Defining the Impact of AIDS Drug Pricing on the Private Sector

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

Thank you for inviting me to join you today.

This presentation will take an operational approach to care provision. What I mean by an operational approach is that I want to talk about what I refer to as "being caught between a rock and a hard place" in the clinic on a daily basis. This is not a policy talk in strictly those terms. It is an outcomes-focused talk based on what I am hearing from our providers and my colleagues in the field. Then in closing I would also like to highlight two ethical discussions we now are undertaking that we never had to undertake before. They are very disturbing, and one of them really relates to the discussion so far today. The other one is sort of "out there." When I first talk about it you are probably going to wonder, "how in the world does that relate," but bear with me and I will bring it back to how it relates to this discussion.

I am not a bean counter. I am an administrator, however, the second word in my job description, approved by our human resources department, is "ethical," the first being "provide" -- "provide ethical ..." in other words. So, I am not compensated by how much money I save my company. I am responsible for developing appropriate outcomes- and evidence-based procedures for providing optimal care to our HIV-infected population. I really do see myself as an HIV patient advocate that is in the private sector. That is often misunderstood.

I want to give you just a little example of the frustrations that those of us at Kaiser Permanente sometimes have in terms of misperception of who we are and what we do. I am going to go through some demographics and background about the program, but I just wanted to relate to you a story that helps illustrate some of the perceptions about our group. I do not relate this story with any intent to depict any specific organization. I only say, "relate this story," to demonstrate the perception of the individual who was saying these things to me -- not necessarily the views of whom she represented, but her personal opinion and perceptions.

The story is this: I was very lucky in January 2001 to be a civil society delegate to the United Nations (UN) for the UN Global AIDS Response to HIV and AIDS. As a civil society delegate, I was a consultant representing Kaiser Permanente, and I offered services to the UN on the part of Kaiser Permanente, but there was something very interesting that was different about the United States' representation at the UN versus all other countries. All other countries except the United States enrolled their civil society members into their UN delegations. The United States did not do that, and we only had one meeting with the US delegation, which was held here in Washington, DC, at the US Department of State. It was actually pretty far into the discussions, and because it is the US Department of State, we had to offer our Social Security numbers and our addresses, so I am sure there was some sort of security check and some knowledge base of who we were. I walked into the US Department of State and into this meeting to understand what the collaboration between the US Mission and the civil society delegates was going to be, and a public affairs representative from the US Department of State came up to me, shook my hand and said, "Mr. Allerton, you are from Kaiser Permanente. We are so glad to see industry represented at this." I said, "Well, what do you mean?" She said, "Well, were you one of the delegates that was recruited by ..." and then she named a major pharmaceutical company. My first reaction was, "No, I am surprised. I did not realize that company was negotiating to have civil society representation at the UN." She said, "Well, I am very concerned that the delegations will be overtaken by advocates, and that the importance of business will not be understood." I said, "Well, you have to understand that I come from Kaiser Permanente. We are a not-for-profit prepaid health plan." Her response to me was, "Oh, come on, you sell insurance." Well, we do not sell insurance. I do not sell insurance. I am part of the Permanente Medical Group, and I think that is a good example of the misunderstanding of the not-for-profit private sector.

I have spoken to colleagues who are in Blue Shield, which in California is also a not-for-profit, and we have some of the same difficulties. I cannot speak for the for-profit industry, and it would be interesting to see what their perspectives would be, because I am sure theirs might be a little different from mine. This example was just my way of qualifying what Kaiser Permanente is from a personal level, and explaining the frustrations regarding some of the common misunderstandings. I hope that helps to provide some perspective as I continue.

Kaiser Permanente is a national medical care program. We are in nine regions across the country. Most of my statistics are going to be combined for northern and southern California. The set-ups are slightly different in some of the other regions, but overall we provide care for over 8 million members and 14,581 of those are HIV positive. ... The average length of time those individuals have been in the health plan is eight years prior to diagnosis. So, we have a very stable population and they tend to stay with Kaiser Permanente. They tend to be very satisfied with Kaiser Permanente and the quality of care that they get, so we have very good longitudinal data for outcome measures and research purposes.

I am from California, and I am going to talk about California and some of the unique things that have happened there in the last few months. It is important to understand that the total HIV patient population is just under 10,000, but if you look at the total California membership, we have a seroprevalence rate of 0.16 percent; that 0.16 percent of our total patient population accounts for our second highest pharmacy cost, second only to depression. With costs like that, we are going to be concerned.

I do not have to preach to this group about the benefits of therapy, but I thought it would be interesting to look at just our specific population. Slides 1 and 2 show just the northern California population database registry results. As you can see, we have certainly had the same marked benefit of antiretroviral therapy that has been seen everywhere else, both in terms of viral load suppression and immune reconstitution. Viral suppression is probably one of the most amazing pieces. You see here measures for viral load suppression. The viral load under 500 copies/ml is what was used as a measure until 1998, because that was what the levels of detectability were for the first few years of this evaluation. The reason why the dark diamond bar goes much farther below 500 copies/ml at a certain point is that in 1998 we changed assays and were able to go below 500 copies/ml as a detectable level.

Slide 1
Slide 1
Slide 2
Slide 2

Another amazing statistic from Kaiser Permanente is that the mortality rate of the HIV/AIDS cohort has been less than 1 percent per year for the last six years, and that mortality statistic includes all fatalities, so some of those individuals were killed in car accidents or died of heart attacks, etc. Another statistic that I think is also extremely important is that in northern California, viral load is below levels of quantification for 72 percent of all of our members who are on therapy. I think that it is very clear that highly active antiretroviral therapy (HAART) is high-cost but extremely high-benefit for our members. But given that it is high-cost and high-benefit, we have three major concerns. First, how are quality and efficacy assured? Second, how do we maintain numbers like that? And, third, ultimately who pays?

I am going to answer the third question first. Obviously, private purchasers, entitlements, and AIDS Drug Assistance Programs (ADAPs) pay, but I want to talk about some unique aspects of each of these. Increasing numbers of private purchasers over the years have instituted caps and limited pharmacy benefits. It is really important that people understand that this is purchaser driven. Kaiser Permanente does not decide how much we are going to pay, it is the purchaser who buys Kaiser Permanente as insurance that dictates to us more and more that there will be high caps and high co-pays. What we are seeing is that there is an increased need and demand for new product lines. Those new product lines mean we need to reach and provide coverage for the young, healthy individuals, and they do not want to subsidize everybody else. I firmly believe that this is going to backfire in a few years.

For now, anyway, we have plans that are being paid for by purchasers such as Bank of America, Wells Fargo, and General Motors. They buy health insurance or premiums through us with, for instance, maximum drug coverage of US$1,200 to US$2,000 a year, or US$50 co-pays to the emergency room, or US$200 a day co-pays for hospitalization. These plans are very attractive to that young, 20-something family. But I think the first time that family, which may now believe that their health is benefited more by their membership in a gym than their membership in an insurance program, is going to be sorely woken up is when they have an infant who is born with a heart defect and needs open-heart surgery, and they are going to go bankrupt because they will not have insurance. The headlines are going to say, "Kaiser Permanente refuses to do open heart surgery." But the reality is that they or their employer have not purchased a plan that is going to cover that possible medical crisis. The demand for these new product lines is very disconcerting to me.

Out-of-pocket expense caps are also happening. There is a sort of middle ground. You only have US$2,000 worth of medication coverage, but if you spend US$5,000 out of your own pocket, then you go back to having drug coverage. So there is a maximum out-of-pocket expense for some of these plans that, if met, leads back into the insurance coverage. Where that is a real problem is within the ADAP. I firmly believe that in the public sector an ADAP patient tends to stay an ADAP patient, and in the private sector people rotate through ADAP. They are in it, they are out, they are in, they are out. ... I will speak about the problems with that scenario soon.

Issues with Medicare, Medicaid, and medical Supplemental Security Income (SSI) were significant for us this year. Many of you know that Medicare does not reimburse for name-brand drugs. They have carved out life-saving drugs such as chemotherapy, but they have not carved out AIDS drugs from that exclusion, and this is very important. It is very ironic that our oncologists, when they hear this, are very supportive of the HIV providers. They say, "Antiretrovirals have a better track record than chemotherapy agents." But we continued, even though there was no reimbursement for name-brand drugs, to reimburse them until January 1, 2004. Just from a competitive standpoint, we could not continue to do what nobody else was doing, so as of January 1, 2004, all of our Medicare and SSI patients lost any kind of name-brand drug coverage for HIV.

To cope with this, we did some proactive planning. We knew that at any given time, we have a number of patients who are enrolled in ADAP. We knew that there was going to be a sudden increase in those patients who are eligible for and require ADAP assistance, and so we hired some temporary case managers. Through pharmacy records, they identified those individuals, about 500 in the state of California, to make sure that their paperwork and everything was completed in time to enroll in ADAP starting January 1, 2004. At exactly the same time, the new governor of California, Arnold Schwarzenegger, announced the proposal to freeze all new ADAP enrollments starting January 1, 2004. So we were caught again between a rock and a hard place.

The main ADAP stability issue, of course, is whether it is going to be there, and whether it is going to become capped. In California, we had slightly under 2,000 people living with HIV/AIDS, or 20 percent of our members, enrolled in ADAP in the fourth quarter of 2003. Approximately 500 new enrollees were eligible January 1, 2004, because of the generic versus non-generic exclusion. Now 791 patients nationwide (or at least we keep hearing the number 791) are on waiting lists. Had Governor Schwarzenegger's proposal gone through, we would have added 500 to that number just through Kaiser Permanente's health plan membership in California alone.

I think the stability of ADAP is very important. It is also extremely important for the private sector to remember that it is not always the same 20 percent. That rotational issue has a profound impact on day-to-day operations. Our case managers are telling me that they used to spend time with our clients and our members talking about adherence strategies, developing pill-taking methodologies, and loading trays. They now spend the majority of their time just trying to find out where patients are going to get their drugs. It is a different role for them than what they were originally hired to fulfill. Also, the issue of whether there should be a freeze on new enrollees in ADAP is going to mean that a lot of patients are going to drop out of, forgo, or abandon other coverage just so that they will not lose their slot in ADAP, which ultimately will cause the cost of ADAP to go up.

Now, I would like to tell you a little bit about our model of care, and how quality and efficacy are assured. We do not talk about the best bang for the buck, we talk about the best bang for the pill, and how we can assure the most appropriate utilization of the drugs that we prescribe. The knowledge and abilities of care providers for HIV is a critical component. In California, we defined an "HIV specialist" for our organization long before the American Academy of HIV Medicine (AAHIVM) came up with their definition for the United States, and ours was actually much more stringent. The AAHIVM's definition is actually quite thin, so once the AAHIVM came up with a definition, all of our HIV providers immediately qualified.

We defined HIV specialists, and we moved our care of HIV patients to specialists. One of the ways we did that is a gate-keeping mechanism around the initiation of therapy rather than around drugs. A pharmacy will not fill an initiation of antiretroviral therapy unless it is written by one of our HIV specialists. The concern here, of course, is that a general internist who may be working out in The Valley, and may have had one or two HIV patients, could be reading that the most effective new drug is enfuvirtide (ENF). We certainly would not want them to initiate therapy on a new patient with ENF. Although that would likely not happen, we certainly want to make sure that something similar to that does not happen, thus the heavy reliance on HIV specialists as we define them. Kaiser Permanente in California is really the HIV specialist model. We now have 88 certified HIV specialists in northern California by our criteria. ...

We also do heavy monitoring. One of our quality control measures is CD4 counts and viral loads on an ongoing basis, basing the frequency of those tests on clinical guidelines. We also do resistance testing for initiation and for any change in therapy. Again, part of the reason we rely on the HIV specialist is to interpret those tests.

What are the implications for physicians and members? I would like to give you an anecdote. In an earlier presentation today you met an HIV patient named Bill. I would like to introduce you to Sarah. Sarah is a 63-year-old female. She was infected by her husband, who was infected by a blood transfusion given to him during a total hip replacement. She is an ADAP patient. She is a Medicare patient. She is not Medicaid eligible because she has an Individual Retirement Account (IRA) and the amount of that is too great for her to qualify for Medi-Cal, which is what we call Medicaid in California. She has been in our Medical Financial Assistance (MFA) program for six months -- this is a private charity that is within our organization. The social workers and case managers have access to MFA funds to help patients who get caught in situations where they cannot afford their care. In the past, it was used for things such as durable medical equipment, but now it is being used more and more for pharmacy. Sarah exceeded the limit because MFA is only eligible to a member for six months, and she was on it for a full six months. Her AIDS drugs are covered completely by California's ADAP, but she and Bill are good examples of people with co-morbidities. She also has significant cardiac problems and none of her cardiac medications are covered at this time. These medications were being picked up by MFA, but now they are being paid for by her church. It was the social worker who went through the gymnastics of finding a charity like her church to get those drugs covered. Again, it has a real operational impact because those people are best employed working with our members around other issues, rather than trying to make phone calls to find dollars.

Another impact is that although the cost of drugs is not a factor integrated into the clinical guidelines, adherence and the ability to adhere is part of the clinical guidelines. I am hearing more and more concern from providers about initiating therapy that will then have to be stopped because of cost factors that are being borne by the member. An example that was given to me by one of our physicians was of a hypertensive diabetic patient who, every December, stops taking his hypertension medication and his diabetes oral hypoglycemics because his property taxes are due. He knows that once he pays the property taxes in January or February, he can start picking up his medication again, or otherwise he will try to spread it out during that period of time and make a 30-day pill supply last 60 days by taking his medication every other day. If a physician has the idea that an HIV patient might be thinking of this strategy with his/her antiretroviral therapy when December rolls around, I can guarantee you that, if truly qualified, that physician will not be prescribing antiretroviral therapy, because the consequences of interrupted therapy not only for the individual but for the public health are significant.

One of the reasons I stress the fact that 72 percent of our patients on antiretroviral therapy have undetectable viral loads is that it has an impact on transmission. So we are not only talking about the quality of life of the individual, we are also talking about arresting the epidemic through medication. I have already mentioned that the case managers and other allied health professionals are spending more and more time dealing with these issues, but I think it is only going to get worse. I have a couple of ideas for solutions; they are perhaps not solutions, but they are things that we have done with success.

One is certainly clinical trials. Clinical trials have been a boon to our pharmacy costs. We do a significant amount of clinical trials in California. We were five of the ENF clinical trial sites in northern California. What that meant was that our five medical centers that were ENF clinical trial sites were disbursed geographically enough that every health plan member in northern California had access to the then-investigational ENF. That benefited us because we got that drug free, and the patients who needed it and met the criteria got that drug free, and they got it earlier than they would have otherwise. Their cost savings continued because even after it was US Food and Drug Administration (FDA)-approved, we were getting free drugs for a period of time. That was a short-term cost offset that was very beneficial. The downside, however, is that we have never recovered our cost of clinical trials, outside of pharmacy costs. There are costs for just the FDA regulation and management of the records and the clinical trial nurses. Some of you who do not live or practice in California might be surprised to know that a Clinical Trials Registered Nurse (RN) in the San Francisco Bay area -- because of skill, demand, and union contracts -- makes more than a general internist in many other parts of the country. When pharmaceutical companies come to us with an operating budget that is based on a national average of cost per full-time equivalent (FTE) for an RN, we never recover those costs, not in California anyway.

The other piece is treatment Investigational New Drugs (INDs), which are certainly a boon to us, but again, the time commitment of providers on treatment INDs is significant. The cost to go through the Internal Review Board (IRB) is not insignificant, and is not usually thought of as a direct cost. I sit on the IRB, so I know what we have to review, and the cost for us to do those reviews is not insignificant.

The last thing that I want to mention as an idea for a solution, is something that I have already seen right here through this treatment coalition that is gathered. I am really glad to see you folks, but I must say that I am definitely not a person who openly advocates civil disobedience, especially having once been handcuffed by ACT UP. I definitely do not advocate civil disobedience. However, I have to tell you that there is a significant role in advocacy today, and in conveying strong messages. In 1996, when viral load tests were not yet FDA-approved, our New Technologies Committee was absolutely adamant that they would not cover viral load testing when it was becoming the standard of care on the West Coast. It was not an issue on the East Coast, ironically enough. It was, however, a major issue on the West Coast. Our New Technologies Committee changed their minds the day after ACT UP delivered coffins to the Kaiser Permanente Board of Directors. I think that is quite an interesting little comment on the juxtaposition of an activity and then a change of heart, so my biggest concern is the visibility of the advocacy effort and where it is these days.

I mentioned two ethical questions that are being posed for us on the horizon. The first one is: "Adverse selection, and is that an issue?" The second one is: "What is the moral imperative for post-exposure prophylaxis (PREP)?"

I was asked this question just the other day by one of the providers: "Have we reached a point where it is no longer socially acceptable or economically viable to do the right thing?" What did he mean by that? I have already told you that we covered the name-brand drugs for a year longer than they were reimbursed, that we have MFA so that patients can get their needs met. We also have case managers who break their necks on a day-to-day basis to find out how patients are going to get their coverage. We feel that we have a moral obligation to those health plan members who have HIV, to make sure that all their needs are met, but since we do that and nobody else does, when the playing field is not level we may not be able to sustain economic viability if we continue to do many of these things. Where does the social acceptability come in? In California, we had a multiple month strike of one of our major purchasers, the grocery clerks in southern California, who wanted cheap, affordable healthcare. They do not want to accept carrying the costs of a sicker population. They want the rating based on their own utilizations. We are getting pressure from both directions, and I think this is probably the most disturbing question I have heard in my lifetime at Kaiser Permanente, that someone would actually think that we may have reached a point where it is no longer socially acceptable or economically viable to do the right thing for our patients.

Now, let me discuss the ethical issue around PREP. We know that one of the most important advances in curbing the AIDS epidemic would be an efficacious vaccine. But in the absence of an efficacious vaccine, other strategies are being examined, one of those strategies being microbicides. This is especially important when you think about the disenfranchised female population on a global level that is at continued risk for HIV infection with no social ability to practice any kind of safety mechanism. So, in the absence of a vaccine and/or a microbicide, the Bill & Melinda Gates Foundation and others have said, "What if one of these antiretroviral medications, taken on an ongoing basis in low doses, would prevent infection?" It sounds wonderful, but I have to tell you there is a lot of skepticism, and there is going to be a lot of fallout on an international level.

At the 12th World AIDS Conference in Geneva, a representative from the San Francisco Public Health Department presented a proposed study on PREP for non-occupational risk categories, and there was a flurry of negative, adversarial, downright confrontational questions that came from other parts of the world. The questions were along the line of: "We are talking about a non-occupational exposure and providing drugs to individuals in a wealthy environment who do not have this infection, when the vast majority of the world which does have this infection cannot get medications?" Now the argument may be made that if we sell more of these drugs in the United States, pharmaceutical companies may have more resources to give lower prices elsewhere. There is not any given answer to this, but the whole issue of providing pills, at least in this country, to an uninfected population whose members can prevent infection by other means, when this medication is not available to HIV-infected people in other parts of the world, could have tremendous fallout.

These are the sorts of conversations that are being undertaken today and will become even more important in the future. There are a lot of skeptics. The first thing one of the physicians at the Geneva conference that I referred to said when he heard about PREP was, "My, what a way to sell more drugs. This must be sponsored by a drug company." Of course, he is much more cynical than I. But, again, I think that is one of the issues that we have to deal with, and we would not be having these conversations if these pills cost the same as aspirin. Those are some of the discussions that are happening in the private sector, some of the dilemmas that we are facing, and I really believe that it is only going to get worse.

Thank you very much for the opportunity to let me get that off my chest, and I really appreciate the honor to be able to be here today with you and with the International Association of Physicians in AIDS Care (IAPAC).

Michael Allerton is HIV Operations Policy Coordinator at the Permanente Medical Group at Kaiser Permanente.

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