The Michigan Department of Insurance and Financial Services (DIFS) issued a bulletin reminding health insurance companies they are bound by Michigan law to cover all approved cancer drugs, even if treatments cost hundreds of thousands of dollars and may be ineffective.
The DIFS issued the bulletin after an article describing how an insurance company, Priority Health, denied coverage to a Michigan cancer patient for a gene therapy costing at least $475,000 was published by Propublica. The patient’s cancer returned after years in remission, in an aggressive form of lymphoma. Doctors recommended a therapy known as Chimeric Antigen Receptors (CAR-T) that uses the body’s immune system to attack cancer cells. CAR-T was approved by the Food and Drug Administration in 2017 and Medicare greenlighted coverage in November 2020.
Priority denied coverage, arguing CAR-T wasn’t a drug but a genetic treatment. The patient filed an appeal, but died during the appeals process, several months after his diagnosis.
Penalties Await
The DIFS bulletin stated that if a patient was improperly denied coverage, the insurer could face penalties and regulatory actions. While not mentioning CAR-T specifically, DIFS made clear how it interprets the 1989 law, which uses the word “drug” and was enacted before genetic therapies were available, when cancer treatment cost far less.
“As affirmed in a newly issued DIFS bulletin, Michigan law prohibits health insurers from denying coverage for cancer treatments, including genetic and immunotherapies when certain criteria are met, including that the treatment is ordered for a specific cancer and the treatment is approved by the United States Food and Drug Administration for cancer therapy, even if it is not approved for the specific cancer being treated,” states the bulletin.
The Michigan Association of Health Plans (MAHP) disputes that interpretation, according to an article in Crain’s Grand Rapids Business, on January 25.
In a letter to the DIFS, MAHP Executive Director Dominick Pallone wrote, “It is the opinion of MAHP that gene therapies could not have been intended to be included by the Legislature (in the state law) because gene therapies did not exist when the Legislature enacted its statute.” The DIFS told Crain’s it rejects that interpretation.
Impact on Insurance Rates?
Some genetic and immunotherapies for cancer cost tens of thousands of dollars; forcing insurers to pay for them could impact insurance rates for all policyholders. Denial of coverage may not only put insurers in the crosshairs of government regulators but also make them easier targets for litigation if they deny coverage for cancer treatment.
“It is MAHP’s understanding that our member health plans are compliant with all existing federal and state laws and are already providing coverage of expensive gene therapy procedures,” said Brian Mills, MAHP’s deputy director of commercial markets and communications, in an email to Health Care News.
“Our member health plans will continue to work with lawmakers and regulators in Michigan to find the best ways for health insurance providers to offer Michiganders affordable access to effective, evidence-based treatments and procedures,” said Mills.
Mandated Coverage Increases Costs
The fact the law is now getting scrutiny is no surprise, says Michael Cannon, director of health policy studies at the Cato Institute
“It is just dawning on policymakers what economists have always known: requiring insurance companies to cover all drugs sends drug prices through the roof,” said Cannon. “The solution is to let consumers, rather than government or employers, control the $4 trillion that goes to health care every year. They will do a better job of bringing drug prices down than government has.”
Less Costly Options
There are alternatives to mandated coverage, says John C. Goodman, co-publisher of Health Care News and founder of the Goodman Institute for Public Policy Research.
“In the United Kingdom, they use a cost/benefit approach for drug coverage,” said Goodman. “If a drug is really expensive, and if it is expected to add only a few months of life for the average patient, it won’t be covered by the British National Health Service. However, British patients can buy the drug out of pocket. Even better, they could buy private insurance to cover such an eventuality.
“In the United States, private insurers should adopt their own cost/benefit standard and make sure the standard is well known and understood,” said Goodman. “Then, let people buy a second type of insurance to pay for drugs that don’t meet the standard if they want to insure against that risk.”
‘Restore a Competitive Drug Market’
To deal with breathtaking new drug prices, Congress, and now some states, have taken the price control approach. In 2022, President Joe Biden signed into law the so-called Inflation Reduction Act (IRA), which allows the federal government to select 10 drugs for price cuts. Drug companies that resist face a massive tax on drug revenue.
Cutting-edge drug prices are high because the government has stood in the way of more competition, Gregg Girvan, a scholar at the Foundation for Research on Equal Opportunity, told Health Care News, previously.
“Making the patent system fair, paying for drugs based on value, and removing barriers to generic and biosimilar market entry would restore a competitive drug market that is freer, and affordable for American patients,” said Girvan.
AnneMarie Schieber (amschieber@icloud.com) is the managing editor of Health Care News.