By Barbara Hawes and Cory Jorbin

Miracles do happen, and we are witnessing them increasingly in science and medicine. Advances in gene therapy are producing exciting breakthroughs like Zolgenzma, which treats children with the often deadly disease of spinal muscular atrophy. And more and more specialty drugs are being developed to cure once fatal diseases or substantially prolong lives.

What’s a miracle worth, though? Zolgenzma’s price tag is $2.125 million. The specialty drug that effected a 99% cure rate for Hepatitis C cost $100,000 per course of treatment. Others today run $50,000 per month – without necessarily delivering a cure.

But who’s going to pay for these high-cost drugs?

It’s putting employers, particularly those with self-funded plans, in the difficult position of balancing compassion with their broader fiscal and legal responsibilities as they ask: “Do we have to cover these medications?”

The question is neither unfair or uncommon. But the decision to amend plan coverage accordingly is a tough one. It shouldn’t be reached without first evaluating potential solutions for high-cost claims as well as the regulatory implications of excluding a drug or drug class or even all specialty drugs. (And do enlist experts for the job.) Here are your chief considerations:

Potential solutions to high therapy and pharmaceutical claims costs

The in-house course. Relief is available within the framework of your health plan and Pharmacy Benefit Management (PBM) services. (But it may take outside pharmacy and benefits advisors to run interference in order to reduce these costs.) The solution lies in improved coordination between the in-house specialty pharmacy and the pharmaceutical manufacturers’ assistance programs, which feature discounted prices or free product for low-income individuals. Successfully accessing those programs can reduce high cost claims – in some cases by 100%. Keeping the prescription, along with the care delivery, patient history, and claim coordination, within the established PBM solution and stop loss accounting is by far best-case scenario for the patient and the plan.

Carve-outs of carve-outs. These “innovator” solutions are another cure, but they are inherently more risky. Their underlying premise is brilliant: to capture the pool of dollars set aside by manufacturers in assistance programs for patients who need the expensive therapies but can’t afford it or are ineligible due to a PBM claim denial or employer coverage exclusion. They are new intermediaries in facilitating enrollment in the programs, meeting a dire need of patients and plans. But it’s important to step carefully with the innovators. Their long-term viability is still in question, and if larger PBMs do agree to work with them, specialty network discount guarantees and minimum rebate guarantees could be forfeited. The savings analyses provided by the innovators often overlook or undervalue such offsets. Another concern: As startups, there may be growing pains, with inconsistent staffing and support. That makes a detailed evaluation of data exchange protocols and patient privacy protections essential.

To exclude or not – the role of regulations

Compliance issues should also guide your decision on whether drug exclusions from your plan are in order. Among them:

Inclusion in any of the  Affordable Care Act (ACA) preventive care lists. The ACA requires plans to cover certain screenings, procedures and drugs falling under the applicable preventive classifications.

Falling under an essential health benefit (EHB) category, as described by the ACA. EHBs are set in each state using a “State Benchmark Plan,” which reflects the terms of group medical coverage in that state. Self-funded and large group employers are not required to cover all the items or services (including individual drugs) that a State Benchmark Plan covers.  However, if they chooses to cover the drug, they can’t impose annual or lifetime dollar limit. The basis for using the EHB designation for determining whether or not to exclude a drug/drug class is complex, and shouldn’t be undertaken without a compliance attorney’s guidance.

Issues of discrimination by the plan. If you cherry-pick your plan and, for example, provide medical and surgical benefits along with benefits for mental health and substance abuse, but exclude coverage for depression, this could lead to issues with the Equal Employment Opportunity Commission (EEOC) and under the Mental Health Parity and Addiction Equity Act rules.. A benefit has to apply to a broad group of employees and apply to multiple, dissimilar conditions, and at the same time not exclude both individuals with or without a disability.

Potential HIPAA issues, particularly if the exclusion is reactionary. An exclusion responding to a claim already being incurred could raise questions that Protected Health Information (PHI) had been used in the decision-making process. HIPAA provides that PHI can’t be used or disclosed for employment related actions or decisions or in connection with other benefits or employee benefit plan of the employer.

For employers, the ability to successfully balance between compassion and pragmatism is only going to get more difficult – and urgent – as science and technology advance and promise to save more lives in the process. They will have to step carefully, with the help of the right expert partners, in order to meet everyone’s best interests.


HUB International’s team of Employee Benefits consultants, including members of its Pharmacy Practice and compliance organization, are available to help you manage the issues facing today’s benefits programs. Learn more about healthcare cost management with HUB!