An Overview of AIDS Drug Access in the United States

Examining the Pharmacoeconomics of U.S. AIDS Drug Access, Washington, DC, April 6, 2004

May 2004

Examining the Pharmacoeconomics of U.S. AIDS Drug Access

A couple of disclaimers: One, I know very little about drug pricing. Most of my work in AIDS has been about healthcare access, which means I know a little bit about the programs that pay for drugs. So, basically, what I am going to do is give you a very quick overview of who pays for drugs in the United States.

These are the major providers of payment for AIDS drugs: Medicaid; private health insurance; the Ryan White CARE Act, including but not limited to the AIDS Drug Assistance Program (ADAP); the Veterans Administration (VA); the US Department of Defense (DOD); Medicare; and uncompensated or charity care. I am not going to talk about the DOD. They are doing very well indeed financially, and have fabulous coverage. But, just moving through some of these programs, I think the first thing to say is -- and, I guess, as I was preparing this presentation I sort of stepped out of being an American and thought -- what an outrageous situation we continue to deal with here in the United States.

We have, in fact, growing numbers of people who are uninsured, 43.6 million in 2002, and still no comprehensive solution to this problem. Looking first at the private health insurance market, which may cover about a third of the people in this country:


  • Premiums have risen 13.9 percent.

  • Co-pays are going up. The average co-pays are US$9 for generics, US$19 for preferred drugs, and US$29 for non-preferred. Theoretically, most of the antiretrovirals would be preferred drugs because there are no generic substitutes.

  • 71 percent of workers are in plans that use a formulary.

  • US courts have upheld coverage limits for the treatment of HIV/AIDS related to private health insurance. Several of us worked on and supported an amicus brief a couple of years ago when Mutual of Omaha had policies that capped spending for HIV care at a very low level. The US Supreme Court did not grant cert. So, of course, one of the concerns is whether we are going to begin to see more of these coverage limits.

There are also very little data. As mentioned by José [M. Zuniga] in his opening remarks, more attention should be paid to the private health insurance market. There are really very little data on what is happening with AIDS care in that market, although there are probably snapshots of what is happening in some parts.

Medicaid is the largest payer of AIDS care and the largest payer of AIDS drugs. In 2003, Medicaid spent US$8.5 billion for more than 200,000 people. It is important to note that eligibility requirements include being a member of a specific category, as well as being poor. This is not a universal access program for poor people. Most people with HIV/AIDS qualify on the basis of disability or as a caretaker parent of poor children. The eligibility issues have been huge, especially since the advent of highly active antiretroviral therapy (HAART), and clearly there is an urgent need to get people access before they become completely disabled by AIDS, especially since we know that drug intervention after an AIDS diagnosis has a poorer prognosis than intervention before a diagnosis. But states are required under federal law to cover medically accepted indications of US Food and Drug Administration (FDA)-approved drugs and off-label use.

Just as the rest of our economy, Medicaid is in a huge financial crisis. What we have seen is a number of cost-control measures on prescription drug access, everything from preferred drug lists to preauthorization, to requiring generics, to increasing co-pays, to locking individuals in to get their drugs only at one pharmacy, and generally tighter controls on high-cost drugs. Probably the most worrisome of all the cost-control measures is the increasing number of states that are actually limiting the number of prescriptions that people can get filled per month.

One of the other cost containment strategies is reduction in acquisition costs. The states are trying to get greater discounts on average wholesale prices (AWPs) for drugs in their formularies, limits on the number of medications, limits on the number of refills, etc. There are certainly states, including the states of California and Florida, both of which are among the top three states in terms of numbers of people with HIV/AIDS, that are looking to dramatically increase co-pays for certain populations of people on Medicaid, and obviously with the number of prescriptions people with HIV/AIDS need to fill, this could really be a barrier to getting everything they need.

Many of us have been working for some years on the Early Treatment for HIV Act (ETHA), which is about addressing the need for early intervention in healthcare. It gives states the option to amend their Medicaid eligibility, basically to extend Medicaid to low-income people with HIV before they become disabled. It also gives states an enhanced federal match to do so, modeled on the Breast and Cervical Cancer Act. We have spent a lot of the last two years defending the Medicaid program, but also feel it is important to have a proactive strategy, and to acknowledge the ways in which Medicaid does not work for our population.

I want to give you a little bit of data on Medicaid prescription drug prices. The latest estimate is from fiscal year 1999, which is obviously a long time ago, but Medicaid spent US$617 million on antiretroviral drugs, and what has been discovered is that, notwithstanding the language about Medicaid getting the best price on prescriptions, in fact, that program categorically does not get the best price. A study specifically on AIDS drugs found that Medicaid pays 33 percent more than other federal drug discount programs for HIV drugs, including a number of ADAPs. There is also wide variation in the prices paid for the same drugs among state Medicaid agencies in that particular study, which looked at the 10 states with the highest number of cases. Massachusetts paid far less than any other state, and Georgia paid far more. In all the discussions we have been having over the last couple of years about the South and the southern epidemic and the number of people on rural Georgia's ADAP waiting lists, it is sort of interesting to find out that Georgia is actually getting a pretty bad deal on Medicaid prices.

All 50 states and the US territories have ADAPs. The goal of the program is to provide HIV/AIDS-related drugs to uninsured and underinsured persons. Funding is based on formula, and is largely federal. There is some state funding, but the amount of state funding varies quite dramatically. The overwhelming majority of the money, and this has consistently been the case since 1997 or 1998, is spent on antiretroviral drugs. The majority of recipients are people who would qualify as low-income. Ten states account for more than three quarters of all the expenditures for drugs. It is a discretionary program; how well we know that. Funding depends on annual congressional appropriations. Such decisions lately have not been in our favor, and there is little indication that that situation is going to change. I cannot remember the last time we had a successful supplemental funding approach for ADAP -- the payer of last resort, intended to fill in the gaps in Medicaid and private coverage, because the private health insurance market has been pretty successful in avoiding paying for our population of people, by and large.

The ADAP is critical. It is certainly a major focus of our community. A lot of ADAPs have been imposing cost-containment strategies, enrollment caps, waiting lists, restricted access to drugs, and per capita expenditure caps. They are only going to pay for X thousand dollars per year per beneficiary, by implementing limited formularies and reducing financial eligibility criteria -- though, by and large, that does not save a lot of money because there are not very many people on the higher end of eligibility. This is a map indicating where ADAP restrictions are the most serious (Slide 1). According to the National Alliance of State and Territorial AIDS Directors (NASTAD), there are 791 people currently on ADAP waiting lists.

Slide 1
ADAPs With Waiting Lists and Other Access Restrictions, Jan. 20004

We are clearly having challenges in terms of providing access to drugs. I think this is also a time when most people in the world, with the attention garnered by the global epidemic in the last few years, assume that there is universal access to life-saving drugs in the United States. As you all probably know, there is a lot of variability in ADAP eligibility. What drugs are on the formulary? How much do states contribute? That is determined by individual states, it varies pretty dramatically in terms of financial eligibility. There are no minimum formularies or requirements by the federal government, and there is a lot of discussion every time we talk about Ryan White CARE Act reauthorization about whether there should be. I think the most common view is that the only way this can happen is if there is some type of federal responsibility for helping to implement that formulary state by state. There are dramatic differences: 18 drugs versus 463 drugs.

I represent HIV physicians now, and I have been trying to get some response about the Ryan White CARE Act reauthorization. One physician from New Hampshire e-mailed me and said, "I think it would be a good idea if we changed the law so the ADAP formulary could include drugs other than antiretrovirals." Has he been to New York lately? Their idea of a cut in the formulary is to reduce the amount of Ambien® people can get per month. People tend to think the ADAP that exists in their state is the same as programs in every other state.

Not all ADAPs receive state contributions, and although 36 states contributed in 2002, that was two fewer states than contributed in 2001. There is a tremendous variability in negotiated prices among state ADAPs. There have been some precedents in recent years of negotiations between ADAPs and individual pharmaceutical manufacturers; they have led to some agreements, although some people tell me that several of the companies have reneged on those agreements already. About half the states get 340B drug discount prices that are available to some public health entities. In order to do so, you have to acquire drugs through a central purchaser. The other half have a rebate option that allows them to access Medicaid rebates on a quarterly basis.

I think we often forget about one of the biggest providers of HIV care: the VA. In fiscal year 2003, the VA provided antiretroviral drugs to almost 15,000 people and had over 19,000 people with HIV/AIDS under its care. The VA exists in a rarified environment where drugs are purchased through one of the only statutorily discounted price programs enacted by the federal government. The prices are called "Federal Ceiling Prices" and they are part of the Federal Supply Schedule, which is also how federal contractors get a good deal on buying commodities such as office equipment. These prices, which are dramatically lower than what Medicaid and most ADAPs get, are available only to the VA, DOD, US Coast Guard, and some elements of the US Public Health Service (PHS).

In 1997, some of the national AIDS groups joined forces with the National Association of Public Hospitals and tried to enact legislation that would allow ADAPs to access the Federal Supply Schedule, because public hospitals were hemorrhaging financially from the high cost of AIDS drugs. I never saw such a quick reaction from the pharmaceutical industry in my life. Within days the word was out that the AIDS community was trying to undermine medical care for veterans, which I thought was a sort of interesting take on all of this.

Moving on to Medicare, which before last year would have been a very short conversation, since Medicare currently pays pretty much exclusively for inpatient drugs and for some outpatient cancer medications. We have a new Medicare prescription drug law, which is a very complicated piece of legislation in its own right; but briefly, starting this spring and next year beneficiaries will have access to Medicare-endorsed discount drug cards, and US$600 in an annual drug subsidy will be available for low-income seniors and persons with disabilities, which will indeed include some people with HIV/AIDS. In 2006, beneficiaries will have a choice of staying in fee-for-service Medicare with access to private drug-only plans, (emphasis on "private") or Medicare Advantage (MA) integrated plans that are essentially Medicare-managed care plans that also include drugs, but there will be preferred provider organizations (PPOs) as well as health maintenance organizations (HMOs) in that option.

There will be reasonably generous subsidies to help low-income beneficiaries pay premiums, and cost sharing. Our community was a very small part of a very large debate, but we did try to do some advocacy around issues that would be critical. We do not really know the number of people with AIDS on Medicare, but speculation is that there are as many as 60,000 to 80,000 of them, and many of them are duly eligible for Medicaid but some are not, and in some states they are a rather significant part of the ADAP rolls. I remember several years ago hearing a presentation by the ADAP Director for the State of Washington in which he stated that 15 percent to 17 percent of his state's ADAP rolls were people on Medicare only. So certainly this benefit has the promise of alleviating some of the burden on ADAP.

One of the very interesting parts of the Medicare prescription drug law is that we have a completely decentralized private-sector model, in which individual plans negotiate with pharmaceutical companies for prices. There is an explicit statutory prohibition against the federal government negotiating drug prices on behalf of 40 million Medicare beneficiaries. You would think that might get us a good deal. The pharmaceutical industry, which actually had historically opposed a prescription drug benefit from Medicare because they thought it would inevitably lead to price controls, in fact was incredibly successful -- the big winners. They gained a large market with no threat of price controls, with all due respect to my friends from industry.

What about the Medicare law and people with AIDS? We have a number of concerns about this law ... with which we are working administratively and perhaps someday legislatively to remedy. There is little hope that this law will be opened up legislatively this year. We are worried about comprehensive coverage of antiretroviral drugs on plan formularies. Not only can US Secretary of Health and Human Services (HHS) Tommy Thompson not negotiate prices, but his department cannot be proscriptive in terms of a formulary -- it cannot say, "You must cover all antiretroviral drugs in all three classes," for example. As we know, given the history of many people with this disease, all the options need to be on the table because there is no one-size-fits-all antiretroviral combination.

We would really like to change the law to allow Medicaid to supplement Medicare coverage with federal matching funds. Currently, people who are eligible for both Medicare and Medicaid must join this drug plan and if the drug plan does not have all the drugs they need, Medicaid will not be able to supplement their coverage. Their best hope will be to turn to the already-strapped ADAP in their community and ask for help, and it remains to be seen whether that help will be available. There are some consumer protection issues that we are concerned about, which we actually share with many other constituencies. Right now Medicare does not have to provide even appeals information on enrollment, and they also require a beneficiary to file his or her own grievance, though under current Medicare law, for instance for the Medicare-managed care plans, a physician can file on behalf of a beneficiary, a friend, or a family member. We have beneficiaries who frankly are not equipped to negotiate a grievance process alone, so it would appear that in fact the statute has a way of discouraging people from filing grievances.

It is unclear whether ADAP can wrap around this benefit, and that is also one of the issues we are working on now. Virtually the only programs that can do so are the so-called "State Pharmacy Assistance Programs." Our patients are not included under that rubric, but we are trying to argue that in fact, ADAPs are State Pharmacy Assistance Programs.

It is really important that all medically necessary drugs count toward the catastrophic limit. If you know anything about this law, you know that there is a phenomenon called a "donut." It is about US$2,000 that you are stuck carrying by yourself, unless you are categorized as low-income. But there is also a catastrophic limit over which you pay nothing, and one of our questions is: "If you have to buy drugs yourself that are not on the plan formulary, do those count toward the catastrophic limit or not?" Obviously, we know that drug costs to people with AIDS are going to facilitate them reaching that limit, and the sooner they do that and have federal support, the better off people will be.

Finally, there is the bizarre situation where the burden of health plans to provide information to the public does not begin until people actually enroll. If you are living in a community that has a fairly robust provider system with several plans, you cannot go to Plan A and ask, "What drugs do you cover?" They are not required to tell you. But as soon as you join a plan, you are locked in for a year. We think this is a little troubling, and this is actually one of the issues we hope to talk to HHS about, and hope there might be some wiggle room in regard to regulation. So, not only did the pharmaceutical industry win, but also the health plans won big with the new Medicare law.

There are many issues and challenges. ... A lot of people think the Medicare benefits start immediately. When deciding whether to enroll, a large number of Medicare beneficiaries have access to some private supplemental insurance that they hope to keep. There is a lot of concern that some of the companies that provide insurance for retirees and people with disabilities will in fact no longer do so. I am worried about my mother in this regard.

There are financial penalties for delayed enrollments. You have got to be informed about what to do, and if it is the best bet -- for instance, making sure you get in the low-income subsidy program if you are eligible, which is pretty critical. How do you sign up? These are all things that I think people on the ground, Ryan White CARE Act-funded case managers and others, are going to have to help people do -- for example, comparing plans and deciding which to join, because they are all going to be different. First of all, we are fighting for the right to make informed decisions about comparing plans, which we do not have; again, with the risk of consequences of bad decisions or a lock-in to a sub-optimal plan. It appears that the burden may be on the beneficiaries to track out-of-pocket cost. If you manage your finances the way I do, you would be in lot of trouble that way. Obviously people with AIDS have a lot more challenges in their lives than I do.

Just some summary comments: We have, in case it is not incredibly obvious, a fragmented patchwork of a healthcare system that links access to healthcare with employment, disability, age, sometimes poverty, and other factors. Because of the categorical nature of access, there are no guarantees of continuity of care from childhood to old age in this country. There is no human right to healthcare. There is no legal right to healthcare, and obviously that has tremendous implications for access to drugs. Drug costs vary considerably across public and private programs by kind of system and by geography, like everything else related to the AIDS epidemic. The high costs of prescription drugs affect individual decisions to adhere to drug protocols, and also affect the capacity of public programs to offer a medication safety net. If drugs did not cost so much, ADAPs could offer more of them to more people, for example.

Most information about drug pricing is proprietary, even among state Medicaid programs and ADAPs, so they are not allowed to share information about that. So only the individual pharmaceutical companies have the big picture about what the pricing structure looks like across payers, and they only have that picture for their drugs. It is not a transparent process. It is very difficult to change. Patient-assistance programs sponsored by pharmaceutical companies serve a critical role as safety nets for individuals, as eligibility for programs fluctuates or as benefits fluctuate, but they create tremendous burdens for providers and patients alike. I talked to one of our providers at a recent conference, a private-practice doctor in Indiana. She had about 20 patients who lost their eligibility because of a change in the Medicaid program, and she was a sole practitioner and did not have the time or the personnel to do the paperwork to get each of her clients on the drugs they need since she was getting out of AIDS care. It sounds like a good job for Ryan White CARE Act-funded case managers; but what do I know?

Continuing access to life-saving medications for people with AIDS remains an elusive goal. Without more clarity, uniformity, better pricing, and an increased level of purchasing power, I am not sure how we get there.

Christine Lubinski is Executive Director of the HIV Medicine Association.

Back to the May 2004 Supplement issue of IAPAC Monthly.

This article was provided by International Association of Physicians in AIDS Care. It is a part of the publication IAPAC Monthly.


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