Will a spate of recent lawsuits shift the balance of power in the health care industry?
While no companies in the health care industry are strangers to legal action, a crop of recent lawsuits points to some interesting lines being drawn on drug prices, transparency, and exactly who health insurers are meant to protect. (Patients? Or their bottom lines?)
I suggest that these suits, some of which have already been heard in court, could be signaling a shift towards more scrutiny on health insurers, even as many are complaining about lower profitability and some are pulling out of various state marketplaces.
One of the most recent and high-profile cases is a class action suit filed against Express Scripts, Inc. and Anthem, Inc. by a number of individuals whose health plans were administered by health insurer Anthem, which subsequently contracted out pharmacy benefit management exclusively to the company Express Scripts.
The suit alleges that, in the making of the 10-year exclusivity deal between Express Scripts and Anthem, Express Scripts pitched two potential deal structures: first, Express Scripts could pay Anthem a smaller exclusivity fee up front, but then charge lower per-prescription amounts to the Anthem beneficiaries, or second, Express Scripts could pay Anthem a larger exclusivity fee, but then charge higher per-prescription amounts to the beneficiaries. Anthem went with the larger fee deal, the suit claims, gaining nearly $5 billion at signing, even though this meant higher prices for beneficiaries/patients in their plans.
Based on this deal structure, the suit alleges that Express Scripts charged Anthem “more than competitive benchmark pricing,” and as a result, patients paid more than they should have had to when a percentage of the drug prices were passed along as co-pay charges to patients. Both Anthem and Express Scripts, the suit claims, are bound in this situation by ERISA, the Employee Retirement Income Security Act, to have fiduciary duties towards the beneficiaries of the plan and not overcharge them.
Express Scripts had revenues of $101.8 B in 2015, according to paperwork filed with the suit, and their exclusivity contract with Anthem was meant to run from 2009 to 2019. Perhaps ironically, the information that forms the backbone of this suit might have never been public had Anthem not sued Express Scripts in March 2016, alleging that Express Scripts had failed in their obligations to provide Anthem with competitive benchmark pricing, among other things, and thus breached their contract, resulting in approximately $3B of overcharging per year in the contract. The first suit did not have any provisions for passing recovered funds along to beneficiaries/patients who might have been overcharged for their out-of-pocket shares; the class action suit would seek to close that gap.
Another triad of lawsuits in Washington state, one of which had a recent day in court, focus on how insurers are covering, or not covering, new Hepatitis C drugs.
An injunction in federal court was granted in one of the suits, a class action suit brought by beneficiaries against Apple Health, Washington state’s Medicaid program, which serves over 28,000 beneficiaries with Hep C. As a result of the injunction, the state Health Care Authority (HCA) is prohibited from restricting access to Harvoni (Gilead Sciences) and other new Hep C drugs based on a fibrosis score and must offer them to all Hep C patients. Prior to this, a 2015 policy restricted access to patients who had advanced disease evidenced by liver scarring. That policy was, in part, based on recommendations from a group called ICER with insurance-industry ties.
A major factor in all three of these suits is that the American Association for the Study of Liver Diseases (AASLD) guidelines have been updated to state that the newer class of Hep C drugs benefit “nearly all” patients with chronic HCV, not only those who have reached advanced stages of liver disease or who meet a threshold fibrosis score. Thus, payer restrictions that don’t follow the AASLD guidelines may be tiptoeing into the risky area where restrictions limit access to the clinical standard of care.
What are the implications? I see a few possibilities:
1. While pharma companies have long been a target in the debate over drug cost, major law firms, policy-makers, and patient groups are now turning a spotlight onto the practices of insurers and PBMs, who more directly control patients’ out-of-pocket costs. This extra scrutiny into payer and PBM deals is unlikely to end with Anthem and Express Scripts; rebate and discount negotiations and similar deals are opaque, and more allegations against other payers and their vendors may be waiting in the wings.
2. Despite efforts to rein in costs by restricting access, at least one federal judge has sent a clear message that payers may not make arbitrary, not-based-in-evidence decisions about restricting access to therapies just because they are expensive. The injunction in Washington State is a bell-weather for the preserved authority of national, disease-focused guidelines in setting an evidence-based standard of care. For example, this bodes well for the continued influence of groups such as National Comprehensive Cancer Network and their Guidelines and Compendium in clinical policy-setting.
3. These suits are led by groups of patients, angry not at the cost of drugs, but at how their insurers are responding to high-cost products, whether that is by restricting access or passing along more expensive cost sharing. Perhaps this heralds greater awareness on behalf of patients and patient advocacy groups regarding some of the “hidden economics” behind health care, and will lead to a push for greater transparency in how insurance companies make decisions — and how that information is shared with patients and beneficiaries, who are ultimately the ones paying for the health care system through their wages, taxes, premium contributions, and more.
by Jennifer Hinkel, MSc, Partner, McGivney Global Advisors
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