VCSD prescription-drug plan caught in a nationwide trend of soaring prices

Enterprise file photo — Melissa Hale-Spencer
Francis Rielly, Voorheesville’s assistant superintendent of finance and operations, said that the district’s current prescription-drug plan has no mechanism for containing costs; whatever the price of the drug, the district has to pay it. Those cost increases led to a large budget deficit, which led to the loss of jobs. 

VOORHEESVILLE — Across New York State, school health-care costs  continue to outpace both the rate of inflation and allocation of state aid, with costs rising 22 percent between the 2013-14 and 2017-18 school years, from $5.8 billion to $7.1 billion.

In the Capital Region, over those four years, health-care costs grew by over 26 percent.

This year, Voorheesville’s self-funded prescription-drug plan, after years with barely any increase, saw a 35-percent spike in its prescription-drug costs, which led to deep budget cuts to balance next year’s school budget. The district’s drug plan is not tied to its health-insurance plan; it’s a separate premium set by the district’s pharmacy benefit manager, Express Scripts.

The district has already blown through its million-dollar prescription-drug budget for the year, and is burning through a $681,000 reserve that, as of the beginning of this month and not including the most recent bill, had about $380,000 left in the account; however, the current number is lower.

The high-cost biologic and maintenance drugs “buried us,” Francis Rielly, Voorheesville’s assistant superintendent of finance and operations, told The Enterprise last week.

Biologics, which are not made like typical drugs, are very costly and, coupled with the lack of government oversight, leave Americans paying more for their prescription drugs than residents in any other wealthy nation.

The problem for Voorheesville, Rielly said, is that the district is enrolled in what he called a “basic” formulary drug plan, which has no mechanism for containing costs; whatever the price of the drug, the district has to pay it.

The basic formulary plan, Rielly said, is the pharmaceutical package that is offered to member districts of the Capital Area Schools Health Insurance Consortium (CASHIC), a health-insurance trust made up of 19 school districts in the Capital Region.

Rielly and other CASHIC members were told by representatives from Express Scripts, the health-insurance trust’s pharmacy benefit manager, that the primary drivers of cost increases were biologics — drugs produced from living organisms or their components — and specialty drugs. A pharmacy benefit manager negotiates prices with drug manufacturers on behalf health plans of all kinds: government, private, and employer-based.

In addition to the cost increases brought on by biologics, Rielly said that the district was also paying for brand-name drugs for which there are generic equivalents available, but, because of the setup of the district’s basic formulary plan, Voorheesville will continue to pay through the nose for brand-name drugs.

At the meeting with Express Scripts, Rielly said, the CASHIC members were told that, to lower prescription-drug costs, the school districts should move to managed formulary plans, “because then you are negotiating prices.”

A managed formulary plan is a preferred list of drugs that, according to Express Scripts, “carefully exclude[s] medications in an effort to negotiate better rates on behalf of [Express Scripts] clients,” and, “opens access to all clinically superior medications, while eliminating ‘me-too’ options that have no added clinical benefit but have higher costs. And as a result, drug makers are compelled to charge fair prices for the medication they manufacture.”

The managed formulary plan, Rielly said, has cost-saving restrictions — like step therapy, prior authorization, and quantity limits — that are not part of the district’s current basic formulary plan.

Step therapy — also called “fail first” — is a process where a patient would start with a less expensive, generic drug, and, if that doesn’t work, would then move up to a more-expensive brand-name drug. Prior authorization, according to the American Medical Association, is “any process by which physicians and other health-care providers must obtain advance approval from a health plan before a specific procedure, service, device, supply or medication is delivered to the patient to qualify for payment coverage.”

These cost-saving restrictions have also been criticized for hindering patient care.

Over the next six months, Rielly said, the district will look into placing all employees into a managed formulary plan. The seven members of the administrators’ union recently agreed to a new contract, which included an agreement for the union to enter into a managed formulary plan, which starts Oct. 1.

But no matter what options Rielly is able to find, a change in plan coverage still has to be negotiated with the district’s two other bargaining units: the United Employees of Voorheesville, which represents non-instructional workers, and the Voorheesville Teachers’ Association.

The UEV just signed a five-year agreement, but Rielly said that the contract can be reopened for “a particular item,” if there is cause, “and certainly there would be cause for that to happen.”

And the district continues to negotiate with the teachers’ union; its contract ran out in June 2018.

Right now, though, Rielly said that he is gathering information on a drug plan from the Board of Cooperative Educational Services that covers about 60,000 people, whereas the current CASHIC plan that Voorheesville is part of covers about 20,000. “It sounds like they are getting good prices,” Rielly said of the BOCES drug plan.

However, the BOCES plan is still experienced-based, Rielly said, so the quote that the district would receive would be based on the sky-high prices that the district is currently paying for prescription drugs.

Going to a managed formulary plan, Rielly said, “is what we need to do for the long-term health of the district,” which, he added, is why the administrators' union got on board.

Voorheesville’s current drug plan is damaging the budget and costing employees their jobs, he said, adding that the most recent bill Voorheesville received for prescription drugs was $87,678, which was for a two-week period — the district budgeted $89,500 for the entire month.

The high-cost biologic and maintenance drugs “buried us,” Rielly said.

Biologics

Biologics are derived from living material — a sharp contrast from conventional drugs which are “chemically synthesized” and “have a well-defined structure and can be thoroughly verified,” according to the United States Food and Drug Administration.

Scientific American describes the process of “growing” biologics:

“In a factory just outside San Francisco, there’s an upright stainless steel vat the size of a small car, and it’s got something swirling inside.

“The vat is studded with gauges, hoses and pipes. Inside, it’s hot – just under 100 degrees Fahrenheit. Sugar and other nutrients are being pumped in because, inside this formidable container, there is life.

“Scientists are growing cells in there. Those cells, in turn, are growing medicine. Every two weeks or so, the hot, soupy liquid inside gets strained and processed. The purified molecules that result will eventually be injected into patients with Stage IV cancer.

“Drugs that are made this way – inside living cells – are called biologics.”

In broad strokes, what differentiates chemical compounds from biologics is the size and make up of the molecules.

Conventional drugs are made up of small molecules that act as an inhibitor, blocking a person’s symptoms, like someone plugging a whole in a dam with a finger.

Biologics have large molecules that have the ability to bind to the molecules in a person’s body, which can inhibit a person’s symptoms, according to Scientific American, but biologics also have the ability to “stimulate the immune system in a problem area, like at a tumor, prompting the body to take it out.”

Costs

Americans pay more for their prescription drugs than citizens of other countries because there is no government entity that regulates the cost of prescription drugs, whereas around the world many governments step in to regulate drug prices.

As recently as the turn of the century, Americans were paying approximately the same for prescription drugs as their counterparts among the world’s wealthiest countries.

Then, between 1997 and 2007, spending on prescription drugs in the United States tripled, according to a study in Health Affairs. Spending around the world increased as well but not nearly as rapidly.

In 1997, for example, per-person spending for pharmaceuticals in the United States was about $285; by 2015, that number became about $1,011.

Switzerland, which in 1997 paid about $206 per person for pharmaceuticals, by 2015, had a per-capita spending of about $783. Sweden was the lowest per-capita spender in 2015, at $351 per person.

At the heart of the spending increases is biologics.

Twelve of the 15 best-selling prescription drugs in the United States in 2018 were biologics.

About 2 percent of the United States population “is treated with a specialty drug each year — a category that includes biologics and other complex, often expensive drugs,” according to a report from the RAND (Research ANd Development) Corporation. Yet, in 2018, according to Express Scripts, specialty drugs accounted for about 52 percent of total drug spending. And biologics, specifically, made up between 27 and 40 percent of total drug spending, according to the White House Council of Economic Advisers.

Humira, a biologic, is not only the best-selling prescription drug in the United States but around the world as well. AbbVie, the maker of Humira, has doubled the drug’s price from $19,000 annually in 2012 to about $38,000 today.

In the early 1990s, for example, the most expensive drug sold was Taxol, which was used for treating breast cancer and cost $4,000 per year, according to Health Affairs. By comparison, Herceptin, a biologic used in treating breast cancer, cost $27,990 per year in 2009, when the Health Affairs study was written.

To be clear, biologic drugs have been very successful in treating major chronic diseases, like cancer and auto-immune diseases.

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