Managing formulary changes
DermWorld looks at disruptive prescription coverage changes and offers tools for navigating these pain points.
By Amy Freed Stalzer, Contributing Writer, March 1, 2023
It’s not an uncommon scenario: A dermatologist refills a prescription for a patient but comes to find out that the patient’s insurance formulary has changed without notice. Sometimes the prescribed drug is no longer covered.
Unfortunately, dermatologists know all too well that when insurers force patients to switch their prescription therapies by removing or restricting patient access to their medicine, it can negatively impact patient outcomes and quality of life by increasing risk to the patient of disease flaring, immunogenicity, adverse effects, and secondary nonresponse. Switching a patient’s therapy can also promote a loss of effectiveness of the prescribed medication should the patient resume the original medication later.
The AADA has worked for years on this issue, developing practice management resources and advocating at the state level to help physicians reduce their administrative burden and protect patients.
Barriers to patient care
Many health insurers institute drug-tiering systems that place drugs into various pricing categories. Tier 1 often includes the drugs that cost the least for both the insurance company and the patient — these are often generic medications — while Tier 3 often includes drugs that cost the most for the insurance company and the patient — usually brand-name products.
Specialty drugs, such as biologics for psoriasis, for example, will often be in a fourth or fifth tier, depending on the insurer’s tiering structure for all other drugs.
Problems arise for both physicians and their patients when insurers remove drugs from the formulary altogether or move them to different tiers, where drugs will either cost significantly more or require the patient to “fail” a lower-tier drug first before ascending to a higher tier — a practice known as step therapy, or “fail first.”
Physicians select prescription therapies based on intimate knowledge of a patient’s medical history. Formulary changes requiring protocols like step therapy can be highly disruptive to a patient’s care when that person is prevented from accessing their prescribed treatment and is switched to a medication that may not be as effective or is switched to a medication that may create a risk of disease progression.
According to the State Access to Innovative Medicines (SAIM) Coalition, step therapy is widely applied by health insurers for prescription drugs used to treat a range of life-threatening diseases and chronic conditions, but it often is not safe or affordable for patients.
“Patients have reported serious side effects from medications they were required to take as part of step therapy protocol,” said the coalition. “In many of these cases, the insurer was notified of an expected adverse reaction, but still required the patient to follow the step process.”
The group reported relevant step therapy findings from a 2018 study by Health Affairs: “In an analysis of coverage decisions for specialty drugs from 17 of the 20 largest commercial health insurers in the U.S., it was found that all insurers used step therapy to restrict access to specialty drugs, ranging from 2% to 49% of coverage decisions (as of August 2017). Further, among the 1,208 coverage decisions that involved step therapy, 761 (63%) required patients to use a single therapy first, 447 (37%) required using multiple therapies, and 181 (15%) of protocols included three or more steps.”
Moving vital medications such as biologics into higher level specialty tiers that require patients to pay a percentage of the actual cost of these drugs rather than a reasonable fixed co-payment can impact the ability of patients to access the treatment they need, adding a significant financial burden for patients and putting necessary medications out of reach for most of them.
Protocols like step therapy and their resulting prior authorization requirements for specialized, highly nuanced medications can also compromise the doctor-patient relationship, when a third party, with no knowledge of the complexity or full history of a patient’s condition, is placed in an inappropriate decision-making role for the patient.
Administrative burden for physicians
When health insurers remove drugs from the formulary, it is not always done transparently or communicated well to physicians. The speed and ease of access to current and accurate formulary data varies from insurer to insurer, with some companies offering more advanced and well-designed technology portals for the data than others, for example.
Depending on the health insurance provider, it may be difficult for physicians to stay informed about which drugs are available to prescribe at any given time, or to immediately determine an appropriate alternative medication, if the initial prescribed medication is not available.
Lack of fast and easy access to current formulary data can slow a physician’s ability to prescribe effectively and cause difficulties for medical staff when helping patients find medication alternatives, both delaying patient care.
When health insurers move drugs to different tiers, physicians and their staff can also spend hours trying to battle step therapy requirements and obtain prior authorization for drugs — one of the top administrative burdens faced by dermatologists.
“It’s a very difficult issue, when a prescribed medication is not on the formulary or there are significant step edits,” said Robert E. Kalb, MD, FAAD, of Buffalo Medical Group in New York. This situation can create significant delays for the patient to receive the medication, the patient not being able to obtain the medication, and is associated with a significant amount of time and effort involved for the staff to rectify this problem.
“The prior authorization process puts a huge office staff burden on every office prescribing these types of medications,” Dr. Kalb said. “I sent in a prescription for an oral medicine for psoriasis, but there were six other medications they had to fail for it to be authorized. If I knew this immediately when placing the prescription, I would be able to consider other options or initiate the prior authorization process that day which can expedite the patient receiving the appropriate therapy. Often a detailed patient-specific letter sent to the insurer carrier is required for the therapy to be approved. The Academy template letters are helpful in these situations available at www.aad.org/prior-auth.”
Additional challenges for dermatologists
Joerg Albrecht, MD, PhD, FAAD, chair of the Cook County Health Pharmacy and Therapeutics Committee in Chicago, said that two main problems dermatologists face related to formulary changes are the high cost of many drugs used for dermatology prescriptions and the lack of transparency provided by health insurers into the decision-making behind formulary changes.
Most formularies for private insurance are run through pharmacy benefit managers (PBM), which have grown to become a major and highly profitable part of the pharmaceutical supply chain, negotiating with drug manufacturers to design formulary tiers, administering outpatient prescription drug benefits for insurers, managing pharmacy networks and distribution, and distributing drugs to patients through mail order programs, according to Albrecht.
While individuals or professional groups can make recommendations to private insurance and Medicaid about drugs and prior authorization requirements for the formulary, PBMs or indeed the state can always ignore them.
Albrecht asserts that it’s detrimental when dermatologists are underrepresented on such committees, since it’s essential for them to have a voice in decision-making about which drugs appear on the formulary on behalf of dermatology patients, in lieu of leaving such decisions to others who don’t have dermatology expertise and might nix a particular drug to cut costs or for other reasons.
Though every state has its own formulary committee, insufficient representation of dermatologists on these committees perhaps predictably leads to inconsistent insurance coverage nationwide of the drugs typically prescribed by dermatologists. For instance, “some decide that acne is never covered, while others cover it, but only to a certain age,” Albrecht said.
“Cost control is a huge struggle, and there has to be some kind of control, but it has to be competent,” he concluded. “Dermatologists are particularly affected by this because a lot of the drugs we use are expensive. These drugs are really important for us, but a lot of the people who regulate it don’t know what they’re doing.”
Practice management resources
To relieve physician members of administrative burden and improve timely and cost-effective patient access to prescription therapies, the AADA offers many practice management resources on insurance and drug pricing issues.
Letter generator tools help members quickly write and send letters to insurance companies to resolve prescription drug issues. For example, the Private Payer Appeal Letter Generator automates the generation of appeal letters for private payers, and the Prior Authorization
Letter Generator easily creates appeal letters to help overturn denials for prior authorizations. The AADA insurance and drugs resource site also provides members-only guidance about the prior authorization workflow, where physicians can review a typical workflow on how prior authorization might work in cases where the insurance company objects to a prescription or service, as well as other prior authorization resources to assist physicians in getting medication for their patients.
Since the cost of medications is a barrier for many patients, especially those whose prescriptions are not covered by insurance, the Academy also provides the Find Drug Prices tool, which enables fast online searches for the price of any drug to educate patients on the cheapest alternative in real time.
Outside of AADA resources, other prescription drug assistance programs available for physicians to share with patients include:
NeedyMeds – This national non-profit organization provides free information on more than 5,000 assistance programs that help people who can’t afford medication.
RxAssist – This comprehensive database of patient assistance programs is run by pharmaceutical companies that provide free medications to people who cannot afford to buy their medicine.
The Medicine Assistance Tool – This resource helps qualifying patients who lack prescription coverage get the medicines they need through public or private programs.
Dr. Kalb said that tools provided by the AADA such as auto-generated letters are “wonderful” and provide relief from some of the unnecessary paperwork caused by formulary changes, but they don’t completely mitigate the administrative need for medical staff to generate a letter, send it to the right person at the insurance company, and await a reply, which can be days to even weeks.
He emphasized that problems stemming from formulary changes can fully be solved only by the insurance companies themselves, with the “gold standard” being for the companies to ensure that formularies and EMR systems are in sync. It’s also important for insurers to provide secure and user-friendly digital portals that deliver requested information instantaneously.
“This must be a point of service issue. In an ideal world, when I place a prescription electronically, there will be software that provides information on whether the medication is on the formulary and what prior authorization requirements, if any, are necessary,” Dr. Kalb said. Some private insurance companies already provide this real-time data, but not all. “There are insurance companies interfaced with our EMR, that when a prescription is placed, says ‘this product is not on the formulary; consider these alternatives,’” he said.
“The other day I wrote a prescription for a simple topical medicine, and I received the message in real time, ‘this is not on formulary,’ but suggested other options on the formulary that would be equivalent. This type of information allows the patient to receive therapy more expeditiously and saves the office staff the burden of submitting prior authorization requirements when they are not needed. If the physician deems the suggested alternatives are not appropriate for their patient, the prior authorization can be started immediately,” he said.
In addition to providing many useful resources for physicians and their patients, the AADA is also devoted to advocating for improved patient access to affordable prescriptions.
“There are two state legislative priorities that we have to address when patients are told by insurance companies that they can’t be on the medication that has been prescribed to them by their physician,” which are formulary switches made by a health plan midyear and step therapy, said AADA Director of State Policy Lisa Albany, JD.
For the former, the Academy supported a model bill that it’s worked on with other patient and physician groups limiting the ability of insurers to make formulary changes midyear, such as by moving a drug to a more restrictive tier or moving it to a higher cost-sharing tier with larger deductible, co-pay, or co-insurance.
This bill is specifically focused on preventing mid-year switching which results in disruptions to patient care, and not switching at the beginning of the year during the open enrollment period. The AADA has been working on it since about 2016 in several states, including Colorado, Florida, Illinois, Massachusetts, and New York.
Albany acknowledged that it has been difficult to pass the switching bill in certain states due to a possible divided loyalty on the part of some legislators in favor of the needs of health plans over those of patients, among other possible reasons, or questioning whether this approach will reduce health care costs.
The Academy has also been working with a large coalition of patient and physician groups — including not only dermatology but rheumatology, oncology, and psychiatry — on “fail first” legislation.
Since 2015, it has successfully worked with state dermatologic societies to help enact state laws that protect patients against step therapy in Arkansas, California, Kentucky, Massachusetts, Nebraska, Pennsylvania, and Tennessee, Albany reported. Altogether, 33 states have passed legislation restricting the use of step therapy by deferring to a physician’s medical judgment to date.
“In this bill, we’re not trying to prohibit the use of step therapy; we’re just saying if they’re going to develop these protocols, we want them to be based on up-to-date information, as well as involve physician medical judgment,” said Albany.
Other recent AADA legislative victories related to formulary changes include:
In 2022, the Academy worked with the Oregon Dermatology Society to oppose language in an Oregon Medicaid policy that would have created a closed formulary for adult Medicaid patients, providing broad discretion to the state as to whether a drug has “limited or inadequate evidence of clinical efficacy.” Thanks to Academy, Oregon Dermatology Society, and Oregon Medical Society advocacy efforts, this closed formulary language was removed from the proposal.
In 2021, Anthem and Empire Blue Cross Blue Shield announced a formulary change that excluded ixekizumab (Taltz). After members brought the issue to AADA, the Academy worked with Anthem to explain the threat to psoriasis patients. Ultimately, Anthem grandfathered patients who were stable on Taltz and confirmed they could remain on the drug.
In 2021, Blue Shield of California (BSCA) had a policy restricting dermatologists from prescribing omalizumab (Xolair), resulting in prior authorization denials, but the AADA successfully advocated to reverse BSCA’s policy.
How physicians can advocate
Albany notes that to promote the success of these and other advocacy issues, it’s important for member physicians to get involved and bring examples to state legislators to show them “this is what’s happening to my patient, and this is the impact.”
“The more stories we can share with legislators, the easier it is to pass legislation,” she said. “What I find really exciting is when we have these conversations with legislators and in the states where bills are passed, it’s almost always unanimous and bipartisan, because it just makes so much sense.”
Members can take action to advocate on behalf of patients in several ways:
At the AADA Grassroots Action Center at takeaction.aad.org, members and others can take action on issues that impact dermatology practices and patients by contacting their elected government officials.
The Academy relies on its members to inform it of formulary changes that can negatively affect patient care. Contact AADA with concerns about any problematic policies.
When encountering step therapy policies, physicians can review state laws regarding step therapy to ensure the policy is not in violation of a law.