How the U.S. Rations "Specialty Drugs"

A recent spate of articles (here, here, here, and here) on how the U.S. rations "specialty drugs" calls for more open discussion of the taboo topic of rationing.

The term "specialty drugs" is used to refer to products that are (a) very expensive, (b) typically have no less costly equivalents, (c) often biologicals, and (d) addressed to serious conditions like cancer, rheumatoid arthritis, and multiple sclerosis. The specialty drug sector is the fastest growing segment of national expenditure for pharmaceuticals.

Faced with costs that can go above $100,000 per year, many insurers have added a fourth tier in drug benefit plans. (For readers outside of the U.S. - Tier I is for generics, Tier II for preferred brand drugs, and Tier III for non-preferred brand drugs.) Typically Tiers I - III have escalating copayments, perhaps $10, $20, & $40-$50. For low income insurees, even a $10 copayment can create a significant financial barrier.

But Tier IV is another story. Insurers are increasingly charging a coinsurance (percentage of the actual cost) - up to 20% - 30%. This level of cost sharing can mean financial ruin for a family or simply no medication.

In other words - we are rationing these drugs by the patient's ability to pay.

Market rationing is an ideal system for optional purchases. Society owes no one a BMW or a high definition TV. It is ethically appropriate for us to make decisions about optional purchases in light of our own resources. It may be unfortunate if our desires are frustrated, but it is not unjust.

But market rationing of specialty drugs is simply wrong. Most people - correctly - are horrified by the idea of making access to life saving cancer drugs, or drugs that may stop the progress of a crippling form of rheumatoid arthritis, contingent on individual wealth in a country as wealthy as the United States. But that's just what we are doing.

In the presidential campaign we will soon be hearing excoriation of "bean-counting insurers" for rationing specialty drugs this way, as if insurers could simply print more money, or charge ever more to employers and individuals.

The question isn't whether we will ration - we do and will continue to do so - but whether we do it in a more or less ethical fashion.

Because national leaders typically prefer to avoid honest talk about health care and hard choices by taxing future generations through the federal debt, we have to look to the states as the most promising sources of rational health policy. States are required to balance their budgets. The opportunity cost of double digit health care cost escalation is most apparent at the state level.

Here are four of the key things we need to do:

1. Recognize that specialty drugs are only the latest bulge in health care costs, not a silo to be squeezed without looking at the health care sector in its entirety.

2. Educate ourselves, from the ground up, as through the blogosphere, and from the top down, as through state-level leadership, about the ethical imperative to ration health care. (As an example, see my recent posting about Oregon.)

3. Speak out against rationing by wealth as an unjust and un-American way of conducting the process.

4. Interpret the fact of our (hopefully temporary) decision to ration specialty drugs by wealth as a symptom of our not having developed a comprehensive, value-based approach to spending our health care dollars.

Specialty drugs represent the best and worst of the U.S. health care "system." At its best, the sector exemplifies applying cutting edge science to major human problems. At its worst, the sector exemplifies market forces run amok, with monopolistic price gouging and rationing life by wealth.