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September 2014 St@teside

Specialty Tier Pharmacy Benefit Designs in Commercial Insurance Policies: Issues and Considerations

Georgetown University's Center on Health Insurance Reforms, with support from the State Health Reform Assistance Network (State Network), recently released a new brief, “Specialty Tier Pharmacy Benefit Designs in Commercial Insurance Policies: Issues and Considerations,” which explores the issues of specialty tier pharmacy benefit design and offers regulatory approaches to address them.

As health care costs increase, one of the chief determinants of the rate of increase has been the cost of prescription drugs. Over the past 20 years, health insurers have experimented with different approaches to moderating the costs of providing prescription drug coverage to their enrollees. The one design that has survived and emerged as the most common approach is the tiering of benefits, or benefit designs that assign covered prescription drugs to a “tier” based on cost-sharing and other requirements, like preauthorization. Over time, additional tiers have been added to pharmacy benefit designs. As the tiers were added, cost-sharing in the new, higher tiers has increased. With the enactment of the Affordable Care Act (ACA), which eliminated underwriting and imposed the federal minimum loss ratio, or MLR (a limit on administrative and other non-health care spending), health insurers have looked to pharmacy benefit designs as one of the few remaining mechanisms for controlling costs. As a result, tiered pharmacy benefit designs with as many as five or six tiers are emerging.

Consequently, for those in need of drugs on the higher tiers with the most cost-sharing, three important issues have emerged for regulators to consider: 1) the affordability of prescription drug therapies for those who need them most; 2) the adherence challenges that result from loss of affordability; and 3) the potential for tiered pharmacy benefit designs to violate the anti-discrimination provisions of the ACA. For more information, view the brief on the State Network’s website.