CMS will be pushed to develop a methodology to account for drugs having multiple indications. The agency will also have to account for: The availability, or lack of, outpatient drug data Added cost and administrative burdens Sensitivity of risk adjustment to variations in prescription drug utilization Gaming or pervasive incentives to prescribe high cost medicines when not indicated 10
CMS will use 10 principles to evaluate conditions and corresponding medicines into its risk calculations in 2018: 1 Clinically meaningful 2 Predict total medical and pharmacy costs 3 Affect payment should have meaningful sample size 4 Member illness and medicine for condition should be included, but medicines not meaningful to that specific condition should not 5 Should not reward overprescribing From a pharmacy perspective, there are still many outstanding questions about the new risk adjustment methodology. How will CMS incorporate pharmacy within the medical risk calculation? Is it one score or two? If a separate score is used, is it based on (the class of drugs, the disease severity associated with a specific drug, a hybrid, etc.)? How can a single NDC be assigned to a drug that is prescribed for multiple diagnoses? With such significant downstream administrative and financial implications, it s imperative that CMS continues to use data to drive decisions. 6 Providers should not be penalized for prescribing any approved drug 7 Classification system should be internally consistent 8 Classification should assign all national drug codes (NDCs) 9 Classification should assign NDCs to only one medicine claim 10 Discretionary drug categories should be excluded from payment therapeutic categories included in risk: Hepatitis C HIV Autoimmune Cancer Diabetes High cholesterol therapeutic categories not included in risk: Respiratory High blood pressure Pain (NSAID) Depression CMS is choosing to focus only on high-cost medicines for risk score calculations. Many of the top-utilized drugs, such as high blood pressure, pain and high cholesterol drugs, will not be included. 11
Risk score variation within the public exchange When compared to the broader public exchange, we can expect high pharmacy risk scores, in general, for members receiving cost-share subsidies. This assumption can be attributed to a higher percentage of females (results in higher risk score using current formulas) and higher utilization of drug categories, such as diabetes, that will be factored into future risk scores. Given the higher financial liability placed on plans covering cost-share subsidized members, the associated risk scores will always be inflated. With the current risk adjustment payment model, however, having more benefit-subsidized members does not necessarily equate to higher total costs. Informed plans that actively manage this population may come out ahead. RISK SCORES UTILIZATION PERCENT FEMALE 12
looking forward Though the future of the public exchanges is unclear, understanding lower income members is critical for plan sponsors. Our analysis highlights this population s greater need for medicine and the higher resulting expenses. By understanding their unique prescription drug use and spend patterns, health plan sponsors can better manage risk, promote positive health outcomes, and design sustainable, affordable benefit plans. As health care continues to evolve, Prime will continue to offer innovative approaches to managing risk and driving value for members and plan sponsors. Through our foundational integration with our Blue Cross and Blue Shield Plan owners and clients, we have unique connections that provide a holistic view of health care. These connections allow us to partner on building solutions, integrating data and working together toward a shared goal helping members get the medicine they need to feel better and live well at an affordable cost. For the latest information on drugs, trends and the pharmacy industry, or to learn more about Prime s pharmacy benefit solutions, visit PrimeTherapeutics.com. 13
KEY TERMS Adverse selection: occurs when consumers who are most in need of health care are more likely to purchase insurance, which can lead to higher premiums and market disruption. Risk selection: occurs when insurers have an incentive to avoid enrolling people likely to require costly medical care, which can spur competition for healthier members instead of plan value. Reinsurance: HHS program that provides funding to health plans that incur high claims costs for enrollees, reducing incentives for plans to avoid high-cost individuals and stabilizing premiums. Who participates: issuers and third-party administrators on behalf of group plans contribute funding; non-grandfathered individual market plans are eligible for payments. Risk corridors: HHS program that limits health plan gains/losses through federal payments/charges if allowed costs and above/below a target amount, encouraging competition by limiting risk. Who participates: Insurance plans certified by the HIM, a.k.a., Qualified Health Plans. Grandfathered plans: health plans in existence at the time the ACA was enacted in March 2010. Actuarial value: amount paid by the health insurance plan, representing premium and cost share (deductible, copay, coinsurance, and out-of-pocket maximum). Benefit subsidies: reductions in individuals out-of-pocket cost share for covered health plan services, individuals must meet certain income requirements (less than 250 percent of the federal poverty line or less than 300 percent for members of a recognized Native American tribe, band or nation). Public exchange members: people enrolled in a public health insurance exchange plan with pharmacy benefits provided by Prime, excluding members receiving benefit subsidies, when noted. Commercial members: people enrolled in health insurance plans provided by an employer or other organization with pharmacy benefits provided by Prime (excluding Medicare and Medicaid). Gross PMPM spend: spend for drugs covered under the pharmacy benefit, including plan-paid and member out-of-pocket costs, not inclusive of rebates, divided into a per member per month cost. Unadjusted claims: any pharmacy claim filled, no matter the length of the supply, is counted as one claim. Adjusted claims: claim counts are attributed to days of supply, with one prescription counted for every 30 days of supply (e.g., if claim is for 90-day supply, it would be counted as three prescriptions). Specialty: all drugs managed through Prime s specialty pharmacy program. Traditional: all drugs not on Prime s specialty drug management list. 14
DATA AND INSIGHTS This report looks closely at changes in drug costs, utilization and other key measures that affect pharmacy spending. Data from Jan. 1, 2015 June 30, 2016, is compared across actuarial-value levels within the benefit-subsidized public exchange membership; Prime s public exchange membership as a whole, excluding members receiving benefit subsidies; and Prime s commercial membership. Unless otherwise noted, all insights come from Prime s analyses. Pharmacy trend data represents adjusted public exchange and commercial claims processed in 2015 and from Jan. 1 June 30, 2016. Claim counts are attributed based on days of supply, with one prescription counted for every 30 days of supply. To calculate data within this report, we used an average membership for benefit-subsidized public exchange, public exchange and commercial populations. REFERENCES 1 Norris, L. (2016, August 16). The ACA s cost-sharing subsidies. healthinsurance.org. Accessed at: healthinsurance.org/obamacare/the-acas-cost-sharing-subsidies/. 2 Claxton, F. (2015, February 11). Cost-sharing subsidies in federal marketplace plans. The Henry J. Kaiser Family Foundation. Accessed at: kff.org/health-costs/ issue-brief/cost-sharing-subsidies-in-federal-marketplace-plans-2016/. 3 Centers for Disease Control and Prevention. (2016, Sept. 16). HIV among men in the United States. Accessed at: cdc.gov/hiv/group/gender/men/. 4 Centers for Disease Control and Prevention. (2013, Nov. 22). Diabetes United States, 2006 and 2010. Accessed at: cdc.gov/mmwr/preview/mmwrhtml/ su6203a17.htm. All brand names are the property of their respective owner. 15
About Prime Therapeutics Prime Therapeutics (Prime) helps people get the medicine they need to feel better and live well. Prime manages pharmacy benefits for health plans, employers, and government programs including Medicare and Medicaid. The company processes claims and delivers medicine to members, offering clinical services for people with complex medical conditions. Headquartered in St. Paul, Minnesota, Prime serves just over 22 million people. It is collectively owned by 14 Blue Cross and Blue Shield Plans, subsidiaries or affiliates of those plans. Prime has been recognized as one of the fastest-growing private companies in the nation. Prime Therapeutics LLC 800.858.0723 1305 Corporate Center Drive, Eagan, MN 55121 PrimeTherapeutics.com 6244-A Prime Therapeutics LLC 12/16 YouTube.com/PrimeTherapeutics Twitter.com/Prime_PBM LinkedIn.com/company/prime-therapeutics 06002077