• Why are asthma meds so expensive?

    If my daughter doesn’t take her asthma medication, she’ll end up in the ER. I’m not exaggerating. Just ask Aaron, whom I’ve called at late hours asking for help caring for her. She tends to get attacks at night. If we can’t get her breathing well enough, there would be nowhere else to go but the ER. Once an ER visit resulted in a three-day hospital stay. This costs the system a lot of money, the patient a lot of concern, to say nothing of the heartache and lost productivity of her parents and loss of attention they can provide to the patient’s sister. We all want the patient to stay out of the ER.

    I think about this every time I refill her medication at the pharmacy. Total monthly cost runs to about $45. And yes we use generics. That’s not a lot for my family, but it is enough to get my attention. It is enough that I think about cost every time she fails to breathe in her inhaled dose properly, forcing us to use another. That’s medication, and money, wasted. It’s enough money that it is likely many families with fewer resources would try to skimp, to skip doses, to go without filling prescriptions, and, yes, to run the risk of landing in the ER.

    Asthma medication is exactly the type of health product that should be free, or nearly so, especially for low-income families. I cannot imagine many would take the meds for “fun”. I don’t think “skin in the game” causes patients to avoid overuse. All I think it does is risk more asthma attacks and more ER visits, even more deaths.

    Value-based insurance design is a good concept. We have a long way to go in getting it implemented more thoroughly. I’d call breathing a merit good, something we all have a right to enjoy. Let’s not charge people for medication that permits it, particularly if doing so means we’re likely to pay vastly more if they don’t take their meds.

    UPDATE: If you’ve come here from some blog quoting this post, you must read this.


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    • In order for this to work, insurance companies would have to completely change the way they pay for drugs. Actually, I have wondered why they have not already done something like this. maybe lack of data? Ability to pass on costs rather than hold them down?


      • Steve –

        Could you please elaborate on this comment? I can’t come up with a reason this would be difficult to implement.

        Wouldn’t this be equivalent to having a $0 copay tier for certain medications?


        • A $0 co-pay would probably work, but that is not what they do for any drugs in plans I have been in or looked at for my corporation. It would require insurance companies to evaluate medications and the long term costs of not using them. At present, they mostly just adjust based upon whether it is formulary or not. (Thanks fro pointing this out. It would be easier than the convoluted plan I had in my head.)


    • Austin, on first reading, I thought you were saying that I (as a taxpayer) should help pay for your daughter’s asthma medication — even though you agree that you can afford to pay for it your self. Disbelief overcame me, so I read your post a second time. Then I read it a third. Each time, the message was as incomprehensible as on the previous reading.

      Is there a pursuasive reason why I owe the Frakkt household something? If so, it’s not in this post.

      • You owe me nothing. Follow the link to value-based insurance design or find the V-BID center at U Mich. I think you’re looking for trouble where none should exist.

      • I guess that the idea here is that it is cheaper for somebody to help pay for asthma medication rather than helping to pay for an ER visit that results from not having the medication.

    • I didn’t see any mention of taxpayers or government in the post. But I admire the creativity in the neologism “pursuasive.”

      • Pursuasive (pur sway siv) adj to follow an idea in the hope that you may prevail in imposing that idea upon another person.

    • Steve –

      Could you please elaborate on your first comment. I can’t come up with a reason this would be difficult to implement. Wouldn’t this be equivalent to having a $0 copay tier for certain medications?


    • Total monthly cost runs to about $45

      Is that typo or do you really think that $45.00/month is not as very low amount?

      • No typo. Read the post. I spoke of others with lower income.

        • Actually, it doesn’t matter. Studies have shown that even small copay and dramatically reduce adherence to pharmacological therapy. I believe I’ve cited them? Search for “medication adherence”.

          • I take your point but it is only $1.50 a day, I think that even full time minimum wade workers could afford it. Poorer than that should get help. So one question is why would people not buy the meds and how can convince them to make buying them top priority.

            • The adherence study shows that people are sensitive to cost, which is not surprising. But hiding the cost from the patient doesn’t solve the problem, it only shifts the decision to someone else, i.e., an insurance adjuster or government employee. Remember, someone is always making the price decisions, and no one is going to know the specifics better than the actual patient.

              Floccina is correct. $1.50/day really isn’t that much. If a patient is skipping meds to save that much, more likely there is an education issue.

    • Mr. Frakt, can you be more specific on the asthma drugs and co-pays you are paying? There are several programs already in place that pay for all or part of the prescription drugs costs, including asthma prescriptions. For example:

      1) For low-incomes who qualify, Medicaid will cover the costs of asthma care and prescriptions.
      2) Also, go to Together Rx Access, a partnership that offers discounts on prescription drugs.
      3) Many drug manufacturers offer a co-pay discount card which may cover the full cost, typically up to $50 of the monthly co-pay.

      • Yes, there are some decent plans out there for the Medicaid population. However, I tend to worry more about the working poor-median income group. These are the people who often have marginal insurance, or none. They make too much to qualify for these programs, but not enough that they dont have to choose between meds for the kids or other necessities. When the kids are doing well it is tempting to cut out some treatments to save money. Then they end up in the ER.


        • Steve,

          That is incorrect. The co-pay assistance typically has no income limitations. All they require is the patient is not already being reimbursed by some other mechanism such as Medicaid.

      • Some of us have been hit very hard by the economy and have no income and as a single adult without income yet the state says I can’t get medical assistance from medicaid and am an asthmatic needing a medication that cost 125 dollars wht are you supposed to do?

    • This strikes me as asking why housing is so expensive and then criticizing the banking industry for failing to come up with mortgage products that somehow lower housing costs. The reason asthma medications are expensive is that the drug companies that make asthma medications charge a lot for them. Creating an elaborate third-party payor scheme in which asthma medications are provided for “free” insulates end-users from the cost of waste and minimizes the incentives for drug companies to lower costs; in other words, it ensures that asthma medications will *remain* expensive, merely hides the expense from anyone that doesn’t want to dive into insurer’s actuarial charts and the complexities of AWP pricing.

      • OOP costs vs. premiums. Makes a difference. Design matters.

      • “Creating an elaborate third-party payor scheme in which asthma medications are provided for “free” insulates end-users from the cost of waste and minimizes the incentives for drug companies to lower costs; in other words, it ensures that asthma medications will *remain* expensive”

        Or, it keeps people out of the ER. Asthma meds are much more effective now than when I started practice, but you have to use them. This is not a class of drugs prone to abuse. If we can lower total health care costs by eliminating unnecessary ER visits, this seems like a worthwhile goal. Think of it as using incentives to get people to follow healthier practices.


    • -On the opposite side of the incentive spectrum, insurers could also start off with extra-high copays for preventable ER trips arising from chronic conditions that are easily managed with medications. Or couple that with low or no cost provision of drugs that will keep people who use them correctly out of the ER.

      If the objective here is really to keep people out of the ER, there’s no logical a priori reason to go all carrot, no stick when designing incentives – at least for those segments of the population.

    • Your post about value-based insurance — to which you refer John Goodman — suggests that by reducing the co-pay on asthma drugs, trips to the ER would be averted, thus reducing the insurance company’s total costs and (possibly) the premiums it must charge its policy holders. If I have that right, it explains your reply to Goodman that “You owe me nothing.” I suspect that what he reacted to — and I would have reacted to similarly — is your assertion that “breathing [is] a merit good, something we all have a right to enjoy.” That assertion is unnecessary to the discussion of value-based insurance. And your use of the term “merit good” strongly suggests that your statement “Asthma medication is exactly the type of health product that should be free, or nearly so, especially for low-income families” is not just a statement about the presumed efficacy of value-based insurance, but advocacy for income redistribution. In that case, a modified version of Goodman’s reaction is entirely in order, and I subscribe to it: “Is there a persuasive reason why I owe other households something, and what qualifies you (or anyone else) to make that judgment?” The excuse that I might otherwise end up paying for ER services through my taxes or insurance premiums relies on the assumption that ER services are a merit good that ought to be covered by tax subsidies and/or mandated insurance coverage. There is no end to the number of things that can be called merit goods, but calling them merit goods does not disguise the fact that doing so is an excuse for imposing one person’s or group’s preferences and burdens on others. Those impositions have led to the present state of affairs, in which myriad interest groups pick each others’ pockets — and the pockets of the unfortunate who are not well-represented by an interest group. One truly unfortunate result of that state of affairs — aside from the gross diminution of liberty — is the diversion of resources from uses that would foster greater economic growth and alleviate much of the poverty that provides an excuse, in the first place, for special pleading about merit goods.

      • Excellent reply. If only Goodman had explained it that way, either here or on his blog, I might have reacted differently. Let me be clear, I am absolutely in favor of income redistribution to assist people with asthma get the drugs they need, as well as, to varying extent, for other purposes and reasons. To this add that whether or not ER visits should be tax-financed for those who can’t afford them, they in fact are and will be. That is, whether you or I think they should be a merit good, we, as a society, have already decided they are a merit good.

        But, back to income redistribution. It is the only tool available to those who advocate market solutions on efficiency grounds (see First & Second Fundamental Theorems of Welfare Economics). Though we can certainly argue about how much and for what that tool should be used, I reject the implication by some that it is not OK to consider it. It is not a four letter word. Are you or Goodman suggesting that we should not provide the ability for poor people to afford asthma drugs? We can certainly have a debate about that, but I would like others to come clean about exactly what they are saying and to engage in the discussion without implying that one side is fundamentally incorrect. There is nothing incorrect about redistribution.

        Now, Goodman would still owe me nothing if we provided income-based assistance for asthma drug purchases. I would not qualify based on income. The copays are not problematic for me, which is clear from my post.

        For all that, I still think copays should be lower for drugs that keep people out of the ER, as warranted by value-based insurance design. To keep the plan revenue neutral for the insurer, the cost would have to be made up by increasing other copays (e.g. for Viagra, say) and/or premiums. That’s also income redistribution, just not through the government and not compulsory. Who has a problem with that?

    • Austin, I think you are solving the wrong problem. I agree that increasing access to asthma medications for the poor is probably a worthwhile goal, particularly in the pediatric population. However, by burying the costs of the medication in a third-party payor system, you ensure that, particularly with value-based insurance, the price of the medication will be tied to the utilization it serves to avoid. In other words, as emergency department visits become more expensive, asthma medication can become more expensive and still show cost-benefit. A better solution would be to provide direct subsidies to medical savings accounts of the poor but still have them make marginal choices when purchasing drugs.

    • I think Ryan has exactly the right idea. In the same way that we decided that our needy fellow citizens should not go hungry, we could decide that we don’t want then to go without health care, either. In the food/nutrition sector, we didn’t dismantle free markets and voluntary monetary transactions between providers and consumer. We let them stand, and the result is and incredible diversity of options provided by the free market, from bulk commodities and ramen noodles to five course dinners at La Grenouille. Instead, we subsidize the needy with food stamps that allow them to participate and take advantage of the efficiency that the free market brought to food production. The same arrangement could be applied in the health care sector, allowing market forces to exert their cost control powers and increase consumer satisfaction at the same time. Funded HSAs in the names of individual needy citizens who could use them to purchase their own high deductible indemnity policies and pay for routine health services with the debit card in their wallets?

    • Why do you single out asthma as a disease for which treatment should be free? Why not diabetes, for example?

    • There are a few obvious points to make:
      1) Going to Steve’s first point, value based insurance designs are beginning to be tried in the US and more frequently used abroad. BCBS MA has a pilot program (I believe for diabetes or hypertension), according to American Journal of Managed Care from last year. France’s Assurance Maladie has zero copays for people with diabetes for all drugs as an incentive to maintain drug adherence.

      2) There seems to be some confounding of cost sharing under value based insurance. While John Goodman, Thomas and Austin discuss merit goods, typically, it’s the people in a risk pool who cross-subsidize one another. Reasons include it lowering administrative cost in pricing everyone together instead of individually and in part it’s impossible to accurately assess risk for every individual. So to the extent a private plan (including Medicare Advantage) sets up value based insurance design, it’s not everyone in society subsidizing one another. Plans may find that it’s more cost effective to institute value-based insurance design. Also, just for fun, consider that polluting industries should be subsidizing asthma drugs as they lead to asthma (and asthma-related deaths).

      3) As for JayB’s idea of charging more for unnecessary ER visits, don’t forget that insurers are really constrained by what employer groups will let them do. We also run into constraints from people not paying the ER again, which ACA tried to fix. In fact, I believe the literature finds that copay’s effect on drug compliance starts at very low levels. These data use group plan members, so we’re not talking about the Medicaid population.

      4) Marko notes copay assistance programs. Copay assistance programs are tools used to create incentives for people to take very expensive drugs that insurance puts at a high tier. I think he means patient assistance programs, which are often provided with income restrictions. In any case, having direct industry knowledge here, PAPs are only for branded drugs and they account for a very small portion of the total cost (or revenue) for a drug.

      5) Austin – what’s with your health plan? $45 for a generic COPAY?? Even cheap Medicare PDPs with 5 tiers charge less for non-preferred generics. My kid’s beclomethasone doesn’t cost that (“negotiated price” paid to pharmacy) even when counting the insurer’s contribution.

      • It was more than one drug. That was a rough guess at monthly cost. We don’t fill every drug every month. I don’t wish to discuss what plan I’m on, but I am in the FEHBP system and have availed myself of the work of Walton Francis to select a plan. It turns out to be among the most popular ones.

    • Well, asthma medication and rescue inhalers run about $200 per refill these days. My household, which is a young married couple with low incomes, is forced to pay almost $400/ mo on asthma related care, just so my husband can breathe. Is there truly someone who can tell me that this isn’t a CRIME against those with preexisting conditions at low income levels. Even with insurance rescue inhalers run about $50. Preventative medicine costs about $200. Why should my family have to choose between food and my husband’s life. I am so disgusted by you people who have no sense of shared responsibility. We all pay taxes to help families who are struggling to get by, why not set aside some of that for those who are struggling to live on a daily basis. Is it my husbands fault he was born with this condition? No. Is it anyone else’s fault? No. But why can’t we all just focus on the idea that we all have a responsibility to out communities, not just to ourselves.

    • I sympathize with your plight – but I’m interested in where you draw the line between personal misfortunes that others should be legally obliged to pay for and personal misfortunes that, however much they may appeal to the moral sentiments of community members – aren’t things that they should be legally obliged to pay for.

      Since asthma is an indelible characteristic of birth, anyone who has it is equally a victim of fate. If being a victim of fate that you have zero control over is sufficient grounds for forcing other members of the community to pay for a remedy – then on that grounds a millionaire is entitled to every bit as much community support as a desperately poor individual.

      If simply being poor provides sufficient legal grounds for forcing other members of the community to share their income to alleviate a particular condition – then the obligation arises from the recipient’s income, rather than the condition that they were born with. Ergo – if you win the lottery, “the community” no longer has any obligation to help you.

      I think that the general consensus is that life is uncertain and unfair and we’re all collectively better off if we have mechanisms that help alleviate misfortunes that could afflict any one of us (though there’s lots of debate about whether those mechanisms should be private or public, voluntary or enforced by the state) – but I’m genuinely curious about how people who appeal to community obligations understand their origins and their limits.

      Are others obliged to pay for your husband’s medications because he was unfortunate enough to be born with asthma, your incomes are low, or both?

    • I am curious how you can even find generics anymore. My asthma medications are costing me over $300 a month (Advair, Pro Air, Clairovent.) My sons run about $240 (Singular, Pro Air.) Because we cannot afford this, I often go without, resulting in more ER visits. Most of our medications have been taken off the market (such as my Flo-Vent, Seravent, Albuterol, and liquid Combivent) and replaced with newer ones, which because of FDA regulations, make provide a patent protection period that prevents generics from being introduced for many, many years after a new drug is introduced. Forcing us to go from all generics to brand name for both our preventative and fast relief has made it impossible to get the medications we need.

      I realize this is not what your main issue was – but as they are taking more and more asthma medications off the market, you may face this too.