A Serious Look at Expensive Drugs

The Office of Personnel Management is undertaking a review of how much federal employees and retirees pay for certain types of expensive, specialized prescription drugs that help treat such diseases as cancer, multiple sclerosis and hepatitis.

Employers and insurance companies determine the share of prescription-drug costs that are passed along to patients, and those decisions sometimes can create thousands of dollars in out-of-pocket costs for federal employees and retirees.

"We do not want people who are seriously ill being put in the position of being subject to extreme costs," said Nancy H. Kichak, an OPM associate director. "It is our responsibility, and we do work very hard at it, to make sure there is some limit to what folks have to pay in a serious illness."

The OPM's review grew out of a complaint from someone enrolled in Kaiser Permanente's mid-Atlantic plan that her drug costs had soared and from discussions with Kaiser, Kichak said in an interview.

The health maintenance organization, effective in January, changed the charge for specialty drugs, known as Tier 4 coverage, from a co-payment, or a flat rate, to coinsurance, or a percentage of each medication's total cost. The shift to coinsurance had been cleared by the OPM.

Kaiser picked up "rumblings" from patients and physicians who were concerned about the benefit change early in the year, according to Sandra Gregg, vice president of communications for Kaiser in the mid-Atlantic region.

Some enrollees in the Kaiser plan did not see or did not pay attention to an announcement of the benefits change, while doctors were surprised to hear from patients about the higher drug costs, Gregg said.

On April 1, Kaiser decided to suspend the coinsurance system for the rest of the year. The company also decided to reimburse enrollees for the difference between their coinsurance and co-payment rates. By April 9, Gregg said, the company had engaged the OPM and was preparing material to send to enrollees.

From 700 to 800 Kaiser enrollees have prescriptions for Tier 4 drugs, and some were taking multiple medications that could have cost $300 for each refill. "We stopped it before it had a chance to spin out of control," Gregg said.

Under the co-pay system, enrollees spend from $7 for a generic drug at a Kaiser pharmacy to $65 for a brand-name medication purchased at a commercial pharmacy, she said.

The change from the flat rate, first reported by the New York Times, raised questions of fairness because it appeared some enrollees were being singled out and required to pay more than others. "It seems to go against the philosophy of having a group plan with the risks spread out over all of the enrollees," said David B. Snell, director of retirement benefits at the National Active and Retired Federal Employees Association.

Kichak said the OPM has had no complaints about Tier 4 pricing from federal enrollees in other health plans, but "this whole thing has given us a new viewpoint, and we have started looking at other carriers."