Working for a healthcare company can by incredibly interesting. There are more moving pieces than many people see and the government, federal and state, is always changing the rules. It means that nothing is set in stone. One aspect I don't like about the industry and company in particular is that I'm blamed, in a sense, for all the decisions the industry/company makes. Not to mention, people, my family included, feel the need to tell me their thoughts and feelings regarding the company's decisions. Most of those decisions are out of my control.
My dad, who has recently moved to Colorado and can't seem to pick up the phone to say 'hi'
(that's a different post), sent me a text today about the fact that he dislikes that my company is now requiring him to be on the generic drug for Lipitor as opposed to the brand drug. Furthermore, he felt the need to follow up my return text with an email stating that his insurance company should not be the one making his healthcare decisions.
I get it. Healthcare is an emotional and personal part of life. It is very hard to separate that feeling from any decision that is made, especially one that was seemingly made without you. In addition, many people outside the healthcare insurance industry simply think decisions are financially driven (which dad did point out). While I'm not going to tell you that decisions are not made with some financial incentive, I do want to point out some facts.
1. Healthcare costs in the United States have been rising and rising and rising
2. Generic drugs, while not identical, are bioequivalent to the brand
3. Many people have taken generic drugs with no complications
4. A generic drug is typically a fraction of the cost of a brand drug to both the individual and the insurance company
5. The decisions, while made in light of financial incentives, are not always for pure profit
So why does this matter? Lipitor, arguably one of the best blockbuster drugs of the 20th century, went generic in Nov 2011. My company made a decision, which I can say included medical expertise, to require members of fully insured plans to take the generic instead of the brand as of Jan 1, 2012. The decision, while saving money, is a way to push the common person to use generic drugs. Most generic drugs affect people the same way the brand does. And should a person find that they respond differently or adversely to a generic, healthcare companies are apt to make exceptions for people to use brands or another alternative. This is often known as step-therapy. They try to find the cheapest alternative that will get the job done. I recognize that that might not sit well with a consumer, but here's another side.
First a little insurance 101. Health insurance is supposed to be a means of spreading the risk of a catastrophic case over a number of people instead of having to bear the risk solely, much like car insurance. However, in contrast to car insurance, Health insurance has become a full maintenance plan where the average American believes a company should cover everything. The problem is, someone has to pay for the services. Generally, everyone pays a premium (often covered in part by an employer). As healthcare costs rise, the premium rises. The premium is set mostly to pay medical/ pharmacy costs. It is possible that if you are a healthy individual, you do not use your "fair share" of the medical costs. Contrarily, someone who has a heart ache or surgical complications may rack up hundreds of thousands or millions of dollars in medical bills. With the appropriate insurance, the bulk of those costs are covered and subsequently, an individual has a slightly more affordable bill (I do recognize there are varied circumstances and I am generalizing a lot.)
Back to Lipitor. Lipitor is a top 10 drug, which means, if you were to look at spend for the top 10 drugs per year, Lipitor would sit in that category, comfortably. Lipitor's sales were roughly $7.8 billion last year in the US (http://blogs.wsj.com/health/2011/12/08/how-much-money-will-generic-lipitor-save/). Now that Lipitor is generic, as much as $4.5 billion annually can be saved by 2014. This savings is transitioned into premium pricing for health plans around the country. Should people not actually switch to the generic, the assumed savings basically becomes an underpricing of a health plan. Consequently, in the subsequent year, this premium discount may be repriced to better reflect the actions of the population. Much like any business, an insurance company wants to make money. Though the profit margin baked into group premiums is not nearly as much as people think. After broker commissions, sales commissions, administrative costs, and medical costs, the profit is typically 2%. That money is often reinvested into the business to make IT improvements and acquisitions among other things. Fact is, there are many moving pieces and while some hit home harder than others, we're all trying to balance cost and reward. Healthcare is personal and don't think that we or anyone else making decisions doesn't realize that.
