Obamacare: California exchange caps specialty drug costs for patients

Peter Lee, executive director of Covered California, said consumers should benefit from new caps on specialty-drug costs taking effect next year. Above, he speaks in L.A. in February.

Peter Lee, executive director of Covered California, said consumers should benefit from new caps on specialty-drug costs taking effect next year. Above, he speaks in L.A. in February.

(Anne Cusack/Los Angeles Times)
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Tackling the high price of specialty drugs, California’s Obamacare exchange capped what consumers will have to pay for expensive medications each month.

The new limits, set to go into effect in January, mark a first for state exchanges nationwide, according to Covered California. The exchange’s four-member board approved the changes unanimously Thursday.

Most consumers will have their specialty drug costs capped at $250 per month, per prescription. But the exchange resisted pleas from patient advocates to extend that same limit to Bronze health plans, the cheapest coverage available on the state-run marketplace.


The monthly cap on Bronze plans will be $500 a month -- after a $500 pharmacy deductible is met.

Consumer groups generally applauded the state’s move, but they said it didn’t go far enough at protecting consumers from big medical bills.

“As it stands now the Bronze plan will not meet the needs of Californians with chronic conditions,” said Liz Helms, chief executive of the California Chronic Care Coalition.

The exchange had lowered its proposed caps after hearing numerous complaints at last month’s board meeting. California Insurance Commissioner Dave Jones had been one of the most vocal critics, and he had called for a $300 monthly limit on Bronze plans.

The exchange’s decision “makes prescription drug coverage unaffordable to Californians who buy Bronze plans, one of the most popular health insurance levels of coverage,” Jones said Thursday.

Under the current rules, some patients can face enormous out-of-pocket costs in the first few months of taking a specialty drug. They can be forced to spend up to the annual limit of $6,250 for an individual policyholder right away.


Peter Lee, executive director of Covered California, said the exchange was being mindful of not making changes in benefits that drive up premiums too much. Officials estimated that the new spending caps would increase rates by less than 1%.

“These new policies strike a balance between ensuring Covered California consumers can afford the medication they need to treat chronic and life-threatening conditions while keeping premiums affordable for all,” Lee said.

“This is the first time that an exchange has ensured that all of its consumers have access to the medications they need,” he added.

The huge price tags for some specialty drugs, such as hepatitis C drug Sovaldi, have attracted scrutiny nationwide. These expensive medications often treat chronic conditions such as cancer, multiple sclerosis and rheumatoid arthritis.

A drug industry report issued last week found that 139,000 Americans had medication costs in excess of $100,000 in 2014, nearly triple the number who reached that mark a year earlier.

Covered California board members expressed alarm at the soaring prices and acknowledged that monthly caps won’t do much to address the larger problem of reining in medical costs.


“You can fault the drug companies,” said exchange board member Marty Morgenstern. “There is no basis for these charges.... They are charging irrational prices.”

A representative of the drug industry responded at the board meeting that health insurers do plenty of negotiating over prescription drug prices.

Twitter: @chadterhune