States’ Approaches to Managing Cancer Drug Costs—Implications for Value-Based Treatment Decisions

As most state legislatures adjourn from their 2015 session, we have begun to reflect on key policy trends emerging this year. In terms of policy impacting cancer care, efforts to limit patient exposure to rising drug costs and maintain access to potentially life-saving treatments have continued to grow, and we are seeing an increase in the number of bills introduced by state legislators and the number of policy approaches regarding these issues. Although there was a focus on achieving oral chemotherapy parity over the past several years, we now see broad proposals to cap copays, limit the use of specialty drug tiers, and limit the use of step therapy.

Proposals to limit patient responsibility for high-cost drugs have grown, with nearly all states considering such proposals this session. To date, 40 states have passed oral parity laws. Seven states—including Delaware, Louisiana, Maine, Maryland, Montana, New York, and Vermont—now cap patient copays per monthly prescriptions, or in some cases, annually. Legislation limiting placement of drugs on the specialty tier was considered this year in several states. In addition, legislation was passed last year in New York prohibiting, and in Alaska limiting, the use of tiered formularies for specialty drugs.

States also continue to respond to insurer step-therapy requirements, creating mechanisms for patients to access needed therapies in a timely manner. At least 7 states considered proposals that would permit providers to override steps based on individual patient health needs—Connecticut passed such a law last year. Protecting patients from drug cost burdens and ensuring patient access to drugs are clearly growing and winning arguments that are placed before state legislatures.

But what of the argument that containing out-of-pocket costs simply shifts the financial burden of high-cost drugs to insurers? This year, California, Oregon, Pennsylvania, North Carolina, Massachusetts, and New York have addressed this issue of high-cost drugs, introducing legislation that would require drug man­ufacturers to provide data about drug development, production, and distribution for drugs that cost more than a specified amount of money.

Although no such bills are likely to pass in 2015, we certainly expect to see this issue spread to other states next year. This policy approach raises questions about whether the required drug information is readily available from drug manufacturers that fund the development of many of these high-cost drugs, some of which never make it to market. And more important, is the cost to drug makers the right metric for evaluating treatment regimens?

Bringing Value into the Equation

As state policymakers are grappling with containing costs for patients, the US healthcare system is transitioning to reimbursement based on value and quality. This past April, the Medicare Access and CHIP Reauthorization Act of 2015 was enacted, bringing a transition to Medicare payment systems that emphasize value over volume. Private payers have also been exploring reimbursement agreements that are tied to quality and performance metrics for quite some time. However, in an environment of rising drug costs, how do we define the value of innovative, potentially high-cost treatments?

In June 2015, the American Society of Clinical Oncology (ASCO) published its conceptual framework for assigning value to oncology drugs—based on their clinical benefit, toxicity, and cost—in which a highly beneficial treatment with low toxicity may be assigned a high value, despite a seemingly prohibitive cost. ASCO’s value framework provides a drug benefit score to compare the cost to the patient and the drug acquisition cost.

The cost to the patient may be influenced by any number of state laws limiting out-of-pocket costs; however, the final treatment decision is presumably left for the patient and provider to select. If patients and providers make treatment decisions by considering drug value based on patient costs, how can we realize true drug value in our healthcare system? Can we expect patients and providers to look beyond individual out-of-pocket costs to total healthcare system costs in making treatment decisions?

To achieve value-based drug utilization, must drug acquisition cost govern treatment decision-making? In light of the many state laws that limit patient exposure to drug acquisition costs, how can ASCO’s framework best be implemented? Do these state laws, which shield patients from high out-of-pocket costs, skew patient and provider perspectives of drug value? If so, where do we go from here in state prescription drug cost policy?

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