PEP, November 2016: Excessive prices cause drug copay hike

Public Employee Press

Excessive prices cause drug copay hike

By GREGORY N. HEIRES

AFTER struggling for years with relentless medication price increases and insufficient funding, the DC 37's Health & Security Plan will be forced to raise the copays of the union's prescription drug benefit in January.

The copay increases come as the plan faces a $40 million deficit in fiscal year 2017 and a $90 million deficit in fiscal year 2018.

"Simply put, what comes into the plan isn't enough to cover our expenses," said Willie Chang, administrator of the DC 37 Health and Security Plan.

Describing the root cause of the plan's gloomy outlook, Chang noted that the high-profit pharmaceutical industry has jacked up prescription drug prices by 105 percent during the last eight years. Meanwhile, employer contributions to the plan that fund the benefits have only increased by 1.05 percent over the same period.

In June, the plan had a $30 million deficit and had to take money from its reserve to cover expenses. Faced with this bleak picture of the future, the plan's trustees voted to take the necessary steps, including copay increases, to address the financial crisis.

"Basically, if nothing was done, there wouldn't have been enough money to provide the benefit in a couple years," the plan's associate administrator and counsel, Audrey Browne, said.

The copay restructuring follows the DC 37 Health & Safety Plan's nearly year-long effort to obtain significant savings through a rigorous competitive bidding process with pharmacy benefit managers. The plan managed to negotiate significant annual savings in the new contracts with OptumRx and Aetna.

This is the first time that the plan has increased the copays of the drug benefit in nearly two decades.

Future Changes

The copay increases are significant, but the DC 37 Health & Security Fund needs additional funding, which the union seeks to obtain.

"The savings will be a big help to the Health & Security Plan as it addresses the deficit," DC 37 Executive Director Henry Garrido said.

"But we still need to take more action to ensure that the benefit is sufficiently funded," Garrido said. "As long as the federal government does nothing to control drug prices and the pharmaceutical industry remains unregulated, drug companies will continue to earn excessive profits and stiff consumers."

In addition to the drug plan changes, District Council 37 is considering two additional steps to address the funding issue:

The union wants to extend the current 2010-17 collective bargaining agreement by two months and 23 days to obtain additional contributions by delaying pay increases and pouring the savings into the fund. That would then push up the contract's expiration date from July 2 to Oct. 1 in 2017, which would be the earliest date for new wage increases to go into effect. The union hopes to get a permanent $200 rate increase in the city's welfare fund contribution rate - not a one-time cash contribution - for each covered city worker and retiree.

DC 37 will seek members' support for devoting a small portion of future contractual wage increases to continue to fund their DC 37 Health & Security benefits.

— GNH

Equitable changes

The plan's trustees insisted that the changes adopted in 2017 for the retirees' and active members' benefits be as equitable as possible. As a result, the copays of the prescription drug plans of members and retirees are similar.

For members, the new copays - which will affect each of the three drug tiers - will go into effect on Jan. 1:

the copay for generic drugs will increase from $5 to $10;
the copay for medication on the list of preferred brand name drugs will go up from $15 to $20
the copay for non-preferred brand name drugs will change from $35 to $45.50.

Members who use non-preferred medication will continue to be required to pay the cost difference between their non-preferred drugs and generic equivalents.

The plan has retained OptumRx as the pharmacy benefit manager (PBM) of the members' plan. PBMs are third-party managers of prescription drug programs for employer and union plans. One of their responsibilities is to negotiate drug prices with pharmaceutical companies.

Retirees covered by the United Healthcare Medicare D drug plan will see a switch to Aetna in January. Aetna runs a "generic-centric" drug plan that encourages the use of generic equivalents of brand drugs approved by the U.S. Food and Drug Administration.

In addition, retirees enrolled in the HIP/VIP plan were informed by HIP/VIP that they will no longer be covered by the Standard Medicare Part D drug plan under HIP/VIP. Instead, they will be automatically enrolled in the Aetna drug plan.

Here are the copay changes:

Retirees will to have a $5 copay for Tier 1 generics as long as they get their medication at Aetna's preferred pharmacies. Retirees who go outside the network will have a $10 copay for their generic prescriptions.
The copay of retirees who use brand-name drugs on Aetna's list of preferred drugs will increase from $15 to $20.
The copay for non-preferred brand-name and specialty drugs will go up from $35 to $45.50.

The structure of the copay benefit changes once an individual's drug costs hit $3,700. That's when Medicare's coverage gap - known as the "donut hole" - kicks in. But retirees who use brand-name drugs on the preferred drug list will have to assume 40 percent of the discounted drug cost.

During the donut hole period, retirees who get their Tier 1 generic drugs filled in the network of Aetna's preferred pharmacies will continue to have a $5 copay. Generic copays for prescriptions filled outside Aetna's preferred pharmacies will be $10.

The DC 37 Health & Security Plan will provide information on how low-income retirees who meet federal guidelines can obtain assistance from the government to cover some or all of the cost of their drugs.

Aetna's catastrophic coverage is triggered when an individual reaches $4,950 in expenditures. Retirees will then be required to pay the Standard Medicare Part D drug copay.

Retirees can learn more about their new Medicare Part D drug plan by calling Aetna's toll-free number 1-800-307-4830 Monday through Friday from 8 a.m. to 9 p.m. They can also call Health & Security's inquiry unit at 212-815-1234.