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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
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6
THIRD-PARTY PAYERS

Most expanded access drugs have been provided ''free of charge'' to patients, but this term can be misleading. For example, Bristol-Myers Squibb has not charged patients for ddI under the treatment IND or parallel track protocols, but patients cannot participate in these protocols unless their physicians send monthly follow-up reports to the company about their health status. These reports must include the results of laboratory tests that cost between $100 and $300. Neither the company nor, in many cases, third-party payers will reimburse patients for these charges. Thus, even though the drug is free, either the patient or the health care system must absorb a substantial amount of drug-related charges.

The parallel track concept has arisen at a time of considerable turmoil in the U.S. health care system. Widespread concern over the high cost of medical care in the United States has placed great pressure on both public and private third-party payers to minimize expenditures. At the same time, government policymakers have been bombarded by studies showing a severe shortage of basic health care services for major segments of the population, particularly low-income minorities in urban centers.

This environment provides a particularly difficult setting in which to resolve questions about payment for health care services related to investigational drugs. Traditionally, third-party payers have covered services that are reasonable and necessary for the treatment of illness or injury. With respect to drugs, this has meant drugs recognized by the FDA as safe and effective—in other words, drugs that are

This chapter is based on the presentations of David Higbee, Susan Gleeson, Steven Peskin, Lee Mortenson, and Daniel Hoth.

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
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considered part of standard medical practice. Most third-party contracts specifically exclude coverage of investigational drugs.

Although such policies seem straightforward, they leave considerable room for interpretation. For example, when a severely ill patient receives an investigational drug, how much of that patient's care is attributable to the investigational protocol and how much would have been required in any case? Also, how should one handle costs for a disease such as AIDS, in which the appropriate and medically required treatment for a patient may be investigational in nature? Finally, how should third-party payers assess coverage for FDA-approved drugs used in ways that are not specified on the drug's FDA-approved label?

Some patient advocates claim that worsening economic conditions in health care have caused third-party payers to become increasingly restrictive in their reimbursement policies. In certain situations, they say, a patient's decision to enter a clinical trial has led insurers to refuse reimbursement for hospitalization, physician fees, and patient care costs that would have been required even if the patient had not been involved in a research protocol. They worry that such behavior will have a negative effect on drug innovation; physicians and institutions that become wary about reimbursement policies might stop entering their patients in clinical trials.

Patient advocates also express concern about the emphasis on drug labels; they say that they have seen a growing tendency to restrict reimbursement for FDA-approved drugs to indications specified on the drug label. They suggest that this practice, and the related practice of requiring prior approval for reimbursement of unlabeled indications, interfere with the physician's ability to provide good medical care. For example, a representative of the Association of Community Cancer Centers reports that there are 12 indications for interferon specified in the U.S. Pharmacopoeia (USP), but only 3 are listed on the FDA label.

Third-party payers, on the other hand, say that they have responded as quickly as possible to a series of very rapid shifts in medical practice, especially with regard to new therapies. A spokes-woman for Blue Cross and Blue Shield uses recent changes in the treatment IND program to illustrate this situation. From the perspective of third-party payers, she says, the treatment IND was supposed to act as a bridge from phase 3 trials to FDA approval. Suddenly, however, the FDA approved a treatment IND for ddI, which had not even entered phase 2 trials.

Blue Cross and Blue Shield, the Health Insurance Association of America (which represents about 320 independent insurance companies

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

in the United States), and the Health Care Financing Administration (HCFA; which administers Medicare and Medicaid) have all begun to reexamine their policies with regard to reimbursement for clinical trials and off-label uses of FDA-approved drugs.

BLUE CROSS AND BLUE SHIELD

Among Blue Cross and Blue Shield plans, 89 percent pay hospital and physician charges for patients in clinical trials when the hospitalization is medically necessary, independent of the investigational treatment. Eleven percent do not pay these standard patient care costs.

A representative of the Blue Cross and Blue Shield Association explains that each of the 74 plans nationwide makes its own decisions about coverage. Often, however, the decisions are based on recommendations made by the association's nationally recognized technology assessment programs. Recently, the association began a study of reimbursement for patient care costs, with special emphasis on clinical trials. The study will look at coverage issues that arise when one or both arms of a trial involve standard therapies. Staff members hope to develop a classification system that will help Blue Cross and Blue Shield plans assess future research protocols.

Last year, the association and plans adopted a new position on FDA labeling. In the past, reimbursement was limited to labeled indications; now, most Blue Cross and Blue Shield plans will reimburse for off-label indications if there is specific evidence of efficacy. Such evidence may come from one of the major drug compendia or from a plan's own assessment of existing research. In addition to efficacy and safety data, a plan may look for evidence that the desired drug is at least as beneficial as existing therapies. (Some patient advocates say that this new position is actually a retreat because many plans paid for off-label indication as part of standard patient care costs in the absence of an official policy.)

The Blue Cross and Blue Shield Association has a mixed record with respect to expanded access programs for investigational drugs. Last year, after considerable debate, the association advised plans that it would continue to view Group C cancer drugs as investigational, largely because plan contracts say that a drug must have final approval from the FDA to be payable. However, the plans did pay for the AIDS-related drug aerosolized pentamidine when it was distributed under a treatment IND (this may have been related to the fact that pentamidine already was approved by the FDA for intravenous administration).

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

The association's overall policy on HIV infection is that it should be treated just like any other disease. At the beginning of the epidemic, the central question was how to manage benefits in the absence of effective therapies. A large Blue Cross and Blue Shield task force recommended that plans adopt the case management approach, a strategy for assessing the circumstances of individual patient cases and making exceptions to standard contracts in an organized fashion.

Services that may be reimbursed under the case management approach include counseling, home care, and hospice care. Blue Shield of California has used the case management approach to supplement services provided by local community groups. Blue Cross and Blue Shield of Massachusetts is exploring the use of case management (under a cost-sharing agreement with participating teaching hospitals) to cover investigational treatments for life-threatening diseases that lack alternative remedies. A representative of Blue Cross and Blue Shield says that case management probably will remain the primary strategy for accommodating the special needs of patients with AIDS and other life-threatening diseases. She does not anticipate any specific contract changes.

Some patient advocates greet such news with concern. They believe that it is illogical to treat vast numbers of patients by exception. In addition, they fear that uncertainties about coverage and delays in reimbursement will discourage physicians from treating AIDS patients. Case management will become more difficult, they say, as more patients progress to the later stages of HIV infection.

HEALTH INSURANCE ASSOCIATION OF AMERICA

The Health Insurance Association of America (HIAA) is the largest trade association for the commercial insurance industry. The companies it represents underwrite about 85 percent of all commercial health insurance in the United States. Recently, HIAA convened a task force to make recommendations to member companies about off-label uses of approved drugs, treatment IND drugs, Group C drugs, and related issues. The recommendations encourage companies to be flexible, especially with regard to drugs for immediately life-threatening conditions.

For example, the task force suggested that member companies refer to three national compendia in assessing reimbursement for off-label uses of FDA-approved drugs. They are the American Hospital Formulary Service Drug Information, the American Medical Association

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

Drug Evaluations, and the U.S. Pharmacopoeia Drug Information. In addition, the task force recommended that insurers study the peer-reviewed literature and seek guidance directly from the research community. For immediately life-threatening conditions—patients with no other hope—the task force encouraged consideration of novel approaches that might not have received full peer review.

With regard to investigational drugs, the task force recommended that drugs for immediately life-threatening or serious conditions be considered for coverage—or at least not categorically denied—by health insurers. This includes treatment IND drugs and Group C cancer drugs. The task force also advised member companies to reimburse for costs associated with hospitalization for multidrug regimens involving a combination of approved and investigational drugs. (The experimental drugs themselves would not be covered; typically, these drugs are paid for by the pharmaceutical company or through research grants.) The task force did not recommend reimbursement for hospitalizations associated with single-drug clinical investigations. (Again, however, exceptions might be made for drugs for immediately life-threatening conditions.)

A spokesman for the task force said that the industry would welcome greater input from the FDA in evaluating the efficacy of investigational drugs. He also recommended the development of an alternative to tort remedy for fair, equitable, and expedient adjudication of disputes over drug coverage denials.

Patient advocates applaud HIAA's recognition of the three major compendia for assessing off-label uses of approved drugs and the recommendations concerning payment of hospital and patient care costs for multidrug clinical trials. They add, however, that it is too early to judge the impact of the recommendations because it is not clear whether member companies will follow them. Moreover, evidence from several studies indicates that the proportion of AIDS patients who are covered by private health insurance has declined over time. This trend probably will continue as the demographics of the epidemic continue to change. In addition, a 1988 survey by the congressional Office of Technology Assessment (OTA) found that commercial insurance companies, along with Blue Cross and Blue Shield plans and health maintenance organizations, were planning to reduce their exposure to the financial impact of AIDS. (Possible strategies included reducing sales to individuals and small group markets through tighter underwriting guidelines, expanding the use of HIV and other testing, adding AIDS-related questions to enrollment applications, and denying coverage to applicants with a history of sexually transmitted diseases.) Some commercial carriers have placed

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

dollar limits on AIDS coverage in new policies and others have introduced waiting periods for AIDS benefits. In this environment, the positive effects of HIAA's new policies on drug coverage might be relatively limited with respect to HIV-related disorders.

HEALTH CARE FINANCING ADMINISTRATION

Three years ago, the Health Care Financing Administration of the Department of Health and Human Services estimated that 40 percent of all patients with AIDS were served under Medicaid. This figure probably has increased substantially as a result of the growing proportion of cases associated with intravenous drug abuse. In some areas, such as New York and New Jersey, the proportion of patients covered by Medicaid may be as high as 70 percent. Medicare, in contrast, covers fewer than 2 percent of AIDS patients.

Medicaid

Drug coverage under Medicaid varies tremendously among states because it is considered an optional service; the only statutory guideline is that states may not receive federal payment for drugs that have not been determined effective by the FDA Coverage of investigational drugs and of unlabeled indications of approved drugs is usually at the discretion of the state.1

1  

In a 1989 decision, the U.S. Court of Appeals, Eighth Circuit, placed a limit on state discretion with respect to the coverage of unlabeled indications of FDA-approved drugs. The case challenged a Missouri Medicaid rule precluding certain Medicaid recipients with AIDS from receiving reimbursement for AZT. The Missouri regulations limited coverage for AZT to patients who had a history of cytologically confirmed Pneumocystis carinii pneumonia (PCP) or an absolute CD4 lymphocyte count of less than 200 per cubic millimeter in the peripheral blood before therapy (limitations stipulated in the FDA approval statement for the drug). The court concluded, "the fact that FDA has not approved labeling of a drug for a particular use does not necessarily bear on those uses of the drug that are established within the medical and scientific community as medically appropriate. It would be improper for the State of Missouri to interfere with a physician's judgment of medical necessity by limiting coverage of AZT based on criteria that admittedly do not reflect current medical knowledge or practice." The court found that Missouri Medicaid's approach to its coverage of the drug AZT was "unreasonable and inconsistent with the objectives of the Medicaid Act" (Weaver v. Reagen, 886 F.2d 194, 8th Cir., 1989).

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
State Discretion

A recent informal survey of 12 states conducted by HCFA staff members revealed that 7 (Colorado, Florida, Idaho, Massachusetts, Michigan, Texas, and Utah) did not allow any coverage of investigational drugs. The other 5 states-Illinois, New York, California, Iowa, and Virginia—allowed limited coverage on a case-by-case basis. For example, Medicaid coverage of an investigational drug in Illinois depends on three conditions: (1) the drug must be for the treatment of AIDS or an AIDS-related condition; (2) the drug must have official treatment IND status from the FDA; and (3) the recipient or program must be officially charged for the drug by the drug sponsor.

New York has a policy against payment for experimental medical care or services through Medicaid; however, the state will make an exception for an investigational drug if the FDA provides guidelines for the safe administration of the drug and if the guidelines meet the approval of the New York State Department of Health. When these criteria are met, determinations are made on a prior-approval basis for each individual. As of March 1990, the only drug approved for coverage in this fashion was aerosolized pentamidine.

In California, a patient's physician may request authorization for reimbursement for an investigational drug before treatment. Again, determination is made on a case-by-case basis.

Patient Care Costs

Such variation among the states raises the issue of fairness to beneficiaries of the different plans. The fairness issue becomes even more acute, however, in relation to patient care costs associated with investigational drugs. Recently, scientists have noticed that the probability of dying from AIDS increases in those patients who are on their second year of AZT therapy. This observation leads many to believe that the positive effects of AZT may begin to "wear off" in many AIDS patients after 12 to 18 months. For thousands of patients, the only remaining therapeutic alternative is an investigational drug.

Drug sponsors or research grants usually pay drug-related patient care costs for individuals enrolled in traditional clinical trials, but there are no similar arrangements for patients receiving drugs through treatment IND or parallel track protocols. Decisions by individual states about how to handle these costs through Medicaid will influence physician participation in expanded access protocols; such

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

decisions could determine the level of care provided for impoverished AIDS patients across the country.

Medicare

At present, Medicare does not cover investigational drugs other than Group C cancer drugs, although there is some possibility that this situation may change in the near future. HCFA is in the process of establishing regulations to govern the Medicare coverage process. A HCFA spokesman says that when the notice of proposed rulemaking was published in the Federal Register, the agency received numerous letters from the public urging Medicare coverage of treatment INDs. The impact of these letters will not be known until the final rule has been published.

RESOURCES FOR CLINICAL INVESTIGATION

In 1988, the National Institutes of Health (NIH) asked the Institute of Medicine to convene a committee to study issues pertaining to support for clinical investigation. Several of the committee's recommendations dealt specifically with the role of third-party payers in the clinical trials process. For example, the committee concluded:

...it is wholly inappropriate for third party payers to deny reimbursement for all appropriate and necessary patient care costs (not marginal costs owing to investigational intervention) that would have been incurred in any case simply because a patient is on an investigational protocol. Such denial would be tantamount to an abrogation of a contractual obligation. Medicare regulations already will not pay for care of Medicare beneficiaries for investigational therapies that may be the best available treatment. These policies interfere with the patient-doctor relationship and patient free choice.2

The committee also recognized that there are diseases for which appropriate and required care involves investigational protocols. In

2  

Institute of Medicine, Resources for Clinical Investigation (Washington, D.C.: National Academy Press, 1988, p. 7).

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×

these cases, the committee said, third-party payers should pay the standard patient care costs while costs related to investigational conclusions should be borne by the drug sponsor—a pharmaceutical company, NIH, or a foundation.

Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
Page 59
Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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Suggested Citation:"6 THIRD-PARTY PAYERS." Institute of Medicine. 1991. Expanding Access to Investigational Therapies for HIV Infection and AIDS. Washington, DC: The National Academies Press. doi: 10.17226/1778.
×
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The call for a "parallel track" for AIDS drug development—a proposal that would allow the early distribution of AIDS drugs to large numbers of patients in parallel with the conventional clinical trials that assess the drugs' safety and efficacy—has sparked controversy within the scientific community. Questions have arisen about the risks to patients of such a plan, about its potential effect on the successful completion of standard controlled trials, and about whether the parallel track will generate useful data.

Larger questions have also been raised about whether the parallel track heralds fundamental changes in the philosophy underlying drug regulation in the United States, about the costs and financing of investigational therapies and associated medical costs, and about the role of expanded access mechanisms for drugs in reaching those whose health care is generally inadequate. This volume summarizes a conference hosted by the Institute of Medicine that illuminated these issues.

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