By Laura Karas
Step therapy is an insurer utilization-management tool imposed in response to high drug prices. As its name implies, step therapy requires “steps” before a patient can receive his preferred medication (i.e., the one his provider has prescribed). Typically, a patient must “try and fail” a less costly medication or series of medications before becoming eligible for insurance coverage of the medication in question. In effect, step therapy allows an insurer’s “preferred therapy” to supersede patient and provider preference.
The need for step therapy is closely bound to the problem of high drug prices. But the crux of the step therapy debate boils down to the following: Who should decide which pharmaceutical drugs your health plan covers? You and your doctor, or your insurer?
This post describes the debate over step therapy, discusses whether and when step therapy may be justified as a business decision on the part of health plans, and reviews recent applications of step therapy to biosimilars. It ends by addressing how the tort system could be modified to give patients an avenue to compensation and injunctive relief after a step therapy decision leads to tangible, physical harm.
Step Therapy: Background and Current Controversy
On its face, step therapy decreases patient choice and detracts from patient and provider autonomy to make clinical decisions deemed in a patient’s best interest.
Instead, third parties like insurers — and the PBMs that set their formularies — decide which drugs are covered and what level of patient cost-sharing stands between a patient and any given treatment.
As an outgrowth of high drug prices and the practical need for cost containment, step therapy places insurers in the difficult position of declining coverage of certain drugs — a position some might view as the unavoidable product of scarcity and the government’s unwillingness to limit drug prices.
Is Step Therapy Ever Justified? If So, When?
Despite the fact that step therapy interjects insurers (and, by extension, PBMs) into clinical decision-making, it may nonetheless be a justified countermeasure to address runaway drug prices. At bottom, the prudence of step therapy depends on the precise tradeoff between a drug’s cost and its efficacy; minimal differences in efficacy but large differences in cost could warrant a policy of “trying and failing” the less costly but similarly efficacious option. In some cases, superior efficacy of very high-priced therapies is simply unproven; in those cases, step therapy could incentivize drug manufacturers to perform comparative trials to establish superior efficacy rather than mere “equivalence” or “non-inferiority.”
But, step therapy becomes problematic when the series of therapeutic “steps” either do not track cost-effectiveness at all (read: you are forced to try the more expensive and less efficacious drug first because of hidden rebate deals between drug makers and PBMs), or when step therapy protocols impose clinically indefensible prerequisites to accessing drugs with known efficacy. Step therapy can thus be a double-edged sword, in several respects: it can help insurers save money at the expense of patient choice and health outcomes, and it can help some drug companies and PBMs profit by giving preference to certain manufacturers’ drugs over others.
Step Therapy and Biosimilars
Step therapy has particular relevance to biosimilar utilization, and it has been used both to promote and to deter the prescribing of less expensive biosimilars. In 2018, CMS announced that it would permit Medicare Advantage plans to implement step therapy for Part B drugs — expensive, physician-administered drugs that include many biologics.
Requiring a biosimilar as a “first step” prior to the reference biologic, rather than the other way around, can help plans (and patients) achieve cost savings.
But the ongoing lawsuit between Johnson & Johnson and Pfizer over Pfizer’s infliximab biosimilar, Inflectra, may prove a cautionary tale of the dangers of step therapy co-opted for anticompetitive purposes. The suit involves antitrust allegations relating to Johnson & Johnson’s exclusive contracting practices with insurers: Johnson & Johnson allegedly secured contracts that excluded Pfizer’s Inflectra from drug formularies entirely, or that required Johnson & Johnson’s Remicade be “tried and failed” first.
It bears repeating here that drug prices create the need for step therapy. Step therapy requirements (and reforms) will not eliminate insurers’ need to make difficult choices about coverage of therapeutic options due to exorbitant prices.
Legal Recourse When Step Therapy Results in Patient Harm
What harm can patients suffer from step therapy?
First, patients must cover out-of-pocket costs for the preliminary drugs required before they can access their drug of choice.
Second, their health may deteriorate in the interim due to delays in effective treatment and worsening of progressive disease, which in turn may induce health care costs. Some research has found that formulary restrictions such as step therapy increase health care costs by lowering medication adherence and increasing hospitalizations.
Third, the “initial steps” may subject patients to unwanted side effects and adverse reactions that they would not have experienced but for the step therapy protocol. Thus, patients could suffer both economic and noneconomic harm due to step therapy protocols, but they currently face few options for relief under the law.
The Safe Step Act aims to change this by amending a federal law regulating employee benefit plans, the Employee Retirement Income Security Act of 1974 (ERISA), to create a more transparent and expedient process for exceptions to step therapy protocols.
The bill enumerates conditions under which exceptions should be granted to insurers’ step therapy requirements, such as when a patient is stable on an existing therapy that was previously covered by an insurer, or when a delay in treatment could lead to “severe or irreversible” patient harm.
A few additions to the Safe Step Act could tip the power balance in favor of patients: (1) give patients a private right of action against insurers if they can demonstrate physical harm from denial of drug access due to step therapy; (2) create a rebuttable presumption of negligence on the part of insurers once harm is demonstrated to be the result of a step therapy protocol; and (3) permit patients to seek both monetary damages and injunctive relief (an order requiring insurance coverage of the therapy in question).
(Of note, insurers in ERISA plans owe fiduciary duties of care and loyalty to beneficiaries, but courts have been reluctant to recognize the content of health plans as fiduciary acts. Also of note, thanks to Section 2713 and Section 1557 of the ACA [the latter being the nondiscrimination provision], certain groups, such as HIV-AIDS patients, can bring causes of action against private insurers who decline to cover necessary preventive medications or impose high levels of cost-sharing for these medications.)
The legal system, of course, does not operate within the 72-hour time window that the Safe Step Act would mandate for an insurer response to a request for a step therapy exception. But, a private right of action for patients harmed by step therapy may incentivize insurers to design protocols backed by good clinical judgment and reasoned cost-efficacy tradeoffs.