Avalere assessed potential implications of step therapy on patients with employer coverage to examine total OOP and payer costs. Step therapy—also known as “fail first”—is a common form of utilization management that health plans use to control costs. Step therapy requires patients to try a preferred drug before gaining access to the drug prescribed by their provider. In some instances, step therapy may provide patients with an effective generic or low-cost treatment option and can therefore be associated with lower patient OOP and insurer costs. In other instances, step therapy may require patients to try a preferred brand option due to considerations related to contracts and rebate negotiations. In those instances, step therapy could serve as an obstacle to getting the product that a provider has deemed most appropriate for their patient and may be associated with delayed treatment, poor patient adherence, or a negative clinical outcome that may cause increased overall costs.

To understand how step therapy influences OOP and payer costs, Avalere developed 2 illustrative scenarios for a patient with Crohn’s disease. One scenario included no step therapy and the second scenario included step therapy when the patient experiences a negative clinical outcome. Avalere reviewed formulary and benefit design data, medical literature, and claims to estimate potential impacts of step therapy on OOP costs and payer costs.

Patient Profiles

Avalere developed 2 illustrative clinical profiles, one without step therapy and one with step therapy and a negative outcome. In 1 scenario, the patient profile assumes steady disease management for a Crohn’s patient adherent on prescribed therapy, which was not subject to step requirements. In the other example, the patient steps from the plan’s preferred drug to another in July after a negative outcome (disease progression requiring surgical intervention), which signals that the disease is not being managed well.

Employer Plan Benefit Design

Avalere analyzed patient cost sharing, OOP expenses, and payer liability by estimating the benefit levels of a 2019 average employer plan. In both scenarios, patients pay the full price of medical services and prescription drugs until their deductible is reached. After that, cost sharing is applied to in-network services and drugs based on parameters of the plan design, until the maximum out-of-pocket (MOOP) amount is reached. After patients hit their MOOP, they no longer pay cost-sharing for drugs and in-network services through the remainder of the plan year. A patient hitting a plan’s MOOP may be viewed as a positive event due to the capping of any additional costs. However, when the MOOP is hit early in the plan year, patients are responsible for high OOP costs clustered within the first few months of the year as opposed to having costs spread throughout the year. This concentrated upfront spending can create affordability challenges for patients that could result in abandonment of therapy and worsening disease progression.

Patient OOP Costs

This analysis found that a hypothetical patient with Crohn’s disease and no step therapy did not hit the MOOP until December, therefore having OOP costs spread out over 12 months with average monthly OOP of $339. In comparison, a hypothetical Crohn’s patient with step therapy and a negative outcome hit the MOOP in May, resulting high upfront OOP liability of just over  $4000 concentrated within the first 5 months of the plan year. In both scenarios, the patient incurred $4,065 in total OOP costs, the plan’s MOOP (Figure 1).

Payer Costs

From a payer perspective, step therapy could also impact costs in cases when patients experience negative outcomes from a fail-first requirement. And while patient annual cost-sharing liability is capped by the MOOP in their benefit design, spending for the plan continues throughout the benefit year. Avalere’s analysis shows that after a full plan year, payer costs were 37% higher in the scenario with step therapy and a negative outcome compared to the scenario with no step therapy, approximately $186K compared to $136K.

Given the potential for negative outcomes and increased costs, policymakers have increasingly sought to find a balance between plan negotiation flexibility and patient access. More than half of all states have already taken action to enact certain patient protections on the use of step therapy. Lawmakers at the federal level have also taken action by introducing the Safe Step Act, a bipartisan bill that would require group health plans to provide an exceptions process for step therapy. Stakeholders should continue to monitor the experience patients have with step therapy policies to better understand the effect on patients, insurers, and market dynamics.

Funding for this research was provided by Bristol Myers Squibb (BMS). Avalere retained full editorial control.

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Methodology

Clinical profiles were drafted in coordination between Avalere clinical staff and BMS to develop 2 hypothetical patient profiles for Crohn’s disease, 1 without step therapy and 1 with step therapy and a negative clinical outcome. Following development of the profiles, Avalere analyzed patient cost-sharing and OOP expenses by estimating the benefit levels of an average employer plan using the Kaiser Family Foundation 2019 Employer Health Benefit Survey.

This analysis was conducted using Avalere’s PlanScape®, a proprietary database of health plan formularies and benefit designs. Analysis is based on data collected by Managed Markets Insight & Technology. Avalere analyzed PlanScape® data, the MediSpan database, and other public datasets to estimate drug benefit tiering information and costs for the products and services included in each patient profile. Avalere then applied the appropriate OOP cost (copayment or coinsurance) based on the plan benefit design. Note that drug pricing information included does not account for rebates, which could decrease plan liability.

Avalere conducted an assessment of prescription utilization patterns for patients with Crohn’s disease using its 100% sample of Part D Drug Event (PDE) data from 2018 accessed under a research-focused Data Use Agreement with the Centers for Medicare & Medicaid Services. The PDE data informed assumptions about the timing of a drug change in the step therapy scenario.