Reinventing Formularies, Drug Pricing to Up Medication Adherence

Update 03/03/2020: This article has been updated to reflect that Oscar Health might expand the number of options for migraine prescriptions. A previous version implied that there were no migraine medications on the current $3 Drug List, but there are.

Vinod Mitta, MD, vice president of pharmaceuticals at Oscar Health, knows that prescription drug pricing goes beyond a number on an invoice. The true cost of modern prescription drug pricing is medication adherence, and affordability is a major factor in determining that final cost.

Study after study has demonstrated the effects of high costs on medication adherence. When forced to choose between paying for bills, food, and other necessities or their medication, patients often will choose to forgo treatment to the detriment of their own healthcare spending and overall health.

“The increasing lack of affordability prompted us to begin exploring more novel solutions,” Mitta told HealthPayerIntelligence in a recent interview. 

Payers have adopted tiered formularies to control costs, organizing drugs by cost and empowering payers in negotiations with pharmaceutical manufacturers. 

However, tiered formularies are notoriously inflexible. They do not allow much price variation within the tier and the model encourages higher out-of-pocket costs for patients who need higher tier medications.

Furthermore, payers can exacerbate the affordability crisis by placing low-cost generics in higher tiers.

“What we found was that the formulary is an important tool for providing access and affordability to our members, and it often doesn't reflect clinical realities,” Mitta explained.

Mitta and the Oscar Health team started thinking outside of the industry-accepted norms to find a solution.

“We believe that there is a set of cost-effective, affordable medications that everyone should have access to,” Mitta stated. “By standardizing it, not just for certain plan types, but all plan types within a given geography, we also simplify the lives of our members, our brokers, our prescribers.”

And from that conviction, the team invented Oscar Health’s $3 Drug List.

The $3 Drug List consists of 100 medications that Mitta and his team identified as “maintenance medications”—prescription drugs that patients take on a daily basis and often in tangent with other medications. The $3 price tag is consistent across all of the list’s prescriptions, covers 30 days of the medication, and is the fixed price whether or not the patient has reached his deductible.

Altogether, Oscar Health says that the drug list encompasses 90 percent of patient use cases.

The $3 Drug List is meant to be particularly well-suited for patients who struggle to afford their chronic disease management treatments because of prescription drug pricing and the quantity of medications that their conditions require.

For example, with Oscar Health’s plan, a patient with diabetes could have access to a month-long insulin regimen of Novolin N for a grand total of $3. If they have a cardiovascular comorbidity, they can also get a month-long supply of heart disease medication, Atenolol, for an additional $3.

Oscar Health estimates that a patient with diabetes could save $4,164 per year by switching to Novolin N and a patient who purchases Atenolol off the $3 Drug List could save $1,836 per year.

It took a multi-team effort to pull off this approach to lower drug pricing.

“Working backwards from the patient and prescriber, there's a number of other parties you need to work with internally,” Mitta said.

He coordinated with the plan design team, actuarial underwriting team, clinical team, and regulatory team. Each of these had input on business constraints and members’ needs.

Apart from the effects this would have on Oscar Health, the teams reached out to external sources as well. Externally, Mitta worked with pharmacy benefits managers (PBMs) to assess the impacts of this change on rates, rebates, and cost.

When settling on the final prescription price of $3, instead of executing a number of affordability and willingness to pay assessments, the payer chose to take a more personal approach.

“We did speak to a number of our patients, our prescribers, community advocates, et cetera to understand what some of the affordability thresholds were in our communities. It ultimately landed at $3, and was something that just felt right,” Mitta recalled.

The key to offering high-tier drugs for $3—at least for Oscar Health’s low-priced insulin—was finding an older class of the drug that is still efficacious, safe, and proven.

Projecting how this new offering will impact financials for patients, prescribers, and Oscar Health is the main challenge. The payer will continue to assess how the program impacts medication adherence, affordability for patients, and whether the process causes confusion for prescribers.

Going forward, Mitta said, the payer will continue to revisit the price and the list itself.

While Oscar Health is committed to never raising the price above $3, the payer is open to dropping the price further.

The drug list is likely to expand by another 50 or 100 drugs next year. To determine drugs that would be eligible for the list, Oscar Health looks at high cost brand maintenance medications. Increasing the list of migraine prescriptions or adding HIV medications may be the next improvements to the drug list, Mitta suggested.

Oscar Health’s $3 Drug List became available to Oscar Health members starting on January 1, 2020, with the exception of plans in New York, New Jersey, and California. Members in catastrophic, small group, and Medicare plans are also excluded from accessing the drug list.

If successful, Oscar Health’s action to lower drug prices may prompt other payers to think outside of the box when it comes to lowering prescription drug pricing.