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Medications becoming biggest cost for gov’t health plan

By on October 15, 2020

ASES executive Director Jorge Galva’s presentation in the P. R. Hospital Association’s annual convention (Screen grab)

Surged in past few years and is close to surpassing Vital’s hospital expenses

SAN JUAN — As the rising prices of medications are compounded by speeding inflation, the executive director of Puerto Rico’s Health Insurance Administration (ASES by its Spanish acronym), Jorge Galva, warned that by next year or 2022 “at the latest,” that expense category could become the largest for Vital, the government’s healthcare coverage option. 

Galva made the related remarks during his update of ASES—which administers the health insurance system used by more than one million people—for the Puerto Rico Hospital Association’s annual convention, which began virtually Wednesday. In his presentation, the head of ASES highlighted that from 2014 to 2019 the medications segment went from 19 percent of Vital’s patient coverage spending to 29 percent, even after Vital’s budget was increased by $300 million. For comparison, Galva mentioned that hospital costs represent 31 percent of Vital’s budget. 

“If the upward trend in drug costs that we have experienced in the last six years continues, there is no doubt that by the year 2021 or 2022, at the latest, the cost of drugs for the Vital plan will exceed the costs incurred in payment for hospital services,” Galva said.

“This is important because it has always been understood that hospital spending is the largest expense within the system as it is the most expensive environment for the delivery of services. And yet the provision of pharmacy coverage is about to surpass the environment historically considered more expensive for the delivery of services,” he added. 

Given that primary doctors and other health providers are paid pre-arranged per-member-per-month (PMPM) amounts, or capitated payments, to reimburse for pharmacy, hospitalization and laboratories, Galva argued that the increase in drug costs could eat up the PMPM to the point that the other expenses won’t be adequately covered. 

Admittedly, the majority of the elements producing the increase in the medication segment are not controlled by ASES. Galva said that, while drug prices had been expected to level off as patents expired, the pace of inflation has sped up. This is because, among other things, pharmaceutical companies have been able to extend the patents by making unsubstantial changes to the drugs’ compositions. Galva also pointed out that generic drug prices have also risen. 

However, ASES executives are looking to promote policies and implement changes aimed at prioritizing generics or the least expensive treatment possible. The latter includes looking at the exception process implemented to cover drugs that are not part of the approved list and rare-disease, or orphan drugs. Additionally, Galva said they want to promote “more efficient” dosing practices by physicians. 

“ASES recognizes that at present there is an important gap that has to be closed in the education of primary physicians and even specialist physicians regarding the efficient use of pharmacological products for the treatment of diseases and conditions of our beneficiaries,” the administrator said. 

Galva put special emphasis on the specialized medications for chronic illnesses such as multiple sclerosis, rheumatoid arthritis, cancer, hemophilia and pulmonary arterial hypertension because, although they make up 0.1 percent of prescriptions, they represent 51 percent of the $710 million drug category. 

Similarly, Galva highlighted patients that use orphan drugs, who on average require $147,000 annually, with some needing as much as $750,000. The ASES chief acknowledged the ethical matter that there are many patients under Vital who lack financial means. 

“That is one of the points that we have to be clear about because we have a dilemma of not only an economic nature, but we also have great ethical issues. To what extent do I have an ethical obligation as the Health Insurance Administration to pay for extraordinarily expensive treatments for a very small portion of the population when I have a limited amount of money and may be leaving an infinitely larger population of people without coverage for much more prevalent and cheaper treatments?” Galva questioned.

The ASES director said that to address the rising cost of medications, whether for market issues or for other elements, like specialized medication, the government entity created a clinical committee composed of physicians who analyze the efficacy of medications on the ASES list and compare them with other options. Additionally, the entity has a finance committee “to be the counterpart to the clinical and therapeutic committee” because ASES needs to include economic considerations in its medical assessments, Galva argued.  

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