Essential Health Benefits Stakeholders Sound Off on Proposed Drug Classes

Featured Health Business Daily Story, Feb. 21, 2012

Essential Health Benefits Stakeholders Sound Off on Proposed Drug Classes (with Chart: Coverage of Generic and Brand ACE Inhibitors Offered by Select Essential Health Benefits (EHB) Benchmark Plans)

Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.

By Lauren Flynn Kelly, Editor – February 10, 2012 – Volume 13 Issue 3

How prescription drug benefits will look in individual and small-group plans in 2014 remains largely undefined at this time, but stakeholders already are demanding more autonomy when it comes to their design. As the comment period for HHS’s Essential Health Benefits Bulletin closed on Jan. 31, insurers, PBMs and employers took issue with a one-drug per-class requirement and the mere mention of modeling Medicare Part D in some instances.

“The bulletin on the whole raised a lot of questions about what kind of variations plans will be allowed to make, with regards to prescription drugs and beyond. And this is really the first opportunity stakeholders have had to make sure their priorities are being heard by HHS and to hopefully influence the process as the rules around essential health benefits are being written,” asserts Lisa Murphy, a senior manager in the health reform practice at Washington, D.C., consulting group Avalere Health LLC.

The health reform law included prescription drugs as one of 10 required categories of health services that must be included as essential health benefits. The bulletin, released by CMS’s Center for Consumer Information and Insurance Oversight (CCIIO) on Dec. 16, proposed four types of “benchmark” plans that states can use to define such benefits. They are: (1) one of the three largest small-group plans in the state; (2) one of the three largest state employee health plans; (3) one of the three largest options available in the Federal Employees Health Benefits Program (FEHBP); or (4) the largest HMO offered in the state’s commercial market.

Drug Class Minimum Raises Issues

CCIIO also explained that if certain benefits — such as prescription drugs — are missing from the selected benchmark plan, benefits in that category would be based on coverage in one of the other benchmark plans.

What’s more, CCIIO said, it would borrow a requirement from the Medicare Part D program: “If a benchmark plan offers a drug in a certain category or class, all plans must offer at least one drug in that same category or class, even though the specific drugs on the formulary may vary.”

Stakeholders are questioning how much flexibility there will be around drug benefits, thanks to that one-drug per-class minimum. Both the Academy of Managed Care Pharmacy (AMCP) and the Essential Health Benefits Coalition, a broad-based organization that includes large and small employers and PBMs, iterated such concerns in their comment letters to HHS.

“A defined number of therapeutic classes that must each contain an individual drug or drugs increases the number of drugs that must be the subject of negotiation and increases the number of manufacturers with which a health plan must contract. This, in turn, diminishes the health plan’s leverage to obtain discounts from manufacturers based on volume for aggregate drug purchases,” argued CEO Edith Rosato in AMCP’s Jan. 31 letter.

Two therapy classes where there is potential for a significant financial impact from the coverage requirement are proton pump inhibitors (PPIs) and non-sedating antihistamines (NSAs), suggests Brenda Motheral, executive director of the Pharmacy Benefit Management Institute (PBMI). According to PBMI’s 2011-2012 Prescription Drug Benefit Cost and Plan Design Report, sponsored by Takeda Pharmaceuticals North America, Inc., 30% of self-insured employers (typically larger employers) excluded coverage of PPIs, compared with 52% of fully insured employers (typically smaller employers). For NSAs, PBMI saw a similar pattern, says Motheral.

“If plans were required to cover these two classes, that would represent a significant cost burden for smaller employers, many of whom have stopped covering the classes because of OTC availability,” she explains.

The Essential Health Benefit bulletin also included a footnote saying it does not intend to adopt the protected drug class policy in Part D, in which CMS designated six drug classes in which “all or substantially all drugs” must be included on Part D formularies.

“This coverage requirement has made it difficult, if not impossible, for plan sponsors to negotiate favorable rates for the drugs in these classes, as pharmaceutical manufacturers know that the plans are required to cover their products regardless of cost,” wrote Rosato.

In a Jan. 31 letter to HHS, Essential Health Benefits Coalition Chairman Neil Trautwein, who also serves as vice president and employee benefits policy counsel for the National Retail Federation, argued against deferring to Medicare as the standard for prescription drugs for “working Americans in commercial health plans.” He also strongly urged HHS to consider “commercial sector innovation in designing and delivering broad, cost-effective prescription drug benefits” in establishing essential benefits benchmarks for prescription drugs. Express Scripts, Inc., Prime Therapeutics, LLC and the Pharmaceutical Care Management Association are all part of the coalition.

America’s Health Insurance Plans (AHIP) also implored HHS on Jan. 31 to abandon specific Part D restrictions and adopt a “more market-oriented approach that can help assure that plans can effectively use their pharmacy management tools — without undue regulatory barriers — to assure access to high-value, cost-effective prescription drug coverage.”

Benchmarks Are Said to Offer Ample Coverage

The one-drug per-class requirement prompted Avalere to perform an analysis of how formulary coverage varies among potential benchmark plans. Avalere selected plans such as Anthem Lumenos PPO in California, CareFirst Blue Choice HMO HSA in Maryland and United Choice Plus POS in Colorado to serve as proxies for the first option, a state’s largest small-group plan. BlueCross BlueShield Standard Option PPO, the FEHBP plan with the highest nationwide enrollment, would represent the third option.

Avalere then reviewed the number of brand-name and generic drugs covered in nine classes from the U.S. Pharmacopeia (USP) Medicare Model Guidelines, including antidiabetic agents, anti-inflammatories/inhaled corticosteroids, multiple sclerosis agents and ACE inhibitors (see chart, below).

Researchers found that all of the plans analyzed covered a significant number of drugs in each class, well beyond the proposed one-drug per-class minimum.

“The most interesting thing is how different the plan coverage looks from the one-drug per-class policy,” notes Murphy. “We saw some differences in the small-group plans versus the federal employee plan and also some differences from state to state. But where we really saw a difference was how the commercial market offers significantly more than one drug per class. If HHS moves forward with its policy, there’s the potential that these plans that must cover essential benefits could be much less generous in terms of drug coverage than what we’re seeing in the commercial market now.”

CCIIO on Jan. 25 released an “illustrative list” of the largest three small-group products for each state, which Murphy says is in line with her study. “It’s not necessarily the benchmark options that states will have to choose from, but it gives kind of a best sense of what those plans may look like, so our study is another snapshot to help folks understand what those benchmark options might look like.”

The CCIIO bulletin did not offer guidance on cost sharing, such as deductibles, copayments and coinsurance relating to medical or prescription drug costs, but HHS says it plans to cover those items in future bulletins. “This bulletin had talked about HHS presenting its intended regulatory approach and they said there definitely will be regulations that follow this. But the immediate next step is there is another bulletin that is at OMB [i.e, the Office of Management and Budget] right now on actuarial values and cost sharing that’s related to essential benefits,” explains Murphy. “That is likely to cover a different set of issues related to essential benefits and give another piece of the puzzle, but we probably won’t have a lot of details until we get a proposed rule or an interim final rule out of HHS sometime later this year.”

View the organizations’ formal letters at, and, and the HHS bulletin at To view the Avalere study, visit

Coverage of Generic and Brand ACE Inhibitors Offered by Select Essential Health Benefits (EHB) Benchmark Plans

*The Federal Employees Health Benefits Program (FEHBP) Standard Option is an open formulary — covering all commercially available drugs approved by the U.S. Food and Drug Administration. FEHBP-covered drugs represent all drugs available in the USP class.

SOURCE: Avalere Health LLC analysis using publicly available commercial formularies.


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