By David Meni, Staff Writer, Brief Policy Perspectives
Paul Melmeyer is a second-year MPP student studying Regulatory Policy. He is on the public policy team of the National Organization for Rare Disorders (NORD), a patient advocacy organization. I sat down with him to talk about his upcoming article in Policy Perspectives.
Brief Policy Perspectives: What problem does your Policy Perspectives article address?
Paul Melmeyer: My article discusses adverse selection in health insurance markets as it applies to very high-cost – but highly effective – cures for chronic diseases. This is a relatively new problem as these cures have only been recently developed. I look specifically at Sovaldi, a new drug that cures Hepatitis C. Before this drug, Hepatitis C was a chronic disease for more than 3 million people in the US. Sovaldi cures 90% of cases entirely, but it costs $84,000 for a 3-month regimen.
I tried to look at the issue through the eyes of insurers. If I were an insurer, I could cover Sovaldi for a patient and incur this one-time $84,000 cost (minus negotiated discounts), which would move that patient from high-cost to low-cost – they would no longer require a lifetime of managing Hepatitis C, which in aggregate would be more expensive than the 3-month cure.
However, if I pay for this expensive cure, premiums in my plan necessarily go up to cover these costs, and what’s to stop the people who receive Sovaldi from leaving my plan once they get treated? There’s the adverse selection problem. From the insurer’s perspective, there’s little profit-maximizing incentive to cover Sovaldi and similar treatments.
That’s the immediate problem the article addresses. However, this problem is going to come up more as expensive cures like gene therapies are developed. The first available gene therapy, called Glybera, hit Europe recently, and many more are coming in the next few years. The US insurance market doesn’t work to cover these sorts of cures, as they may effectively trigger an insurance “death spiral,” leaving only high cost patients on a plan.
BPP: So what can be done about this?
PM: There are two potential solutions the article puts forth. First is establishing a government-run risk stabilization program – essentially like insurance for insurers. Such a program would assume some of the risk that insurers take on by covering expensive cures like Sovaldi.
The second potential solution is to create a system where these therapies are paid for over the course of many years. The payment would be contingent on the effectiveness of the therapies, and payment responsibility would be portable between insurers – if a patient changed plans, their next insurer would be responsible for future payments.
BPP: Do you see either of these policy solutions coming to fruition in the near future?
PM: Well, the Affordable Care Act already created three different risk stabilization programs to address risk ambiguity within exchange plans, so there’s certainly a precedent. The payment plan option would be less expensive for both the government and insurers, and by ensuring coverage of therapies, both patients and pharmaceutical companies would benefit. So there is the possibility of creating a situation wherein everybody wins.
BPP: How do you get interested in this topic?
PM: Mainly through my current job at the National Organization for Rare Disorders (NORD). I work in policy analysis and federal government relations for NORD. We work exclusively on advocacy for diseases with fewer than 200,000 cases in the US, most of which are genetic disorders. I also learned a great deal about the adverse selection and information asymmetry problems the article addresses from Professor Brock’s economics class.
BPP: What would you like your readers to take away from this piece?
PM: I’d like for readers to be excited about the possibility of these cures, and not to throw their hands up in dismay over coverage hurdles due to the insurance challenges. There are ways forward that can work for everyone; solvable policy problems shouldn’t get in the way of advancements in health.
You can read Paul’s article, “Adverse Selection in Health Insurance Coverage of High-Cost Cures” in Volume 23 of Policy Perspectives. The article appears online here.