Cost Sharing, Family Health Care Burden, and the Use of Specialty Drugs for Rheumatoid Arthritis

High-cost drugs and biotechnology-derived agents used to treat complex chronic conditions such as cancer, anemia, and autoimmune disorders are often referred to as “specialty drugs.” Many of these agents provide highly sophisticated treatment for which there are few other viable treatment options, but at prices that can be substantially higher than traditional medications. Spending on biotechnology products is increasing twice as fast as traditional pharmaceuticals and is expected to account for one-quarter of total drug spending by 2010. A major part of the cost lies in the development and manufacturing of these products, and a lack of generics or “bio-similars.” Given this rapid spending growth, many insurers have adopted strategies to control their use and costs. An increasing number of insurers are covering biologics under the pharmacy benefit rather than the medical benefit and applying traditional cost containment measures and utilization management (Goldman et al. 2006a). The effects of these changes are unknown. According to economic theory, individuals consume less health care services when insurance covers a smaller portion of the costs (Pauly 1968). A large body of research focusing on traditional oral pharmaceuticals links increased patient cost sharing with reduced use of prescription drugs (e.g., Motheral and Fairman 2001; Joyce et al. 2002; Huskamp et al. 2003; Goldman et al. 2004; Goldman, Joyce, and Zheng 2007;). A similar strand of research also documents that utilization management effectively reduces demand for traditional prescription drugs (Smalley et al. 1995; Phillips and Larson 1997; Cunningham 2005;). However, it is not well known how responsiveness differs for high-cost biologics and other specialty drugs costing as much as ten times as traditional medications. If high cost sharing forces people away from preferred therapies, it may end up producing more complications and higher overall health care costs (Rizzo and Simons 1997; Groban et al. 1998; Thompson et al. 1998; McCulloch 2000; Wei et al. 2002; Sokol et al. 2005; Goldman, Joyce, and Karaca-Mandic 2006b; Gaynor, Li, and Vogt 2007;). In this paper, we examine how the generosity of insurance coverage affects the demand for specialty drugs in the treatment of rheumatoid arthritis (RA). RA provides a good test case because biologics have been widely used in treating the disease over the past decade and they are expensive in both absolute terms (about U.S.$15,000 annually) and relative to alternative treatments. In addition, there is considerable variation in how generously these drugs are covered both within and across health plans. We also explore the impact of household out-of-pocket (OOP) health care expenses on the decision of RA patients to initiate and continue use of biologics. Few studies have examined the family's financial constraints and their impact on the demand for high-cost medical treatments.