Getting Insurance Coverage for a Newly Approved Drug

1. Getting Insurance Coverage for a Newly Approved Drug Christin L. Engelhardt

2. First things first • Before a physician can legally prescribe a drug for a patient, the drug must be approved by the Food and Drug Administration (FDA). • Until a drug is approved by the FDA, it cannot legally be given to anyone except through an approved clinical trial or through a drug manufacturer’s compassionate-use program approved by the FDA.

3. First things first (cont’d) • When the FDA approves a drug, it is approved for certain conditions or indications. Those indications are noted on the label to be included with the drug. • The FDA approves the language in the label; that is, the FDA approves every word written on the label. • No matter what the drug’s label says, a physician can legally prescribe the drug for any reason. • This is called prescribing the drug off-label. • However, you may not be able to get insurance coverage for using the drug off-label.

4. First things first (cont’d) • If the product is considered to be a “supplement” instead of a drug, it does not need to be approved by the FDA. • However, supplement manufacturers cannot claim that the supplements are intended to treat a disease or disorder. • As a rule, supplements are not covered by third-party payers (although vitamins may be covered in certain circumstances).

5. First things first (cont’d) • Third-party payers include the following: • private insurance companies, • public insurance programs like Medicare and Medicaid, • the Veterans Administration, and • State Pharmacy Assistance Programs (SPAPs).

6. Getting the Drug to Patients After FDA Approval • Once the FDA approves the drug for a specific indication or indications, the drug then gets an NDC (National Drug Code) number. • Information about NDC numbers is on the FDA’s website at http://www.fda.gov/cder/ndc/.

7. Getting the Drug to Patients After FDA Approval (cont’d) • The drug manufacturer begins to produce the drug based on the expected market. • This process may take some time. • Ingredient availability can be a problem and cause delays, especially with biologic drugs.

8. Getting the Drug to Patients After FDA Approval (cont’d) • If the drug is to be administered or given through a procedure such as an infusion and is to be covered by a third-party payer, there must be a Current Procedure Terminology (CPT) code in order to process the claim for administering the drug. • A physician may be able to use an existing code or a miscellaneous code for the new drug.

9. Getting the Drug to Patients After FDA Approval (cont’d) • If there is no code that can be used for the infusion of this new drug, a new CPT code is needed. • There must be an application, usually made by the drug manufacturer, to request a CPT code from the American Medical Association.

10. Getting Coverage for the Drug After FDA Approval • Once the drug is approved, gets to physicians and/or pharmacists, and has a CPT code if needed, a third-party payer will not necessarily automatically pay for it: third-party payers may need to make a decision about covering the drug or not.

11. Coverage by a Third-Party Payer: Medicare • Medicare is a federal health insurance program for all US citizens and legal residents who have resided in this country for a continuous period of five years who either: • are age 65 and older, or • are under age 65 and

12. Coverage by a Third-Party Payer: Medicare (cont’d) • are under age 65 and • have received Social Security Disability Insurance (SSDI) (and in some cases, Social Security Insurance) benefits for at least two years, or • have been diagnosed with end stage renal disease (ESRD) and who have received kidney dialysis for at least three months or who have received a kidney transplant (Medicare eligibility begins the month of the transplant), or • have amyotropic lateral sclerosis (ALS, also known as Lou Gehrig’s disease) and who receive SSDI benefits (Medicare eligibility begins the month of SSDI eligibility).

13. Coverage by a Third-Party Payer: Medicare (cont’d) • There are different parts to Medicare: • Medicare Part A pays for in-hospital treatment, • Medicare Part B pays for out-patient services such as physician office visits and some medications, and • Medicare Part D (a new optional program) provides prescription drug coverage, through private insurance plans, to Medicare beneficiaries who enroll in a plan. • Part D plans cover many but not all prescription drugs and in fact, by law, can not cover certain categories of drugs. • Not everyone on Medicare has all parts. • Some Medicare beneficiaries belong to a Medicare Advantage plan (Part C) which combines Parts A and B and usually D as well.

14. Coverage by a Third-Party Payer: Medicare (cont’d) • Medicare Part A typically pays for any FDA-approved drug that the physician prescribes for an FDA-approved indication that you receive as an in-patient. • Prescription drugs that are covered by Medicare and that are not given to you as an in-patient fall under Part B or Part D. • Whether or not a drug should be covered under Part B or Part D can be complicated.

15. Coverage by a Third-Party Payer: Medicare • The Centers for Medicare and Medicaid Services (CMS) determines what drugs are covered under Part B and what under are covered under Part D. • If you can take the drug on your own without any medical equipment, it is likely to be Part D but not always. • Examples of Part B drugs include drugs that a physician must inject, drugs that a physician must give to you through an IV, and certain oral anti-cancer drugs. Note: the rules are slightly different if you live in a nursing home.

16. Coverage by a Third-Party Payer: Medicare • Newly approved drugs are assumed to be Part D until the Center for Medicare and Medicaid Services determines that the drug will be covered under Part B.

17. Coverage by a Third-Party Payer: Medicare • Medicare Part B typically pays for any FDA-approved drug that a physician prescribes for an FDA-approved indication that the physician must give to you in an out-patient setting.

18. Coverage by a Third-Party Payer: Medicare (cont’d) • However, before Medicare pays for some new services or drugs under Part A or B for the first time, Medicare may require a new coverage determination (national or regional) for it. • Information about National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs) is on the website of the Center for Medicare and Medicaid Services at http://www.cms.hhs.gov/DeterminationProcess/ • While Medicare of course covers only Medicare beneficiaries, Medicare coverage policy influences coverage decisions of private insurance as well.

19. Coverage by a Third-Party Payer: Medicare (cont’d) • For Part B drugs, Medicare beneficiaries in traditional Medicare, after meeting any deductible, typically pay 20% of the charges out-of-pocket if the health care provider accepts what Medicare pays him/her (i.e., if he/she accepts assignment). • “Accepting assignment” means that the provider accepts Medicare’s approved amount (the allowable fee) and does not require you to pay the amount that Medicare does not cover.

20. Coverage by a Third-Party Payer: Medicare (cont’d) • For example, the doctor charges $200 for a procedure but Medicare allows only $160. If the doctor accepts assignment, he/she receives 80% of $160 from Medicare and 20% of $160 ($32) from you and writes off the $40 difference. If the doctor does not accept assignment, you have to pay 20% of $160 ($32) plus the $40 difference. • If you are in traditional Medicare and have a Medigap policy (or other supplemental insurance as an employee or retiree), the supplemental insurance may cover the co-insurance and deductible.

21. Coverage by a Third-Party Payer: Medicare (cont’d) • If the physician does not accept assignment from Medicare, the physician can charge you up to 115% of Medicare’s approved amount. • You then file a request with Medicare to be reimbursed for some of the charges, and Medicare will pay to you 80% of what its fee schedule allows. • If you are in traditional Medicare and have a Medigap policy (or other supplemental insurance as an employee or retiree), the supplemental insurance may cover the 20% co-insurance and deductible. • Some Medigap policies also cover all or most of the “Part B excess charges.”

22. Coverage by a Third-Party Payer: Medicare (cont’d) • For Part B drugs, charges for any supplies should be included with the charge for the drug. • Providers of medical equipment and supplies, however, have no limits on what they can charge if they do not accept Medicare assignment. • Remember, if you have traditional Medicare, a few Medigap policies can help cover out-of-pocket Part B charges. • There are several different types of Medigap policies that offer different coverage and benefits. • The Medigap rules are slightly different for Massachusetts, Wisconsin, and Minnesota. • Information about Medigap policies is on the website of the Center for Medicare and Medicaid Services at http://www.medicare.gov/medigap/default.asp.

23. Coverage by a Third-Party Payer: Medicare (cont’d) • Medicare beneficiaries in Medicare Advantage plans will pay according to the Medicare Advantage plans for Part B drugs. • Generally you have to go to a provider in the plan’s network to have the Medicare Advantage plan cover the drug. • If the drug is a Part B drug, the Medicare Advantage plan must cover it. • A Medicare Advantage plan that also provides Medicare prescription drug coverage (Part D) is called an MA-PD and can cover B drugs as D if it chooses.

24. Coverage by a Third-Party Payer: Medicare Beneficiaries with Part D • If the drug falls under Medicare Part D and you have Part D, the Part D plan may or may not include the new drug on its formulary. • A plan’s pharmacy and therapeutics (P&T) committee will decide if the plan will cover the new drug or not. • The P&T committee will look at the class of drugs to which the new drug belongs and determine whether or not it must cover this new drug. • The P&T committee must keep in mind that the law requires Part D plans to cover "all or substantially all" drugs that are in certain categories: anti-depressants, anti-psychotics, anti-convulsants, anti-cancer, immuno-suppressants, and drugs to treat HIV/AIDS. • If the plan is not required to cover the drug, the P&T committee will then look at the drug’s effectiveness and at what other formulary drugs can be used to treat the condition for which the new drug is prescribed.

25. Coverage by a Third-Party Payer: Medicare Beneficiaries with Part D (cont’d) • Even if the drug is on the formulary, it may be subject to utilization-management tools such as prior authorization, quantity limits, and step therapy. • “Utilization-management tools” are designed to manage your use of the drug: you go through hoops to get the drug.

26. Coverage by a Third-Party Payer: Medicare Beneficiaries with Part D (cont’d) • If the drug is not on the plan’s formulary, you can ask the plan for an exception. • If the plan does not give you an exception, you can file an appeal. • This may be taken care of quickly if the doctor requests an expedited re-determination but can be a difficult process with several steps.

27. Coverage by a Third-Party Payer: Medicare Beneficiaries with Other Drug Coverage • If the drug falls under Part D and you do not have Medicare Part D but other drug coverage, your other drug plan may pay for this drug. • Your other drug coverage may also have a formulary and may or may not include the new drug on its formulary. • Even if the drug is on the formulary, it may be subject to utilization-management tools such as prior authorization, quantity limits, and step therapy.

28. Coverage by a Third-Party Payer: Medicare Beneficiaries with Other Drug Coverage (cont’d) • If the drug is not on the formulary, you can follow the plan’s rules to request that the plan cover it. • Typically you will have to file an appeal. • This can be a difficult process and can take a while.

29. Coverage by a Third-Party Payer: Medicare Beneficiaries with No Drug Coverage • If the drug falls under Part D and you do not have Medicare Part D or any other drug coverage, you may qualify for assistance from the drug’s manufacturer or from another source of coverage such as a State Pharmacy Assistance Program. • Eligibility for manufacturers’ programs is more limited because Medicare beneficiaries do have access to Part D, so you may want to investigate enrolling in Part D when enrollment is open to you.

30. Coverage by a Third-Party Payer: Medicare Beneficiaries with No Drug Coverage (cont’d) • If you do not have any drug coverage and do not enroll in Part D during the initial enrollment period of November 15, 2005 to May 15, 2006, the next time you may enroll in Part D is during the annual open enrollment period of November 15 to December 31. • You will probably pay a premium penalty for as long as you have Part D. • When enrolling in Part D, be sure to choose a plan carefully so that you get a plan that covers as many drugs that you need as possible.

31. Coverage by a Third-Party Payer: Medicaid • Medicaid is a federal entitlement health insurance program; both the federal and state government pay for the Medicaid program. Beneficiaries who apply for Medicaid must prove that they are eligible, based on their income and assets or resources (financially eligible) and situation (category eligible). • Medicaid pays for certain health services such as physician visits and prescription drugs for low-income children and their parents or caretaker relatives; low-income people with disabilities and low-income adults age 65 and older. Medicaid also pays for nursing home care for qualified low-income adults.

32. Coverage by a Third-Party Payer: Medicaid (cont’d) • As of January 1, 2006, people who have both Medicare and full Medicaid (full duals) receive most of their prescription drugs through Medicare Part D. • Duals still have Part B drugs paid for through Part B rules. • Medicaid can still cover, for full duals, drugs that by law cannot be covered by Part D.

33. Coverage by a Third-Party Payer: Medicaid (cont’d) • Medicaid typically pays for any FDA-approved drug that the physician prescribes for an FDA-approved indication that you receive as an in-patient or out-patient. • Some states, however, have recently decided to limit Medicaid’s prescription drug coverage and do not cover all drugs for all Medicaid beneficiaries.

34. Coverage by a Third-Party Payer: Medicaid (cont’d) • Many states, while covering all drugs (except possibly those that states are not required to cover), make it harder for beneficiaries to get certain drugs through utilization-management tools such as • quantity limits, • step therapy where you must “fail first” on less expensive medications, and • prior authorization for drugs not on a “preferred” list. • Prior authorization may be more difficult to get when the drug is prescribed for an off-label use and not for its approved indication.

35. Coverage by a Third-Party Payer: Private Insurance • There are two types of private insurance: group and individual insurance. • Group insurance is often offered by employers. • Group insurance plans can be fully insured or self-insured. • With fully insured plans, the employer or union that offers the health insurance pays a premium to an insurance company which has the responsibility to pay all claims the insured members submit to them. • With self-insured group plans, the employer or union that offers the health insurance is its own insurer and is responsible for paying all claims the insured members submit to them. • A self-insured plan may uses an insurance company to run the plan (to set up a provider network, to process claims, etc.) • Individual insurance is typically purchased on your own.

36. Coverage by a Third-Party Payer: Private Insurance (cont’d) • Coverage by private insurance depends first upon what type of policy you have. • Think of an insurance policy as a stereo: sometimes you buy one with the 5-CD player, radio, turntable, and tape player, and sometimes you buy one with just a 1-CD player and radio. • Sometimes certain coverage is required or mandated by state or federal law. • For example, several states require insurance companies to pay for diabetic supplies, including certain medications.

37. Coverage by a Third-Party Payer: Private Insurance (cont’d) • The policy may have specific exclusions and not cover certain types of care such as all or certain prescription medications, cosmetic surgery, sleep disorders, transplants, durable medical equipment, and eating disorders. • Look at your entire policy to see what is covered: do you have any drug coverage? • If so, see if any types of drugs are not covered.

38. Coverage by a Third-Party Payer: Private Insurance (cont’d) • If your insurance policy excludes prescription drug coverage (a major medical policy), your plan should still cover certain drugs under major medical if your diagnosis justifies or calls for that coverage.

39. Coverage by a Third-Party Payer: Private Insurance (cont’d) • When a drug is newly approved, private insurance companies often must decide whether or not to cover it. • Once a drug is approved, the manufacturer may meet with many insurance companies to discuss how the drug works and to explain the costs and benefits of the drug. • Private insurance companies often follow Medicare’s coverage decisions but do not have to do so.

40. Coverage by a Third-Party Payer: Private Insurance (cont’d) • Your insurance policy may have a formulary or list of drugs that it will cover and may or may not include the new drug on its formulary. • A formulary may be divided into preferred drug lists with different co-pays or co-insurance requirements. • Even if the drug is on the formulary, it may be subject to utilization-management tools such as prior authorization, quantity limits, and step therapy. • If the drug is not on the formulary, you can follow the plan’s rules to request that the plan cover it. • Typically you will have to file an appeal. • This can be a difficult process and can take a while.

41. Coverage by a Third-Party Payer: Private Insurance (cont’d) • If you have to appeal the denial, understand that an insurance company may not pay for a drug that is contra-indicated for you, that is, if the FDA’s list of contraindications means that the drug may not be safe for you. • For example, some drugs are contraindicated for people with high blood pressure, so if you do NOT have high blood pressure, note that in your appeal. • The rules for appeals depend on whether your plan is fully insured or self-insured and whether you have a group plan or an individual plan. • Some state laws may affect your appeal as well.

42. Coverage by a Third-Party Payer: Private Insurance (cont’d) • If the drug is very expensive and covered by your policy, you may be protected by the out-of-pocket maximum each year. • The out-of-pocket maximum (or limit to what you spend each year on covered benefits) is stated in your policy and is often at least $1000. • At the same time, if the drug is very expensive, you may be hurt by the policy’s lifetime limits. • Any lifetime limits will be stated in your policy and may be $1,000,000 or more.

43. Coverage by Miscellaneous Third-Party Payers: The VA • The Veterans Administration pays for in-patient and out-patient treatment, including medical services, as well as prescription medications. However, "(g)enerally, (medications) must be prescribed by a VA provider and be available under VA’s national formulary system" which is available on www.pbm.va.gov/PBM/menu.asp. • Information about VA coverage is on the VA’s website at www.va.gov/healtheligibility/coveredservices/medical_benefits_package.asp • If a drug is not on the formulary, physician can file a prior authorization to get the drug.

44. Coverage by Miscellaneous Third-Party Payers: SPAPs • State Pharmacy Assistance Programs (SPAPs) provide drug coverage or offer discounted drugs to eligible residents in the 35+ states that have an SPAP. • Eligibility often depends upon income (and sometimes assets or resources) as well as lack of drug coverage. • Most SPAPs cover only seniors but some cover those who are disabled and others who need assistance.

45. Coverage by Miscellaneous Third-Party Payers: SPAPs (cont’d) • Some SPAPs have a benefit cap, i.e., there is a limit to how many drugs you can receive through the SPAP. • Some SPAPs have “preferred drug lists” (PDLs) and cover only certain drugs; other SPAPs have open formularies and generally cover almost any drug that you take yourself. • Most SPAPs will not cover drugs that fall into the category of Medicare Part B drugs (drugs that a doctor usually must give you). • SPAPs with PDLs have an appeal process that is similar to the Medicaid-appeal process.

46. Appealing Denials of Coverage • No matter what kind of insurance you have, if your care (or payment for your care) is denied, you can appeal it. • The rules are different according to the type of insurance you have. • Medicare • Medicaid • Private insurance • Fully insured plan • Self-insured plan Note: If you have a private insurance group plan that is fully insured, you may have additional rights under your state’s laws.

47. Appealing Denials of Coverage(cont’d) • If the drug is denied, first see if the denial is based on coverage (or plan) rules or medical necessity and then formulate your arguments accordingly. • If the denial is based on medical necessity, you may want to ask for help from an organization focused on your medical condition, your health care providers, or other advocates who understand the medical reasons your doctor prescribed the drug that is being denied.

48. Appealing Denials of Coverage(cont’d) • If the denial is based on your plan’s rules, you may want to ask for help from a consumer health assistance program (if there is one for your situation), the state Medicaid agency, your state’s Department of Insurance, or another advocate who understands insurance policies. • There is a State Health Insurance Assistance Program (SHIP) to help Medicare beneficiaries in every state, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

49. Appealing Denials of Coverage(cont’d) • To find if there is a consumer health assistance program in your state that can help you, visit www.healthassistancepartnership.org/program-locator/. Note: this website address may change shortly and/or may list only State Health Insurance Assistance Programs (SHIPs) which serve Medicare beneficiaries.