In my lifetime, I have been blessed to see advances in medical science that literally saved my life.
In 1983, at 22 years old, I was diagnosed with a malignant form of bone cancer in my right femur. Cancer was, of course, much more of a deadly condition back then. I qualified for a clinical trial with four other male subjects who were about my age and had the same condition. I was given a brand-new chemotherapy combination in a brand-new delivery method, and within three months, 80% of my tumor was dead or inactive.
I had a “salvage” surgery to rebuild what was left of my right leg, and after a few subsequent rebuilds, I’m still walking on it today, some 36 years later. Had I been diagnosed with cancer just a year or two earlier, the odds were much higher that I would die or have a permanent disability. Technology and timing are powerful forces in healthcare.
This trend is still going on. And accelerating.
Gene Therapy, Healthcare’s High-Speed Rail
Today, many scientists and pharmaceutical companies are attacking diseases caused by genetic defects – health problems people are born with. We are on the horizon of providing treatments, perhaps even cures, for a host of conditions that have historically shortened lives and affected quality of life. Imagine if a child is born missing a gene — we now may have the science to replace it and restore the possibility of a normal life for that child.
One of these conditions, which is the focus of some medical breakthroughs right now, is spinal muscular atrophy (SMA). In its most severe form (Type 1), SMA leaves babies born with this genetic disease paralyzed and on a breathing machine for life. It’s complicated stuff, but at its core, SMA is caused when a baby is born without the gene responsible for producing a particular protein that supports nerve health. Because this gene is not doing its job, the protein is either not produced, or it’s produced “broken.” This means the nerves it was supposed to support die. Without these nerves, babies struggle to breathe, suck, swallow or sit up. SMA1 patients die very young, often by the age of 2. It’s a horrible condition.
SMA (all types) is rare. SMA1 affects only one out of every 6,000 to 10,000 babies.
But guess what? There are now TWO drugs on the market that treat SMA and are actually working! Drugs to repair or replace a defective gene – can you imagine?
Drugs always have crazy names to me. These two are called Zolgensma® and Spinraza®.
These drugs both cost billions to bring to market. Zolgensma is a one-dose infusion treatment. You can only have it once in your life-and it must be given before age 2. Spinraza is only temporarily effective, meaning that you have to continue to receive the injections for the rest of your life. Because it costs so much to build these drugs, the number of actual patients is pretty small, and one of the drugs is given only once, you would expect the prices to be pretty high.
And you would be right.
Spinraza is $750,000* for the first year you get it, and $375,000 each year for life after that. That’s the same price as buying a mansion one year, then a very nice house every year afterward.
Zolgensma, the one-dose treatment, runs about $2.125 million*! Most of the patients for these drugs, as we mentioned above, are infants who will die without it.
So now you must be wondering, “How on earth can anyone afford these drugs?!” Well, health insurance was created for situations like this. Large health plans have the power to provide access to this lifesaving care that could otherwise be out of reach for most folks.
What will Blue Cross do?
I’m glad to report that Blue Cross and HMO Louisiana cover both Zolgensma and Spinraza, according to guidelines set by the FDA (U.S. Food and Drug Administration) and agreed to by our doctors and pharmacists. We’re glad to do this, it’s what we do.
But what about those self-insured employers?
Now, imagine you are running a business and trying to fund quality health insurance for your employees. As a self-insured group, you are responsible for the cost and a good bit of the risk of providing healthcare benefits to your employees. So, let’s do a little experiment, shall we?
Imagine you have a company with 100 employees plus 50 more dependents, so the total group is 150 people. Let’s imagine the average cost for healthcare is $500 per covered person, per month, or $6,000 per covered person per year. That’s 150 people times $6,000 each, or a total investment by your business of $900,000 per year to cover your workforce’s healthcare.
Suppose one of your employees or dependents has a baby with SMA1. Just one baby.
Let’s assume all the medical testing has been done, and the doctors agree that an infusion of Zolgensma provides this baby with the best chance of survival. And it will cost $2.125 million for the treatment.
Your broker/consultant has worked hard to help you build a self-insured plan, where you save money when your group has a healthy year. Your employee group overall is young, and generally healthy, so you’ve been saving every year. Until now.
With just this one treatment, your group’s total healthcare costs tripled with no warning, and your annual bill just shot up by $2.125 million. Because you are a self-insured group plan, you’ll need to make up for this higher cost with higher premiums and out-of-pocket cost sharing. That could create a financial hardship for some of your employees and their families, and you may even lose employees who will leave for jobs that give them a less-expensive health plan.
Of course, you want to do what’s best for the baby. What do you, as the business owner, do?
The Drug Coverage Dilemma
This is a very real scenario that health plans and businesses will face more and more. In the next three to four years, we are likely to see around 40 different genetic treatments approved by the FDA. And they will all be roughly in this price range.
In the situation we just talked about, a smart, self-insured employer like you will have a solid reinsurance plan to take care of much of this expense. That’s a type of insurance you can buy on top of your regular healthcare coverage to lower your financial risk in the event you have unexpectedly high healthcare costs for your group.
But reinsurance companies are not health insurance companies, so they are not bound by the Affordable Care Act to offer coverage regardless of your employees’ or dependents’ health. A reinsurance company can “laser out” employees or dependents they consider a bad risk, putting their healthcare expenses right back on your business in the future.
What if you are a public entity providing health insurance? Like a city government?
You might have 1,000 employees on your health plan. You may cover another 700 dependents as well. Your health plan is funded by tax dollars. Every employee, every dependent, increases the odds of having to pay for a new, genetic treatment that costs millions. Can you raise taxes or contributions enough to cover this when it comes up? What policies or procedures will you endorse to deal with this when it happens? Are you talking about it and putting a plan in yet? I’m thinking we all should be.
Certainly, our approaches to how everyone manages the risk of incredibly high healthcare expenses, like the kind from cutting-edge gene therapy drugs, are about to change dramatically. I’m writing this today to help us all start raising awareness and having those conversations.
The risk is small, so far. Statistics show only six to eight babies born per year in Louisiana will require SMA1 treatments like Zolgensma. But this is only one of many genetic diseases that can be cured or improved by the new treatments waiting for FDA approval. This means the number of potential patients is going to climb, quickly. Changes in healthcare and how we manage its cost are in the near future for everyone.
To afford the miracles, we will need to make sure we are not squandering our money on care or drugs that cost too much and achieve too little. Some of these treatments, like Zolgensma and Spinraza, apply to very young children, making the decisions even more charged.
What happens next? I would not be surprised at all to see companies and individuals seeking out the largest health insurance plans they can find, so that the high costs of these treatments can be spread out across more people. Smaller companies that are self-insured will be especially vulnerable.
Straight Talk is, we must be financially ready. Nobody has unlimited resources to purchase care. That’s why we put measures in place to ensure the patients who have the best chance at success get certain drugs covered. It’s also why we choose to cover some drugs over others. Drugs that cost more, but don’t do more have little value in the marketplace. Those drugs will continue to be weeded out of insurance plans to make way for drugs that truly save or improve lives.
*Wholesale Acquisition Cost (WAC) as of August 2019.