Has the financial tipping point of life vs. death finally arrived? Do you now need to be financially healthy (meaning rich) to ease suffering from or survive diseases such as multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers (such as metastatic breast cancer)?

The lead story in the print edition of today’s New York Times reports this chilling fact:

Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases. With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.



Simply put: For some drugs, you no longer pay a fixed amount as a co-pay; you pay a percentage of the drug’s cost (up to a certain amount, under some plans).

For the past decade, those who can afford health insurance (47 million people don’t have it) or have it provided by employers have become used to drug formularies and three-tier pharmaceutical benefits. For example, my provider requires:

• a $7 co-pay for Tier 1 drugs: generics, over-the-counter and certain brand names.

• a $15 co-pay for Tier 2: other “preferred” brand-name drugs.

• a $40 co-pay for Tier 3: all other drugs; i.e, drugs not listed in the providers formulary.

Increasingly, notes The Times, insurers have added Tier 4 and Tier 5 co-pays, following the lead of Medicare drug plans (you know, those plans in which the government bargained away its ability to get bargains?).

Now Tier 4 is also showing up in insurance that people buy on their own or acquire through employers, said Dan Mendelson of Avalere Health, a research organization in Washington. It is the fastest-growing segment in private insurance, Mr. Mendelson said. Five years ago it was virtually nonexistent in private plans, he said. Now 10 percent of them have Tier 4 drug categories.

The drugs covered by these Tier 4 and Tier 5 categories are expensive. So if these tiers charge a percentage of the cost rather than a flat co-pay, it can become ruinously expensive.

If you’re suffering from the relapsing-remitting (RRMS) form of multiple sclerosis, you may be taking Copaxone to reduce the relapse rate. The drug may cost nearly $2,000 a month. Your co-pay might have been a flat-fee $25 a month in a three-tiered plan. Under Tier 4 or 5, the co-pay may be a percentage of the whole cost.

At 25 percent of Copaxone’s cost, your co-pay could hit $500 a month (unless capped at a specific amount). That’s a life-altering 1,900 percent increase.

Why do insurers do this? Reports The Times: “Insurers say the new system keeps everyone’s premiums down at a time when some of the most innovative and promising new treatments for conditions like cancer and rheumatoid arthritis and multiple sclerosis can cost $100,000 and more a year.” [emphasis added]

That’s like taking on a second mortgage, which people may, in fact, have to do to ease their suffering or prolong their lives. They might indeed ask: What’s the point of having insurance in the first place? Wasn’t it intended to prevent financial ruin by spreading the risk across an enormous pool? Again, from The Times:

But the new system sticks seriously ill people with huge bills, said James Robinson, a health economist at the University of California, Berkeley. “It is very unfortunate social policy,” Dr. Robinson said. “The more the sick person pays, the less the healthy person pays.” Traditionally, the idea of insurance was to spread the costs of paying for the sick. “This is an erosion of the traditional concept of insurance,” Mr. Mendelson said. “Those beneficiaries who bear the burden of illness are also bearing the burden of cost.” [emphasis added]

This is beyond my pittance of knowledge of health economics to figure out. But generally, I smell a rat. Rather, two rats.

I find it difficult to separate Big Pharma (on which we depend for life-saving drugs); Big Insurance (on which we depend to help us pay for those drugs without driving ourselves into bankruptcy); and the decade-long, dramatic rise of out-of-pocket costs for health care (particularly for life-saving drugs) through higher and higher co-payments.

For Big Pharma, which does the research and development for the medications that heal us and save our lives, there’s this question:

Why do you charge so much for these Tier 4 and 5 drugs? (This is not the same question as this: What factors account for the real wholesale costs of these drugs?)

For Big Insurance, there’s this:

Why have you shed the traditional concept of sharing the risk across a large pool of insurees? The subhed of The Times‘ story is telling: Insurers shift burden. Why? Here’s the industry’s stock answer:

Private insurers began offering Tier 4 plans in response to employers who were looking for ways to keep costs down, said Karen Ignagni, president of America’s Health Insurance Plans, which represents most of the nation’s health insurers.

So Big Insurance blames employers, saying they want lower costs. But isn’t that leaving out a bunch of other factors? Why has the cost of health care (and insurance to cover that cost, particularly drugs) become so high that employers complained about the cost? Big Insurance is not being wholly honest in blaming employers.

Meanwhile, I observe the following trends.

According to a 2002 report by the Government Accountability Office:

[P]harmaceutical companies spent $30.3 billion on research and development and $19.1 billion on all promotional activities, which includes $2.7 billion on DTC advertising, in 2001. Pharmaceutical companies have increased spending on DTC advertising more rapidly than they have increased spending on research and development. Between 1997 and 2001, DTC advertising spending increased 145 percent, while research and development spending increased 59 percent. Promotion to physicians accounted for more than 80 percent of all promotional spending by pharmaceutical companies in 2001. Total promotional spending was equivalent to 12 percent of drug sales in the United States in 2001. [emphasis added; DTC = direct-to-consumer]

According to another study using 2004 data, Big Pharma spent almost twice as much on promotion as it does on research and development:

The researchers’ estimate is based on the systematic collection of data directly from the industry and doctors during 2004, which shows the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US $235.4 billion.

Big Pharma lobbies Congress extensively and increased its lobbying in 2007 more than any other industry. According to the Center for Responsive Politics:

[T]he pharmaceuticals/health products industry outspent all industries by shelling out $227 million for lobbying services, or an average of $1.4 million for the 164 days that the 110th Congress met in 2007. The drug industry has spent $1.3 billion on federal lobbying over the last 10 years, more than any other industry. Its reported lobbying increased 25 percent in 2007. [emphasis added]

Overall, the entire health industry spent early $445 million on lobbying in 2007.

Since 1990, Big Pharma has made about $152 million in campaign contributions to candidates for federal office. (Health services and HMOs have given nearly $54 million since 1990.)

Big Insurance (which obviously covers more than health-related insurance) spent about $138 million on lobbying in 2007 and more than $1 billion since 1998. Since 1990, Big Insurance has made more than $287 million in campaign contributions.

What a frickin’ mess. Industries have carved out new social policy. So we ought to be asking some basic questions:

What is the priority of Big Pharma? How does that priority fit into social policy as articulated by the legislative and executive branches of government?

What is the priority of Big Insurance? How does that priority fit into social policy as articulated by the legislative and executive branches of government?

What is the relationship between Big Pharma and Big Insurance? How does that relationship fit into social policy as articulated by the legislative and executive branches of government?

Now, if we can persuade our presidential candidates to stop caterwauling about minutiae in “he said/she said” language, perhaps they’ll address questions like this before we have to vote for one of these feckless dolts in November.

And we might ask our members of Congress what impact those hundreds of millions of dollars in campaign contributions and lobbying expenses have on their ability to set social policy that doesn’t leave people financially bereft of hope and at risk of life when struck by serious illness.