Step Therapy: Legal and Ethical Implications of a Cost-Cutting Measure

Case Western Reserve University Case Western Reserve University

School of Law Scholarly Commons School of Law Scholarly Commons

Faculty Publications

2018

Step Therapy: Legal and Ethical Implications of a Cost-Cutting Step Therapy: Legal and Ethical Implications of a Cost-Cutting

Measure Measure

Sharona Hoffman

Case Western Reserve University School of Law

, [email protected]

Follow this and additional works at: https://scholarlycommons.law.case.edu/faculty_publications

Part of the Health Law and Policy Commons

Repository Citation Repository Citation

Hoffman, Sharona, "Step Therapy: Legal and Ethical Implications of a Cost-Cutting Measure" (2018).

Faculty Publications

. 2009.

https://scholarlycommons.law.case.edu/faculty_publications/2009

This Article is brought to you for free and open access by Case Western Reserve University School of Law Scholarly

Commons. It has been accepted for inclusion in Faculty Publications by an authorized administrator of Case

Western Reserve University School of Law Scholarly Commons.

Step Therapy: Legal, Ethical, and Policy

Implications of a Cost-Cutting Measure

SHARONA HOFFMAN



ABSTRACT

The very high and ever-increasing costs of medical care in the United States are

well-recognized and much discussed. Health insurers have employed a variety of

strategies in an effort to control their expenditures, including one that is common but

has received relatively little attention: step therapy. Step therapy programs require

patients to try less expensive treatments and find them to be ineffective or otherwise

problematic before the insurer will approve a more high-priced option. This article is

the first law journal piece dedicated to analyzing this important cost control measure.

This article explores the strengths and weaknesses of step therapy and its legal and

ethical implications. It argues that in some cases, step therapy reduces insurers’ drug

costs in the short term but causes significant harm to patients that ultimately results in

both human suffering and increased long-term health care costs. Some insurers are

also less than transparent with patients about their programs, adhere to one-size-fits-

all approaches that ignore nuanced clinical and economic evidence, and implement

their policies in a discriminatory way. This article examines how several states have

responded to step therapy through legislation and discusses review mechanisms that

federal law provides for adverse insurance decisions. This article concludes with a

detailed set of recommendations. These include legislative interventions to ensure that

step therapy programs are sufficiently flexible and responsive to patients’ individual

needs and measures to enhance transparency and expeditiously address emerging

scientific and economic evidence.

INTRODUCTION

My husband Andy was diagnosed with Parkinson’s disease at the age of fifty-five

in October of 2013. Happily, he is managing his disease well and still works full-time

as a professor of computer science. He exercises regularly and takes several

medications. We are hopeful that the disease will progress slowly and that there are

still many good years ahead.

Imagine our dismay when, in late 2016, our pharmacy benefit manager (PBM)

informed us that it was denying coverage for the drug that Andy found most helpful

and that it had previously covered. The PBM’s explanation was as follows:



Edgar A. Hahn Professor of Law and Professor of Bioethics, Co-Director of Law-Medicine Center,

Case Western Reserve University School of Law; B.A., Wellesley College; J.D., Harvard Law School;

LL.M. in Health Law, University of Houston; S.J.D. in Health Law, Case Western Reserve University. I

thank Maxwell Mehlman and Jacqueline Lipton for their very helpful comments on prior drafts.

A pharmacy benefits manager administers the drug benefit program for a health plan. It processes

and pays prescription drug claims, negotiates with manufacturers for lower drug prices, and can employ

2018 STEP THERAPY 39

Your plan approved criteria covers this drug when the patient has tried

and had an inadequate treatment response, intolerance, or contraindication

to all formulary alternatives for the given diagnosis (or to at least 1 agent

within each of a given class of agents when more than 1 class is available

for the diagnosis), or when the drug is the only product the patient can use

for their condition. Your use of this drug does not meet the requirement.

This was our introduction to step therapy, a policy that requires patients to take

cheaper drugs first and find that they fail before being approved for more expensive

treatments.

After calling several pharmacies, I determined that the drug, at Andy’s

dosage, would cost us over $8,000 a year if we were to pay out-of-pocket. Because

Andy had already tried several less effective therapies, we undertook an appeal process

and were ultimately rewarded with a temporary reprieve. However, our PBM has

reserved the right to revisit the matter in the future.

This article is the first law journal piece dedicated to the step therapy phenomenon.

Unbeknownst to most patients, step therapy is pervasive in health insurance plans.

Step therapy programs raise a variety of compelling legal and ethical challenges that

are analyzed in this paper. Although it is often PBMs that institutes step therapy

programs (insurers can contract with external PBMs or have their own, internal ones),

the remainder of the article will refer to those who operate step therapy programs

collectively as “insurers” for the sake of simplicity.

Insurers can hardly be blamed for undertaking initiatives to control their

expenditures. Indisputably, the United States suffers from a dramatic and worrisome

rise in health care costs.

The question is whether step therapy programs are a sound solution. There is no

categorical answer to this query. For some patients, step therapy requirements are

reasonable and meet their treatment needs. However, it is not uncommon for step

therapy to provide patients with inadequate care that can cause serious harm.

Eitan Kling-Levine, an ulcerative colitis patient, related in a Boston Globe opinion

piece that his insurer required that he fail several drugs during a six-month period

before approving the physician’s chosen biologic therapy.

During that six-month

other cost-saving mechanisms. PBMs thus act as intermediaries between the insurer and pharmacies. See

Joanna Shepherd, The Fox Guarding the Henhouse: The Regulation of Pharmacy Benefit Managers by a

Market Adversary, 9 N

W. J. L. & SOC. POL’Y, 1, 7–9 (2013); Jessica Wapner, Understanding the Hidden

Villain of Big Pharma: Pharmacy Benefit Managers, N

EWSWEEK, Mar. 17, 2017,

http://www.newsweek.com/big-pharma-villain-pbm-569980 [https://perma.cc/PPT7-6VTT]. For additional

information about PBMs see infra note 86 and accompanying text.

Notice of Adverse Determination to H.Podgurski (Nov. 15, 2016) (on file with author).

Rahul K. Nayak & Steven D. Pearson, The Ethics of ‘Fail First’: Guidelines and Practical Scenarios

for Step Therapy Coverage Policies, 33 H

EALTH AFF. 1179, 1779 (2014).

See infra note 23 and accompanying text.

Wapner, supra note 1 (stating that insurance giant United Healthcare has its own PBM that is called

OptumRx).

See infra Part I. B; Doug Holtz-Eakin, More Government Is Not the Remedy for High Drug Prices,

ORBES, Mar. 2, 2017, https://www.forbes.com/sites/realspin/2017/03/02/more-government-is-not-the-

remedy-for-high-drug-prices/#6d7691082bb5 [https://perma.cc/T4B9-GQ5Y].

Eitan Kling-Levine, A Medical Therapy That’s No Therapy at All, BOSTON GLOBE (July 23, 2016),

https://www.bostonglobe.com/opinion/2016/07/23/medical-therapy-that-therapy-all/wttF75QVPmvEXWJ

knhW6MO/story.html [https://perma.cc/P2YS-KQ9C]. Biological therapy “involves the use of living

organisms, substances derived from living organisms, or laboratory-produced versions of such substances

40 FOOD AND DRUG LAW JOURNAL VOL. 73

period, his health deteriorated to such an extent that he ultimately had his colon

surgically removed. He speculates that he might have been able to avoid this radical

surgery and considerable pain and suffering had he been allowed to take the biologic

as soon as his doctor prescribed it.

Kathleen Arntsen, a glaucoma

patient, stated in

an interview that she was required to try two inexpensive drugs over seven weeks

before being allowed to use the Travatan Z eye drops that her physician had initially

prescribed.

She experienced swelling, increased pressure, and loss of vision in her

eye and, at the time of writing, was considering having the eye removed because it

continued to hurt.

She too believes that the delay contributed to her poor outcome.

For patients, receiving the medication that is most effective for them and causes the

least severe side effects can make the difference between being homebound and being

able to work, care for one’s family, and enjoy life. Working can engender not only

financial stability, but also strong self-esteem, social ties, and a sense of purpose, all

of which contribute to good mental and even physical health.

When an insurer denies coverage for a drug that a physician selects as the best fit

for the patient (in Andy’s case, a drug that he has taken successfully for many months),

the patient can suffer severe consequences, such as adverse reactions to a different

drug, complications, and deteriorating health.

Insurers, in turn, ultimately cover the

cost of treatments for these adverse outcomes.

Patients who wish to dispute the denial

must ask physicians to assist them with an appeal and hope that their doctors have the

time and the gumption to do so. Handling such requests is a burdensome task for which

physicians do not directly get paid.

Step therapy thus impacts multiple parties with often conflicting agendas. Patients

seek treatments that are as safe and effective as possible, want comprehensive

insurance coverage, and often expect to be able to choose among different treatment

to treat disease.” Biological Therapies for Cancer, NAT’L CANCER INST., https://www.cancer.gov/about-

cancer/treatment/types/immunotherapy/bio-therapies-fact-sheet#q1 [https://perma.cc/7QYX-ANEY] (last

visited June 12, 2013). For example, a form of cancer treatment called immunotherapy uses “vaccines or

bacteria to stimulate the body’s immune system to act against cancer cells.” Id.

Kling-Levine, supra note 7.

Glaucoma is a disease that damages the eye’s optic nerve and is usually associated with fluid build-

up in the front part of the eye that increases eye pressure. Kierstan Boyd, What Is Glaucoma? A

M. ACAD.

OPHTHALMOLOGY (Mar. 1, 2017), https://www.aao.org/eye-health/diseases/what-is-glaucoma [https://

perma.cc/9W7Z-KYC4].

Bob Tedeschi, Are Insurance Policies Saving Patients Money, or Keeping Them from the

Treatment They Need?, STAT, Aug. 22, 2016, https://www.statnews.com/2016/08/22/step-therapy-

patients-insurance-treatments/ [https://perma.cc/TG9T-FJFX].

Id.

WORLD HEALTH ORG. & INT’L LABOR ORG., MENTAL HEALTH AND WORK: IMPACT, ISSUES AND

GOOD PRACTICES 5 (2000), http://www.who.int/mental_health/media/en/712.pdf [https://perma.cc/2K6Q-

RJFS] (“Although it is difficult to quantify the impact of work alone on personal identity, self-esteem and

social recognition, most mental health professionals agree that the workplace environment can have a

significant impact on an individual’s mental well-being.”).

See infra Part I. C.

Id.

PFIZER, STEP THERAPY AND FAIL FIRST POLICIES BACKGROUNDER (Oct. 2011),

https://failfirsthurts.org/ffh/wp-content/uploads/2012/10/WWP-Purple-Paper-Step-Therapy-and-Fail-First-

Policies.pdf [https://perma.cc/DB59-U8UD].

2018 STEP THERAPY 41

options. Insurers have a duty to serve their enrollees’ health needs but wish to save

costs whenever practicable. Physicians devote themselves to patient care, worry about

patient satisfaction and their professional reputations,

and wish to minimize

cumbersome administrative work. Also influential are pharmaceutical companies that

market their products aggressively to health care providers and to patients through

direct-to-consumer advertising.

Step therapy, therefore, has more complicated implications than initially meet the

eye. Step therapy policies should be carefully designed to achieve cost savings while

remaining flexible, responsive to patients’ needs, and consistent with relevant clinical

data. Insurers should be careful not to strive single-mindedly to reduce short-term costs

at the expense of ignoring patients’ overall well-being, physicians’ treatment goals,

and the prospect of increased long-term expenditures.

This article proceeds as follows. Part I provides background information about step

therapy. It also discusses the need for cost control measures in light of skyrocketing

pharmaceutical prices. In addition, it analyzes whether step therapy is effective in

meeting cost reduction goals. Part II argues that step therapy raises several legal and

ethical concerns. These include lack of transparency, inflexibility that may disregard

emerging evidence from precision medicine and other research initiatives, and

discrimination. Part III assesses state and federal legislation that is relevant to step

therapy. Several states have passed step therapy statutes that outline the circumstances

under which insurers must grant waivers and require that they do so expeditiously

upon receiving appropriate requests. Federal law in the form of the Employee

Retirement Income Security Act of 1974 (ERISA),

the Patient Protection and

Affordable Care Act (ACA),

and the Medicare Prescription Drug, Improvement and

Modernization Act of 2003 (MMA)

also feature mechanisms for challenging adverse

insurance decisions and for the review process that insurers must implement. Part IV

develops recommendations to address concerns about step therapy. It proposes, first,

that all states enact step therapy laws; second, that federal law specifically address step

therapy programs; third that insurers improve transparency by disseminating clear

information about step therapy requirements in print and on their websites; fourth, that

expert panels such as insurers’ pharmacy and therapeutics committees monitor and

incorporate up-to-date scientific and financial evidence into their policies; and fifth,

that insurers implement step therapy programs in a non-discriminatory way. Part V

concludes the article.

James F. Sweeney, Physicians Dissatisfied with Patient Satisfaction Surveys, MED. ECON., Nov.

10, 2016, http://medicaleconomics.modernmedicine.com/medical-economics/news/physicians-dissatisfied-

patient-satisfaction-surveys [https://perma.cc/3LFT-2NY4].

The Impact of Direct-to-Consumer Advertising, FOOD & DRUG ADMIN., https://www.fda.gov/

drugs/resourcesforyou/consumers/ucm143562.htm [https://perma.cc/H73E-WJLA] (last updated Oct. 23,

2015).

29 U.S.C. §§ 1001, 1461 (2010).

42 U.S.C. §§ 18001 et seq. (2010).

Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173,

117 Stat. 2066 (codified in scattered sections of 26 and 42 U.S.C.).

42 FOOD AND DRUG LAW JOURNAL VOL. 73

I. STEP THERAPY: WHAT, WHY, AND WHEN

Step therapy is a common cost reduction tool of which many insurance enrollees

are unaware. This Part explains step therapy, discusses the need for cost control

measures, and analyzes whether step therapy is effective at reducing medical costs.

A. Step Therapy Basics

Step therapy, also called “fail first” policies, require patients to try less expensive

treatments and find them to be ineffective or otherwise problematic before the insurer

will approve a more costly option.

According to the American Academy of

Dermatology, in 2010, almost sixty percent of commercial insurers had implemented

step therapy and, as of 2014, seventy-five percent of large employers had insurance

plans with step therapy.

Some Medicare Part D plans utilize step therapy as well.

In some cases, step therapy programs require patients to try one or more generic

drugs

before brand name medications are approved.

In other cases, insurers

mandate that patients try a class of drugs that is less costly before allowing a switch to

a more expensive class.

Some insurers publish lists of drugs that are subject to step therapy. Insurers often

require step therapy for drugs to treat the following conditions: allergies, asthma,

attention deficit hyperactivity disorder, depression, diabetes, gastrointenstinal

problems, glaucoma, high cholesterol, high blood pressure, insomnia, menopause,

multiple sclerosis, osteoporosis, pain, Parkinson’s disease, psoriasis, rheumatoid

arthritis, and more.

Other insurers provide patients with only a generic description

of step therapy.

Even detailed websites, however, can be difficult to navigate, and

patients and physicians are very unlikely to scour the insurer’s website before deciding

on a treatment plan.

Nayak & Pearson, supra note 3, at 1779.

Step Therapy Legislation, AM. ACAD. DERMATOLOGY, https://www.aad.org/advocacy/state-

policy/step-therapy-legislation [https://perma.cc/L6X2-3PAD] (last visited May 1, 2017); see also Step

Therapy: The Red Tape between You and Your Meds, N

AT’L PSORIASIS FOUND.,

http://www.steptherapyinfo.com/ [https://perma.cc/W6M3-TUP4] (last visited June 1, 2017).

What Is Step Therapy in Medicare Part D?, Q1MEDICARE.COM, https://q1medicare.com/q1group/

MedicareAdvantagePartDQA/FAQ.php?faq=What-is-Step-Therapy-in-Medicare-Part-D-&faq_id=200&

category_id=1 [https://perma.cc/554C-N6NG] (last visited May 1, 2017).

Generic drugs are less expensive “copies of brand-name drugs and are the same as those brand

name drugs in dosage form, safety, strength, route of administration, quality, performance characteristics

and intended use.” Generic Drugs, F

OOD & DRUG ADMIN., https://www.fda.gov/Drugs/resourcesforyou

/consumers/buyingusingmedicinesafely/understandinggenericdrugs/default.htm [https://perma.cc/8BG4-

8UF4] (last updated April 26, 2017).

Michael A. Fischer & Jerry Avorn, Step Therapy–Clinical Algorithms, Legislation, and Optimal

Prescribing, 317 J.

AM. MED. ASS’N. 801, 801 (2017).

Id.

BLUECROSS BLUESHIELD OF OKLA., STEP THERAPY: WHAT YOU NEED TO KNOW,

https://www.bcbsil.com/pdf/Group_Pharmacy_Step_Therapy_Member_Flier.pdf [https://perma.cc/4BM2-

3PDC] (last visited Dec. 28, 2017); M

EDIMPACT HEALTHCARE SYS., PEEHIP STEP THERAPY LIST,

http://www.rsa-al.gov/uploads/files/Step_Therapy_List.pdf [https://perma.cc/E3ZE-UPX3] (last revised

Oct. 1, 2015).

See, e.g., CVS CAREMARK, STEP THERAPY (2017) (on file with author) (“Even though your doctor

may prescribe one medicine, treatment guidelines may recommend trying alternative therapy first. If that

alternative treatment isn’t effective, you will be eligible for the medicine you were originally prescribed.”).

2018 STEP THERAPY 43

B. The Need for Cost Control Measures

Insurers’ desire to implement cost control measures is understandable. Prescription

drug prices rose 10.9 percent in 2014 and another ten percent in 2015.

According to

the AARP, “[t]he average cost for a year’s supply of medication for someone with a

chronic illness has more than doubled since 2006 to over $11,000.”

The costs of

some drugs such as EpiPens and Daraprim have notoriously risen far more

precipitously than that. The price of EpiPens, which treat severe allergic reactions,

rose from $100 for a two-pack in 2009 to $608 in 2016.

Turing Pharmaceuticals’

embattled chief executive Martin Shkreli raised the price of Daraprim, a drug to treat

infections caused by parasites, by more than 4,000 percent from $18 a pill to $750 a

pill.

Furthermore, insurers worry that some prescribing decisions are driven by

pharmaceutical companies’ intensive marketing efforts.

Whether because of

advertising or for other reasons, some physicians do not follow experts’

recommendations for first-choice drugs that are relatively inexpensive.

For example,

one study showed that thirty-five percent of newly diagnosed diabetes patients did not

receive metformin, recommended as the initial treatment choice in clinical

guidelines.

A 2013 exposé in the Washington Post revealed that many doctors

injected macular degeneration patients with Lucentis at a cost of approximately $2,000

an injection rather than with Avastin, which would cost a mere $50,

though not all

physicians agree about which drug is the better alternative.

Step therapy is one of several cost-saving measures that insurers employ. Examples

of other cost-saving techniques are medical necessity determinations, requirements for

Brady Dennis, Prescription Drug Prices Jumped More than 10 Percent in 2015, WASH. POST (Jan.

11, 2016), https://www.washingtonpost.com/news/to-your-health/wp/2016/01/11/prescription-drug-prices-

jumped-more-than-10-percent-in-2015/?utm_term=.9c950115de36 [https://perma.cc/V334-PYHE].

Jo Ann Jenkins, Let’s Cut Drug Costs, 58 AARP BULL. 24 (May 2017).

Daniel Kozarich, Mylan’s EpiPen Pricing Crossed Ethical Boundaries, FORTUNE, Sept. 27, 2016,

http://fortune.com/2016/09/27/mylan-epipen-heather-bresch/ [https://perma.cc/P363-BNJ3].

Ariana Eunjung Cha, CEO Martin Shkreli: 4,000 Percent Drug Price Hike is ‘Altruistic,’ not

Greedy, W

ASH. POST (Sep. 22, 2015), https://www.washingtonpost.com/news/to-your-health/wp/2015/09

/22/turing-ceo-martin-shkreli-explains-that-4000-percent-drug-price-hike-is-altruistic-not-greedy/?utm_

term=.61a1ccfc50e3 [https://perma.cc/3ZAK-8F96].

Fischer & Avorn, supra note 26, at 802.

Id.

Nihar R. Desai, Patterns of Medication Initiation in Newly Diagnosed Diabetes Mellitus: Quality

and Cost Implications, 125 A

M. J. MED. 302.el (Mar. 2012), http://www.amjmed.com/article/S0002-9343

(11)00651-6/fulltext [https://perma.cc/N8ED-YSB4].

Peter Whoriskey & Dan Keating, An Effective Eye Drug is Available for $50 But Many Doctors

Choose a $2,000 Alternative, W

ASH. POST (Dec. 7, 2013) https://www.washingtonpost.com

/business/economy/an-effective-eye-drug-is-available-for-50-but-many-doctors-choose-a-2000-alternative

/2013/12/07/1a96628e-55e7-11e3-8304-caf30787c0a9_story.html?utm_term=.315eedac0a1d

[https://perma.cc/4YGH-XREA]. Macular degeneration is an eye disease, and the drugs are used to prevent

blindness. Id.

Macular Degeneration P’ship, Lucentis vs. Avastin, AMD (Nov. 2013), http://www.amd.org

/lucentis-vs-avastin/ [https://perma.cc/J8J8-Y6TM] (noting that FDA has not approved Avastin for use in

the eye (it is approved to treat colon cancer) but that it is commonly used and has been shown by most

studies to be as safe and effective as Lucentis).

44 FOOD AND DRUG LAW JOURNAL VOL. 73

prior authorization, quantity limits, and tiering.

Medical necessity determinations

deny coverage based on an insurer’s determination that the prescribed therapy is not

needed to prevent, diagnose, or treat a medical condition.

Prior authorization

mandates establish that physicians must receive the insurer’s permission to prescribe

a drug in order to have the drug covered by the insurance plan.

Quantity limits restrict

the amount of a particular medication that an insurer will cover over a specific period

of time (e.g. only thirty pills per month).

Tiering categorizes drugs into tiers and

assigns different copayment sums to different drug tiers.

The insurer’s bottom line is not the only thing that is hurt by exorbitant drug prices.

Insurers are likely to shift at least some of the costs to patients, raising their premiums,

charging higher copayments, and increasing deductibles.

Therefore, patients

themselves have much to lose from growing coverage costs.

In principle, therefore, insurers are justified in pursuing initiatives to control

expenditures. But cost-reduction measures must be implemented thoughtfully and

responsibly, and step-therapy may all too often do more harm than good.

C. Does Step Therapy Reduce Insurers’ Expenses?

Step therapy aims to reduce insurers’ costs without compromising patient care.

Whether it consistently does so in practice is debatable.

Some studies have shown meaningful cost savings. For example, a study of blood

pressure medications found that a step therapy program saved 13 percent in drug

costs.

Likewise, a study involving antidepressants concluded that step therapy

Joshua Cohen et al., Clinical and Economic Challenges Facing Pharmacogenomics, 13

HARMACOGENOMICS J. 378, 380 (2013); Laura E. Happe, A Systematic Literature Review Assessing the

Directional Impact of Managed Care Formulary Restrictions on Medication Adherence, Clinical Outcomes,

Economic Outcomes, and Health Care Resource Utilization, 20 J.

MANAGED CARE & SPECIALTY

PHARMACY 677, 677 (2014).

Janet L. Dolgin, Unhealthy Determinations: Controlling “Medical Necessity”, 22 VA. J. SOC.

POL’Y & L. 435, 438–43 (2015) (discussing varying definitions of medical necessity).

What Is Prior Authorization, Step Therapy, and Quantity Limit?, EHEALTH MEDICARE

https://www.ehealthmedicare.com/faq-what-are-prior-authorizations-quantity-limits-and-step-therapy/

[https://perma.cc/CP37-H7EK] (last updated May 6, 2017).

Id.

Thomas Reinke, Benefit and Formulary Options Appear in Specialty Pharmacy, MANAGED CARE

(Jan. 2014), https://www.managedcaremag.com/archives/2014/1/benefit-and-formulary-options-appear-

specialty-pharmacy [https://perma.cc/QD3R-T2S8]. A co-payment is “an amount of money that a person

with health insurance is required to pay at the time of each visit to a doctor or when purchasing medicine.”

Co-Payment, M

ERRIAM-WEBSTER, http://www.learnersdictionary.com/definition/co-payment [https://

perma.cc/Z89E-6MV8] (last visited July 4, 2017).

James D. Chambers, Do Changes in Drug Coverage Policy Point to an Increased Role for Cost-

Effectiveness Analysis in the USA?, 32 P

HARMACOECON. 729, 732 (2014). The premium is the price that

individuals pay for insurance. Premium, M

ERRIAM-WEBSTER, https://www.merriam-webster.com/

dictionary/premium [https://perma.cc/AM35-YUGR] (last visited July 4, 2017). For a definition of co-

payment, see supra M

ERRIAM-WEBSTER, note 43. A deductible is the amount of money the insured

individual has to pay before the insurer pays the remaining costs of care. Deductible, M

ERRIAM-WEBSTER,

https://www.merriam-webster.com/dictionary/deductible [https://perma.cc/ARE6-4GPK] (last visited July

4, 2017).

Krista Yokoyama et al., Effects of a Step-Therapy Program for Angiotensin Receptor Blockers on

Antihypertensive Medication Utilization Patterns and Cost of Drug Therapy, 13 J. M

ANAGED CARE &

SPECIALTY PHARMACY 235, 242 (2007).

2018 STEP THERAPY 45

generated savings of nine percent.

A literature review published in 2011 concluded

that step therapy generally led to statistically significant savings in drug costs, though

this was not clearly true in the case of antipsychotics.

Furthermore, step therapy

policies for nonsteroidal anti-inflammatory drugs and proton pump inhibitors

reduced drug costs without causing an increase in consumption of other medical

services.

Other studies, however, cast doubt on whether step therapy achieves significant

overall expense reductions. A 2010 article that analyzed 15 prior studies confirmed

that step therapy lowered drug costs for insurers.

However, it concluded that it

generally does not reduce, and may even increase, overall health care expenditures.

The researchers explained that patients subject to step therapy restrictions often stop

taking medication or underutilize it, a phenomenon that can explain why drug costs

drop while other health care costs rise as a patient’s condition goes untreated.

Several additional studies support the conclusion that step therapy is often

unsuccessful in reducing long-term medical costs. A study focusing on treatment for

attention deficit hyperactivity disorder concluded that step therapy resulted in no

overall cost difference but did cause patients to experience treatment delays and to

underutilize needed drugs.

A study of a step therapy policy involving Pregabalin, a

nerve pain medication, found that the policy decreased use of Pregabalin but did not

reduce total health care costs for patients.

An economic model designed to determine

the cost implications of a generic step therapy program for selective serotonin reuptake

inhibitors (SSRIs) to treat anxiety disorders predicted an adverse cost outcome.

Drug

costs would decrease by $0.26 per patient per month but medical costs would increase

by $0.32 per patient per month.

Jeffrey D. Dunn, Utilization and Drug Cost Outcomes of a Step-Therapy Edit for Generic

Antidepressants in an HMO in an Integrated Health System, 12 J. M

ANAGED CARE & SPECIALTY

PHARMACY 294, 298 (2006).

Brenda R. Motheral, Pharmaceutical Step-Therapy Interventions: A Critical Review of the

Literature, 17 J. M

ANAGED CARE & SPECIALTY PHARMACY 143, 143 (2011).

These drugs reduce gastric acid production. See Rena Yadlapati & Peter J. Kahrilas, When Is Proton

Pump Inhibitor Use Appropriate? 15 BMC M

ED. 36, 36 (2017), https://bmcmedicine.biomedcentral.com

/articles/10.1186/s12916-017-0804-x [https://perma.cc/GXW3-TRQF] (explaining what a proton pump

inhibitor is).

Motheral, supra note 47, at 143.

Rashad I. Carlton, Review of Outcomes Associated With Formulary Restrictions: Focus on Step

Therapy, 2 A

M. J. PHARMACY BENEFITS 50, 56–7 (2010).

Id.

Brandon T. Suehs et al., Impact of a Step Therapy for Guanfacine Extended-Release on Medication

Utilization and Health Care Expenditures Among Individuals Receiving Treatment for ADHD, 21 J.

ANAGED CARE & SPECIALTY PHARMACY 793, 801 (2015).

Margarita Udall, Impact of a Step-Therapy Protocol for Pregabalin on Healthcare Utilization and

Expenditures in a Commercial Population, 16 J. M

ED. ECON., 784, 784 (2013).

Patt Ellen Panzer et al., Implications of an SSRI Generic Step Therapy Pharmacy Benefit Design:

An Economic Model in Anxiety Disorders, 11 A

M. J. MANAGED CARE S370, S370 (2005).

Id. at S375–76.

46 FOOD AND DRUG LAW JOURNAL VOL. 73

It is worth emphasizing that step therapy has the potential to severely exacerbate

health problems.

As noted above, patients who do not receive their drug of choice

may stop taking medication or take it only intermittently, and thus their health may

decline.

Moreover, physicians may have good reasons to select a particular drug for

a patient. A different (cheaper) medication may be less effective for a patient or cause

debilitating side effects.

For example, Dr. Benjamin Kopp, a pediatric pulmonologist, relates: “I have

prescribed certain pulmonary medications for a toddler, only to have the health insurer

insist on a lower cost medication that is designed for a teenager. This shows me the

decisions about step therapy requirements do not involved pediatricians, asthma

specialists, and pharmacists who know the most about the medications.”

Dr. Kopp

further asserts that switching a child who was stable on one drug to a different asthma

drug can cause complications and hospitalizations.

The same is true for many other illnesses. In the case of Parkinson’s disease, patients

and their physicians must carefully weigh the benefits and risks of various drug options

because medications can cause hallucinations, extreme fatigue, compulsive and

impulsive behavior, gastrointestinal problems, and more.

Patients have different

levels of tolerance for these side effects, and some patients wish to avoid the risk of

certain side effects at all costs and choose their medication accordingly.

At times, even switching from a brand name to a generic of the same drug can have

adverse consequences because of lower efficacy of the generic drug, allergic reactions,

or patients’ unwillingness to take a new pill that looks different from the one to which

they are accustomed.

In reality, generics are not an exact duplicate of the original,

brand name drug.

The Food and Drug Administration (FDA) acknowledges that it is

“aware that there are reports noting that some people may experience an undesired

effect when switching from a brand-name drug to a generic formulation or from one

Joseph Burns, Is Step Therapy a Move In the Wrong Direction?, MANAGED CARE (Jan. 2017),

https://www.managedcaremag.com/archives/2017/1/step-therapy-move-wrong-direction [https://perma.cc/

CX74-QH2Y].

Panzer et al., supra note 55, at S372; Arthur Lazarus, Formulary Restrictions Sometimes Harm

Patients, M

ANAGED CARE (Oct. 2004), https://www.managedcaremag.com/archives/2004/10/formulary-

restrictions-sometimes-harm-patients [https://perma.cc/54K9-2UTF] (“In the mentally ill, lack of

appropriate care can also trigger a downward spiral that ends in homelessness or incarceration.”).

Nayak & Pearson, supra note 3, at 1780.

Benjamin Kopp, Opinion, Step Therapy Can Disrupt Best Care for Children’s Health,

LEVELAND.COM (June 4, 2017), http://www.cleveland.com/metro/index.ssf/2017/06/step_therapy_can

_disrupt_best.html. [https://perma.cc/7AN7-M2YR].

Id.

Medications for Motor Symptoms, MICHAEL J. FOX FOUND., https://www.michaeljfox.org

/understanding-parkinsons/living-with-pd/topic.php?medication-motor-symptoms [https://perma.cc/3AJL-

7HWP] (last visited Dec. 29, 2017).

Fischer & Avorn, supra note 26, at 802; Evan H. Langdon, Switching to Generic: The Need for

Physician and Patient Consent when Substituting Antiepileptic Medication, 25 J. C

ONTEMP. HEALTH L. &

POL’Y 166, 180–85 (2008).

Katherine Eban, Are Generics Really the Same as Branded Drugs? FORTUNE (Jan. 10, 2013),

http://fortune.com/2013/01/10/are-generics-really-the-same-as-branded-drugs/ [https://perma.cc/GWV7-

DWFB].

2018 STEP THERAPY 47

generic drug to another generic drug.”

Problems may arise because of quality

discrepancies among different manufacturers. For example, in 2007 FDA noted

variations among levothyroxine pills

produced by different pharmaceutical

companies.

Because of concerns about the stability of the drug, FDA required that

the potency of levothyroxine products degrade by no more than five percent over their

shelf lives.

Likewise, a study of the antipsychotic drug olanzapine found

significantly lower concentrations of the medicine in patients who had switched from

the brand name to the generic form of the drug.

It is also noteworthy that generic

drugs need not contain the same inactive ingredients

as brand name products,

patients who tolerated the original drug well may have an adverse reaction to an

inactive component of the generic substitution.

In addition, patients who have to try multiple drugs sequentially before being

approved for the doctor’s drug of choice may suffer symptoms of drug withdrawal and

find it difficult to adjust to new medications.

This is true both for patients who

initially took the doctor’s recommended drug but were later subjected to step therapy

requirements and for those who immediately were denied coverage and may try

several less costly drugs with which they are dissatisfied before requesting a step

therapy waiver. The Mayo Clinic lists the possible symptoms of antidepressant

withdrawal (especially if the drug is stopped too quickly) as follows: anxiety, insomnia

or vivid dreams, headaches, dizziness, tiredness, irritability, flu-like symptoms,

including achy muscles and chills, nausea, electric shock sensations, return of

Gary Stoller, Can The FDA Adequately Police Generics?, CONN. HEALTH I-TEAM (July 12, 2015),

http://c-hit.org/2015/07/12/can-the-fda-adequately-police-generics/ [https://perma.cc/7SAV-CUES].

Levothyroxin is used to treat hypothyroidism (diminished or absent thyroid function). Questions

and Answers on Levothyroxine Sodium Products, F

OOD & DRUG ADMIN. (Oct. 3, 2007),

https://www.fda.gov/Drugs/DrugSafety/PostmarketDrugSafetyInformationforPatientsandProviders/ucm16

1266.htm [https://perma.cc/88XY-Z47C].

Id.

Id.; see also, Michael Bihari, Brand Name and Generic Levothyroxine: Is There a Difference

between Brand Name and Generic Thyroid Drugs?, V

ERYWELL, (May 28, 2017), https://www.verywell.

com/levothyroxine-brand-name-vs-generic-versions-1124055 [https://perma.cc/SCU3-33M8].

Domenico Italiano et al., Generic Olanzapine Substitution in Patients with Schizophrenia:

Assessment of Serum Concentrations and Therapeutic Response After Switching, 37 T

HERAPEUTIC DRUG

MONITORING 827, 827 (2015).

Inactive ingredients are components of a drug that do not increase or affect its therapeutic action.

Examples are binding materials, dyes, preservatives, and flavoring. Inactive Ingredients, D

RUGS.COM

https://www.drugs.com/inactive/ [https://perma.cc/48WC-GEWJ] (last visited July 4, 2017).

Generic Drug Facts, FOOD & DRUG ADMIN., https://www.fda.gov/drugs/resourcesforyou/

consumers/buyingusingmedicinesafely/understandinggenericdrugs/ucm167991.htm [https://perma.cc/

ZU6U-YKHT] (last updated June 28, 2016); Eban, supra note 64.

Rong-Kun Chang et al., Generic Development of Topical Dermatologic Products: Formulation

Development, Process Development, and Testing of Topical Dermatologic Products, 15 A

M. ASS’N

PHARMACEUTICAL STUD. J. 41, 45 (2013) (“Special attention should be paid to the use of fragrance in the

formulation, because 1% of the general population suffers from fragrance allergies”).

Antidepressant Withdrawal: Is There Such a Thing?, MAYO CLINIC (Jan. 16, 2016),

http://www.mayoclinic.org/diseases-conditions/depression/expert-answers/antidepressant-withdrawal/faq-

20058133 [https://perma.cc/G35A-BY6B]; Panzer, supra note 55, at S372 (discussing the risks of therapy

change and discontinuation of treatments for anxiety and depression).

48 FOOD AND DRUG LAW JOURNAL VOL. 73

depression symptoms.

All of these can be debilitating for patients who are trying to

work and lead normal lives.

Thus, step therapy may often save costs in the very short term but increase costs in

the long term because of complications, health deterioration, and the patient’s need to

seek more and more medical care in order to find relief.

Some insurers may ignore

the risk of long-term consequences in hope that when these materialize, the patient

will be working for a different employer with a different policy

or will have turned

65 and enrolled in Medicare. But ignoring the risks of step therapy is bad policy for

patients, health care providers, and the American public at large.

II. LEGAL, ETHICAL, AND POLICY IMPLICATIONS OF STEP

THERAPY

Beyond the possibility of poor health outcomes, step therapy raises several legal

and ethical concerns. First, insurers may not be transparent about step therapy

requirements. Second, the one-size-fits-all approach is in tension with the emerging

trend of precision medicine. Third, insurers may apply the policy in a discriminatory

fashion that violates federal anti-discrimination mandates.

A. Lack of Transparency

Transparency is a core value in health care.

As the American Health Policy

Institute explains, “[i]n a fully transparent market, measures that disclose the relative

cost, quality and customer experience for all elements of the health care supply chain

would be publicly available.”

Full transparency would allow consumers to become

more informed purchasers of health plans and health care services and to demand

market accountability.

Without transparency it is nearly impossible “to create a

rational marketplace in which those who provide superior value are rewarded with

more business, and those who don’t suffer the consequences.”

Assuming that Andy’s experience is representative, patients often have no idea that

their insurer has implemented a step therapy program and remain ignorant of which

drugs are subject to it.

The news that an insurer has refused to pay for a prescribed

MAYO CLINIC, supra note 73.

Burns, supra note 57.

Younger workers are especially likely to change jobs frequently. See Heather Long, The New

Normal: 4 Job Changes by the Time You’re 32, CNN (Apr. 12, 2016), http://money.cnn.com

/2016/04/12/news/economy/millennials-change-jobs-frequently/index.html [https://perma.cc/U9YV-

G5NM].

STEVE WETZELL, TRANSPARENCY: A NEEDED STEP TOWARDS HEALTH CARE AFFORDABILITY 1

(2014), http://www.americanhealthpolicy.org/Content/documents/resources/Transparency%20Study%201

%20-%20The%20Need%20for%20Health%20Care%20Transparency.pdf [https://perma.cc/ZAH2-97

WB].

Id. at 2.

Id. at 4.

Id.

See supra notes 28–29 and accompanying text.

2018 STEP THERAPY 49

drug comes as an unwelcome surprise for the patient and prescribing provider, who

must decide whether to fight the decision or opt for another treatment.

Moreover, patients may find that busy medical practices are less than enthusiastic

about engaging in combat with insurers over denials, an activity for which they do not

directly get paid.

A 2011 Government Accountability Office report indicated that

between 11 and 24 percent of claims and preauthorization requests were denied in the

three states that were studied.

Health care providers, therefore, may feel

overwhelmed by requests for assistance with patient appeals.

Full transparency about step therapy requirements may enable individuals to choose

more wisely among different health plans. Admittedly, however, many will not have

a choice because the majority of employers offer only one insurance plan.

Even those

whose employers offer several options may find that all plans are served by the same

PBM. In fact, three large PBMs, ExpressScripts, CVSHealth (also known as CVS

Caremark), and OptumRx control approximately 80 percent of the market.

At the very least, however, transparency will enable patients and their doctors to

make more informed decisions about medical care. When physicians and patients

initially decide on a course of treatment, they must be aware of any limitations that the

insurer is likely to impose in order to avoid any harmful treatment delays or

disruptions.

B. At Odds with Precision Medicine Approach

Precision medicine can be defined as an “approach for disease prevention and

treatment that takes into account individual differences in lifestyle, environment, and

biology.”

President Obama’s Precision Medicine Initiative, launched in January of

2015, has fueled precision medicine,

and emerging resources such as genetic

technologies, large-scale biologic and electronic health record databases, and

Linda Berthold, Health Insurance Claim Denied? Don’t Despair. Fight Back., HUFFINGTON POST

(Aug. 21, 2011), http://www.huffingtonpost.com/linda-bergthold/health-insurance-claim-de_b_881538.

html [https://perma.cc/PGE5-QWTU]; David Lazarus, How to Fight Back When an Insurer Denies Your

Healthcare Claim, L.A. T

IMES (Jan. 17, 2017), http://www.latimes.com/business/lazarus/la-fi-lazarus-

winning-insurance-appeals-20170117-story.html [https://perma.cc/9M33-REPU].

PFIZER, supra note 16.

GOV’T ACCOUNTABILITY OFFICE, PRIVATE HEALTH INSURANCE: DATA ON APPLICATION AND

COVERAGE DENIALS (Mar. 17, 2011), http://www.gao.gov/new.items/d11268.pdf [https://perma.cc/44Z4-

B6R7]. Of the six states on which the report focused, only three captured this data, namely, California,

Maryland, and Ohio. Id. at 3, 17.

KAISER FAMILY FOUND. & HEALTH RES. & EDUC. TR., 2016 EMPLOYER HEALTH BENEFITS

SURVEY 72 (Sept. 14, 2016), http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-

Annual-Survey [https://perma.cc/5D6F-BJSU] (“Most firms that offer health benefits offer only one type of

health plan (83%)” and that “[l]arge firms are more likely to offer more than one plan type than small

firms.”).

State of Competition in the Pharmacy Benefits Manager and Pharmacy Marketplaces: Hearing

Before the Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the

Judiciary, 114th Cong. 25 (2015) (statement of David A. Balto); Wapner, supra note 1 (stating that the three

PBMs “control an estimated 80 to 85 percent of the market”).

About the All of Us Research Program, NAT’L INSTS. HEALTH, https://allofus.nih.gov/about/about-

all-us-research-program [https://perma.cc/US6Q-3779] (last visited June 16, 2017).

See Fact Sheet: President Obama’s Precision Medicine Initiative, WHITE HOUSE OFF. PRESS

SECRETARY (Jan. 30, 2015), https://obamawhitehouse.archives.gov/the-press-office/2015/01/30/fact-sheet-

president-obama-s-precision-medicine-initiative [https://perma.cc/W6HC-4VNS].

50 FOOD AND DRUG LAW JOURNAL VOL. 73

advanced computational tools make precision medicine a promising approach.

The

Trump administration continues to support the initiative and calls it the All of Us

Research Program.

Precision medicine aims to enable physicians to tailor treatment to patients’

attributes and characteristics.

Thus, physicians may be able to match treatments to

patients based on factors such as genetic variations, microbiome composition,

medical histories, lifestyles, and diet.

Precision medicine is already improving cancer

treatments as physicians have begun to test patients and their tumors for particular

genetic markers to determine what treatment, if any, is appropriate.

For example, the

breast cancer drug trastuzumab (Herceptin) has been found to work only for women

whose tumors have a particular genetic profile called HER-2 positive, and lung cancer

patients whose tumors are positive for EGFR mutations receive the drugs gefitinib

(Iressa) and erlotinib (Tarceva) that target this mutation.

Precision medicine has

yielded benefits in other areas as well, such as treatments for cystic fibrosis and

reproductive health.

By contrast, step therapy constitutes a one-size-fits-all approach. Insurers require

that, as a rule, doctors prescribe a particular medication before turning to more

expensive alternatives.

In some cases, such mandates may prevent physicians from

harnessing new knowledge derived from precision medicine research and customizing

treatment protocols to fit their patients’ particulars. Such inflexibility could ultimately

Francis S. Collins & Harold Varmus, A New Initiative on Precision Medicine, 372 N. ENGL. J.

MED. 793, 793 (2015); Larry J. Jameson & Dan L. Longo, Precision Medicine—Personalized, Problematic,

and Promising, 372 N. E

NGL. J. MED. 2229, 2229–30 (2015). Nevertheless, commentators also note various

barriers to implementing precision medicine in the clinical setting and caution that expectations must be

realistic. Michael J. Joyner & Nigel Paneth, Seven Questions for Personalized Medicine, 314 J.

AM. MED.

ASS’N. 999, 1000 (2015) (“Even though personalized medicine will be useful to better understand rare

diseases and identify novel therapeutic targets for some conditions, the promise of improved risk prediction,

behavior change, lower costs, and gains in public health for common diseases seem unrealistic.”).

All of Us Research Program, NAT’L INSTS. HEALTH, https://allofus.nih.gov/ [https://perma.

cc/F8GR-L2SK] (last visited July 15, 2017) (explaining that “[t]he mission of the All of Us Research

Program is to accelerate health research and medical breakthroughs, enabling individualized prevention,

treatment, and care for all of us).

The Precision Medicine Initiative, WHITE HOUSE, https://obamawhitehouse.archives.

gov/node/333101 [https://perma.cc/XYX5-FTUY] (last visited June 15, 2017); see, e.g., Xiwen Ma et al.,

Personalized Effective Dose Selection in Dose Ranging Studies in S

TATISTICAL APPLICATIONS FROM

CLINICAL TRIALS AND PERSONALIZED MEDICINE TO FINANCE AND BUSINESS ANALYTICS 91, 91 (Jianchang

Lin et al. eds. 2016) (aiming to “identify subgroups with enhanced benefit/risk profiles with appropriate

doses”); Ilya Lipkovich et al., Tutorial in Biostatistics: Data-Driven Subgroup Identification and Analysis

in Clinical Trials, 36 S

TAT. MED. 136, 136 (2017) (introducing a “general framework for evaluating

predictive biomarkers and identification of associated subgroups”).

Data & Samples, PERSONAL GENOME PROJECT: HARV. MED. SCH., https://pgp.med.harvard

.edu/data/ [https://perma.cc/8U9J-E9BX] (last visited Dec. 28, 2017). Microbiome data focuses on “the

types of bacteria in and on a participant’s body.”

WHITE HOUSE, supra note 91.

Collins & Varmus, supra note 89, at 794; Jameson & Longo, supra note 89, at 2229.

Impact of Cancer Genomics on Precision Medicine for the Treatment of Cancer, NAT’L CANCER

INST. & NAT’L HUMAN GENOME RES. INST., https://cancergenome.nih.gov/cancergenomics/impact

[https://perma.cc/7TX9-SQBF] (last visited June 16, 2017).

W. Gregory Feero, Introducing “Genomics and Precision Health,” 317 J. AM. MED. ASS’N. 1842,

1842 (2017).

See supra Part I. A.

2018 STEP THERAPY 51

raise health care costs.

Some patients may receive therapies that are doomed to be

suboptimal for them and that doctors versed in up-to-date research outcomes would

not have prescribed absent step therapy restrictions.

C. Potential Discrimination

Step therapy can constitute unlawful discrimination if insurers do not thoughtfully

select the medications that are subject to this policy. Insurance policies are governed

by a variety of state and federal laws that protect people with disabilities, including

the Americans with Disabilities Act of 1990 (ADA)

and the ACA.

100

Almost half of all Americans are covered by employer-provided health insurance.

101

Title I of the ADA prohibits employers from discriminating against qualified

individuals because of their disabilities, and this mandate extends to benefits such as

health insurance.

102

Likewise, Title II of the ADA prohibits disability discrimination

with respect to public services provided by state or local entities,

103

and Title III

governs “public accommodations and services provided by private entities.”

104

These

titles thus apply to insurance policies that individuals obtain through the private market

or state programs (rather than employers). Note that Medicare and Medicaid are

federal programs and are covered by Section 504 of the Rehabilitation Act, but this

law’s anti-discrimination mandate is identical to the ADA’s.

105

See supra Part I. C.

42 U.S.C. §§ 12101, 12213 (2010).

100

42 U.S.C. §§ 18001 et seq. (2010).

101

Health Insurance Coverage of the Total Population, HENRY J. KAISER FAMILY FOUND. (2015),

http://www.kff.org/other/state-indicator/total-population/?currentTimeframe=0&sortModel=%7B%22colI

d%22:%22Location%22,%22sort%22:%22asc%22%7D [https://perma.cc/T7L4-69Y4] (indicating that

49% are covered by policies that are provided by employers).

102

42 U.S.C. § 12112(a) (2010). The provision reads:

No covered entity shall discriminate against a qualified individual with a disability

because of the disability of such individual in regard to job application procedures, the

hiring, advancement, or discharge of employees, employee compensation, job training,

and other terms, conditions, and privileges of employment.

103

42 U.S.C. § 12132 (2010) providing that

No individual shall be discriminated against on the basis of disability in the full and

equal enjoyment of the goods, services, facilities, privileges, advantages, or

accommodations of any place of public accommodation by any person who owns, leases

(or leases to), or operates a place of public accommodation.

See also 42 U.S.C. § 12131 (defining a “public entity” as including any instrumentality of a state or

local government).

104

42 U.S.C. § 12182 (2010). Title III provides that

No individual shall be discriminated against on the basis of disability in the full and

equal enjoyment of the goods, services, facilities, privileges, advantages, or

accommodations of any place of public accommodation by any person who owns, leases

(or leases to), or operates a place of public accommodation.

Title III “public accommodations” include banks, insurance offices, private educational institutions,

sales establishments, service establishments, and many other private entities. 42 U.S.C. § 12181(7) (2010);

see also Sharona Hoffman, AIDS Caps, Contraceptive Coverage, and the Law: An Analysis of the Federal

Anti-Discrimination Statutes’ Applicability to Health Insurance, 23 C

ARDOZO L. REV. 1315, 1330–33

(2002) (discussing the applicability of the ADA’s Title I and Title III to insurance policies).

105

29 U.S.C. § 794 (2010). The provision reads:

52 FOOD AND DRUG LAW JOURNAL VOL. 73

The ADA includes a provision that specifically addresses insurers.

106

Section 501(c)

permits insurers to underwrite, classify, or administer risks and to establish the terms

of bona fide benefit plans in a manner that is not inconsistent with state law.

107

Nevertheless, it prohibits insurers from adopting practices that are “a subterfuge to

evade the purposes” of the law.

108

As I have argued in prior scholarship, Section 501(c)

obligates insurers “to provide a cost-based justification for discriminatory benefit

limitations or exclusions and provides a defense only for those who can do so.”

109

Consequently, insurers who select particular conditions for step therapy but exclude

others to which step therapy could apply could be violating the ADA’s anti-

discrimination mandate. For example, insurers might implement a step therapy

requirement for anti-depressants but not for diabetes or asthma, and this choice could

constitute discrimination against mental health patients. Indeed, a 2015 Connecticut

report (that did not focus specifically on step therapy) found that the state’s largest

managed care insurers denied approximately one in 12 initial requests for mental

health services, a rate that represented approximately a 70 percent increase between

2013 and 2014.

110

By contrast, during the same two years, the denial rate for overall

health services claims declined slightly.

111

To avoid liability, insurers should be able

to articulate actuarial and medical reasons for the structure of their step therapy

programs. To that end, they might require that patients first try (or switch to) an

inexpensive drug only in cases in which there is strong evidence that the inexpensive

medication, for most patients, is at least as effective as more costly alternatives, unless

the physician can identify specific reasons for an exemption (e.g. an allergy or prior

history of failure with the drug).

112

The ACA likewise has an anti-discrimination provision. Section 1557 of that law

prohibits discrimination on the basis of race, color, national origin, sex, age, or

disability in health programs or activities that receive federal financial assistance or

are run by a federal executive agency.

113

Thus, the ACA’s anti-discrimination mandate

No otherwise qualified individual with a disability in the United States . . . shall,

solely by reason of his or her disability, be excluded from the participation in, be denied

the benefits of, or be subjected to discrimination under any program or activity receiving

Federal financial assistance or under any program or activity conducted by any Executive

agency.

106

42 U.S.C. § 12201(c) (2010).

107

Id.

108

Id.

109

Hoffman, supra note 104, at 1334.

110

Lisa Chedekel, Report: Private Insurers Deny More Claims for Mental Health Care, HARTFORD

COURANT (May 13, 2016), http://www.courant.com/health/hc-insurance-mental-health-20160513-story.

html [https://perma.cc/2WEC-LR5N].

111

Id.

112

See Nayak & Pearson, supra note 3, at 1782–84 (discussing the ethical implications of various

scenarios in which a trial of inexpensive drug A might be required before approval of expensive drug B).

113

42 U.S.C. § 18116 (a) (2010). The provision reads:

[A]n individual shall not, on the ground prohibited under title VI of the Civil Rights

Act of 1964 (42 U.S.C. 2000d et seq.), title IX of the Education Amendments of 1972 (20

U.S.C. 1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), or

section 794 of title 29, be excluded from participation in, be denied the benefits of, or be

subjected to discrimination under, any health program or activity, any part of which is

receiving Federal financial assistance, including credits, subsidies, or contracts of

2018 STEP THERAPY 53

extends to all insurers that receive federal support such as payments through Medicare

Part D or the ACA Health Insurance Marketplaces.

114

This provision too should limit

insurers’ ability to pick and choose arbitrarily among health conditions that are subject

to step therapy protocols.

The ADA, Rehabilitation Act, and the ACA provide aggrieved individuals with a

private cause of action.

115

Consequently, patients who believe they suffered harm

because of discriminatory step therapy policies could potentially sue their insurers or

employers who provided the allegedly discriminatory insurance benefit.

III. STATE AND FEDERAL LEGISLATION AFFECTING STEP

THERAPY

The state and federal legislatures have not ignored the difficulties that some patients

face in obtaining insurance coverage for their treatments. Some states have passed

laws that specifically address step therapy. Both states statutes and federal law

establish review mechanisms for insurance coverage denials. This Part analyzes these

protections and the extent to which they apply to different types of insurance plans. It

examines state step therapy laws, ERISA, the ACA, and the MMA.

A. State Step Therapy Legislation

The states have begun to respond to the step therapy phenomenon with legislation

that governs how insurers apply these policies. As of mid-2017, 14 states had passed

legislation addressing step therapy,

116

and at least 12 others had bills under

consideration.

117

insurance, or under any program or activity that is administered by an Executive Agency

or any entity established under this title 1 (or amendments).

See also Section 1557 of the Patient Protection and Affordable Care Act, D

EP’T HEALTH HUM. SERVS.

(Jan. 13, 2017), https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html [https://perma

.cc/EM23-J92U].

114

42 U.S.C. § 18116 (a) (2010); Section 1557: Coverage of Health Insurance in Marketplaces and

Other Health Plans, D

EP’T HEALTH HUM. SERVS. (Aug. 25, 2016), https://www.hhs.gov/civil-rights/for-

individuals/section-1557/fs-health-insurance/index.html [https://perma.cc/8M77-2C3A]; see generally

Health Insurance Marketplace, H

EALTHCARE.GOV (June 15, 2017),

https://www.healthcare.gov/glossary/health-insurance-marketplace-glossary/ [https://perma.cc/8H4J-

C3QW].

115

For ADA enforcement provisions, see 42 U.S.C § 12117 (a) (2010) (referring to 42 U.S.C. § 2000e-

5, which furnishes aggrieved individuals with a private cause of action for violations of Title VII of the Civil

Rights Act of 1964); 42 U.S.C. § 12133 (1990) (referring to the Rehabilitation Act’s 29 U.S.C. § 794a,

which in turn refers to 42 U.S.C. 2000e–5(f), described above); 42 U.S.C. § 12188(a)(2) (1994) (providing

for injunctive relief in private suits by affected parties). For the Rehabilitation Act, see 29 U.S.C. § 794a

(2009) (referring to 42 U.S.C. 2000e–5(f), described above). For the ACA’s enforcement provision, see 42

U.S.C. § 18116(a) (2010) (stating that the Rehabilitation Act’s enforcement provisions apply to violations

of the ACA’s Section 1557).

116

Step Therapy Legislation, AM. ACAD. DERMATOLOGY (June 20, 2017), https://www.aad.org/

advocacy/state-policy/step-therapy-legislation [https://perma.cc/8DCN-SYHV]. The states are Arkansas,

California, Connecticut, Iowa, Illinois, Indiana, Kentucky, Louisiana, Maryland, Missouri, Mississippi,

New York, Washington, and West Virginia.

117

Id. The states are Florida, Georgia, Massachusetts, Maine, Minnesota, New Mexico, Ohio, Oregon,

Rhode Island, Texas, Utah, and Virginia.

54 FOOD AND DRUG LAW JOURNAL VOL. 73

No state law prohibits step therapy requirements altogether.

118

Instead, the statutes

establish step therapy exemptions, require expedited review of physicians’ requests

for waivers, and/or limit the duration of step therapy protocols.

119

Some provisions are brief and offer little guidance. For example, Arkansas requires

only a “clear and convenient process to expeditiously request an override” of step

therapy requirements,

120

and California mandates that such requests be handled in the

same manner as requests for prior authorization.

121

Other states have more detailed provisions that place restrictions upon insurers.

Illinois has enacted a typical step therapy statute. It requires insurers to approve or

deny requests for exemptions within 72 hours of receiving the request and to provide

an explanation and information regarding alternative drugs and appeals in case of

denial.

122

It further provides that:

(1) the required prescription drug is contraindicated;

(2) the patient has tried the required prescription drug while under the patient’s

current or previous health insurance or health benefit plan and the prescribing provider

submits evidence of failure or intolerance; or

(3) the patient is stable on a prescription drug selected by his or her health care

provider for the medical condition under consideration while on a current or previous

health insurance or health benefit plan.

123

Furthermore, approvals must be honored for at least 12 months or until renewal of

the plan.

124

Mississippi establishes an additional limitation, which is that “[t]he duration of any

step therapy or fail-first protocol shall not be longer than a period of thirty (30) days

when the treatment is deemed clinically ineffective by the prescribing practitioner.”

125

If the physician believes, based on sound clinical evidence, that the originally

118

Id.

119

Nayak & Pearson, supra note 3, at 1779.

120

A RK. CODE ANN. § 23-99-1115 (c)(1) (2015); see also W. VA. CODE, § 33-16-3aa (2016)

(requiring a “clear and convenient process to request a step therapy exception determination” that is easily

accessible on the insurer’s website); W

ASH. REV. CODE § 69.41.190(2)(c)(iii) (2011) (“[T]he endorsing

practitioner shall have an opportunity to request as medically necessary, that the brand name drug be

prescribed as the first course of treatment.”).

121

C AL. INS. CODE § 10123.197(a) (West 2016); see supra note 41 for explanation of prior

authorization.

122

215 ILL. COMP. STAT. ANN. 134/45.1(b)(2) (2018); see also N.Y. PUB. HEALTH LAWS § 4903.3

(2017) (providing that if “the health of the insured [is]in serious jeopardy without the prescription drug or

drugs prescribed by the insured’s health care professional, the step therapy protocol override determination

shall be granted within twenty-four hours of the receipt of information.”).

123

215 ILL. COMP. STAT. ANN. 134/45.1(c) (2018). For similar statutes, see CONN. GEN. STAT. ANN.

§ 38a 544(b)(1) (West 2015); I

ND. CODE § 27-8-5-30(h)(3) (2016); KY. REV. STAT. ANN. § 304.17A –

163(2) (West 2012); L

A. REV. STAT. ANN. § 46:460.34 (2014); MD. CODE ANN. INS. § 15-142 (2014); MO

REV. STAT. § 376.2034 (2016); MISS. CODE ANN. § 83-9-36(1) (2012); N.Y. PUB. HEALTH LAWS § 4903.3-

a-3-c (2017).

124

215 ILL. COMP. STAT. ANN. 134/45.1(e) (2018).

125

M ISS. CODE ANN. § 83-9-36(2) (2012); see also CONN. GEN. STAT. ANN. § 38a–544(a)(2) (2015)

(establishing a 60-day limitation); K

Y REV. STAT. ANN. § 304.17A–163(3) (West 2012).

2018 STEP THERAPY 55

prescribed medication takes longer than 30 days to become effective, the patient may

be required to take the originally prescribed medication for an additional seven days.

126

For its part, the federal Medicare program also provides guidance regarding step

therapy. Medicare allows prescribing clinicians to submit a request for an exception

along with a supporting statement if “the alternative(s) . . . required to be used in

accordance with step therapy has (have) been or is (are) likely to be less effective or

have adverse effects.”

127

The plan sponsor must then provide notice of its benefits

decision within 72 hours or 24 hours in the case of expedited requests.

128

B. The ERISA Problem

ERISA is a federal law that governs benefit plans that are established and

maintained by employers.

129

Employer-provided health plans cover 49 percent of

Americans and thus are an extremely important component of the insurance

landscape.

130

ERISA’s preemption clause prohibits insurance enrollees from pursuing state law

claims and remedies.

131

Specifically, it states that ERISA “shall supersede any and all

State laws insofar as they may now or hereafter relate to any employee [health] benefit

plan.”

132

Consequently, individuals may not bring actions against insurers based on

tort, contract, and other state common law theories, including lawsuits for harm caused

by treatment delays associated with step therapy protocols.

133

However, the statute includes a significant preemption exception. ERISA’s savings

clause provides that ERISA does not preempt state statutes that regulate insurance.

134

Thus, for example, in 1985 the Supreme Court held that a Massachusetts statute

mandating that group insurance policies provide particular minimum benefits was not

preempted by ERISA.

135

Because of the savings clause, state statutes governing step

therapy in principle would survive ERISA preemption.

The savings clause, however, is limited in its reach because of another ERISA

provision called the “deemer clause.”

136

This clause establishes that state laws

regulating insurance are preempted with respect to self-funded health insurance

126

M ISS. CODE ANN. § 83-9-36(2) (2012).

127

Exceptions, CTRS. MEDICARE & MEDICAID SERVS. (Nov. 29, 2016), https://www.cms.

gov/Medicare/Appeals-and-Grievances/MedPrescriptDrugApplGriev/Exceptions.html [https://perma.cc/

LJ7L-69HW]; 42 C.F.R. § 423.578(b) (2016).

128

42 C.F.R. §§ 423.568(b), 423.572(a) (2016).

129

Health Plans & Benefits: ERISA, DEP’T LABOR (June 22, 2017), https://www.dol.gov/general/

topic/health-plans/erisa [https://perma.cc/J8Y3-MPZW].

130

H ENRY J. KAISER FAMILY FOUND., supra note 101.

131

29 U.S.C. § 1144(a) (2010).

132

Id.

133

Cromwell v. Equicor-Equitable HCA Corp., 944 F. 2d 1272, 1275–76 (6th Cir. 1991); Sharona

Hoffman, A Proposal for Federal Legislation to Address Health Insurance Coverage for Experimental and

Investigational Treatments, 78 O

R. L. REV. 203, 241–42 (1999).

134

29 U.S.C. § 1144(b)(2)(A) (2010) (“Except as provided in subparagraph (B), nothing in this

subchapter shall be construed to exempt or relieve any person from any law of any State which regulates

insurance . . . .”).

135

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985).

136

See id. at 735 n. 14.

56 FOOD AND DRUG LAW JOURNAL VOL. 73

plans.

137

Employers with self-funded plans collect premiums and pay all medical

claims themselves, though they may use a third party to do administrative work for the

plan.

138

Step therapy statutes and other state health insurance laws, therefore, cannot

be enforced with respect to self-funded plans. According to the Henry J. Kaiser Family

Foundation, in 2016, 61 percent of workers were enrolled in self-funded health plans,

which are particularly popular among large companies.

139

Consequently, the majority

of individuals with employer-provided health plans cannot benefit from the protection

of state step therapy laws.

C. Other Legislative Protections

Fortunately, all insured individuals are entitled to a review process for decisions

with which they disagree. This right is furnished by ERISA and by the ACA.

ERISA requires that covered insurers afford participants whose medical claims are

denied a “full and fair review” of adverse decisions.

140

Federal regulations provide

detailed guidance concerning such appeals, which may consist of two different levels

of review.

141

Because this right is created by federal law (not state law), anyone

enrolled in an employer-provided plan is entitled to a review of claim denials,

including individuals in self-insured health plans and those in states without step

therapy statutes.

142

The ACA also addresses health insurance appeals, and unlike ERISA, this federal

law applies to all health insurance consumers, whether or not their policies are

provided by employers.

143

The provision requires that at a minimum, insurers do the

following: 1) have an internal claims appeals process; 2) provide an easily understood

notice to enrollees regarding internal and external review opportunities and any

available assistance for these processes; and 3) permit enrollees to review their files,

present evidence and testimony, and enjoy continued coverage until their appeals are

decided.

144

It is important to note that the ACA mandates that insurers offer not only internal

reviews but also external ones.

145

External reviews are performed by independent third

parties that are not associated with the health insurance plan.

146

137

29 U.S.C. § 1144(b)(B) (2010).

138

Self-Insured Plan, HEALTHCARE.GOV (June 23, 2017), https://www.healthcare.gov/glossary/self-

insured-plan/ [https://perma.cc/M37A-8Z72].

139

H ENRY J. KAISER FAMILY FOUND., 2016 EMPLOYER HEALTH BENEFITS SURVEY−SECTION TEN:

PLAN FUNDING (Sept. 14, 2016), http://www.kff.org/report-section/ehbs-2016-section-ten-plan-funding/.

[https://perma.cc/5NDG-XSQP].

140

29 U.S.C. § 1133 (2010).

141

29 C.F.R. § 2560.503-1(h) (2016); Benefit Claims Procedure Regulation FAQs, DEP’T LABOR (June

23, 2017), https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/benefit-

claims-procedure-regulation [https://perma.cc/2339-9HEL].

142

See supra Part III. B (explaining ERISA preemption).

143

42 U.S.C. § 300gg-19 (2010); NAT ’L CONFERENCE OF STATE LEGISLATURES, RIGHT TO HEALTH

INSURANCE APPEALS PROCESS, (Feb. 2011), http://www.ncsl.org/documents/health/hrhealthinsurapp.pdf

[https://perma.cc/Y2CQ-58HG].

144

42 U.S.C. § 300gg-19(a) (2010).

145

Id. at § 300gg-19(b).

146

External Review, HEALTHCARE.GOV (June 26, 2017), https://www.healthcare.gov/glossary/

external-review/ [https://perma.cc/6AXK-W6CW].

2018 STEP THERAPY 57

External reviews must comply with state external review laws that at the very least

include “the consumer protections set forth in the Uniform External Review Model

Act promulgated by the National Association of Insurance Commissioners.

147

“If the

state has not established an appropriate external review process

148

or the plan is self-

insured and thus not subject to state laws regulating insurance, the insurer must offer

an external review process consistent with guidance from the Secretary of Health and

Human Services.

149

Medicare also enables participants to appeal unfavorable decisions.

150

Pursuant to

the MMA, it establishes a five-level appeal process for those who disagree with

coverage decisions. The steps include: 1) redetermination from the plan; 2) review by

an independent review entity; 3) a hearing before an administrative law judge; 4)

review by the Medicare Appeals Council; and 5) judicial review by a federal district

court.

151

Patients’ success rates on appeal are encouraging. According to a 2011 federal

government report, insurance denial reversals ranged between 39 and 59 percent on

internal appeal, with an additional 23 to 54 percent reversed or revised as a result of

external appeals.

152

The numbers vary significantly by state.

153

The report’s authors

noted that they could not determine an overall appeal rate for claim denials, but data

from Ohio indicated that in the first quarter of 2010, patients internally appealed only

0.5 percent of coverage denials.

154

It is unclear why patients appealed so infrequently.

While some may not have been upset by adverse decisions, it is likely that many others

did not know that appealing was an option or did not have the mental ability or energy

to initiate appeals. It is possible that news stories about insurance appeals in more

recent years have raised the appeal figure.

155

As helpful as review processes may be for some patients, they can extend over

several months. For services not yet received, such as a more expensive drug in a step

147

42 U.S.C. § 300gg-19(b)(1) (2010); NAT’L ASS’N OF INS. COMM’R, UNIFORM HEALTH CARRIER

EXTERNAL REVIEW MODEL ACT (2010), http://www.naic.org/documents/committees_b_uniform_health

_carrier_ext_rev_model_act.pdf [https://perma.cc/JAB9-QN89].

148

See Affordable Care Act: Working with States to Protect Consumers, CTRS. MEDICARE &

MEDICAID SERVS., https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html [https://perma.cc/

6HWE-P2JT] (last updated Nov. 14, 2016) (listing the states and categorizing the types of external reviews

they offer).

149

42 U.S.C. §§ 300gg-19(b)(2)(A)–(B).

150

42 U.S.C.A. §§ 1395w-104(f)–(h); 42 C.F.R. § 423.562 (2016).

151

Appeals if You Have Medicare Prescription Drug Coverage, MEDICARE.GOV

https://www.medicare.gov/claims-and-appeals/file-an-appeal/prescription-plan/prescription-drug-

coverage-appeals.html [https://perma.cc/6SQK-M3M6] (last visited July 13, 2017).

152

G OV’T ACCOUNTABILITY OFFICE, supra note 84, at 23–24.

153

Id.

154

Id. at 22, n. 45. The report also noted that “aggregate claim denial rates for the three states that we

identified as collecting such data ranged from 11 percent in Ohio in 2009 to 24 percent in California in the

same year.” Id. at 22.

155

See, e.g., Pauline Bartolone, Patients Often Win If They Appeal A Denied Health Claim, NPR, (Apr.

14, 2014), http://www.npr.org/sections/health-shots/2014/04/14/302547851/patients-often-win-if-they-

appeal-a-denied-health-claim [https://perma.cc/NRB9-PWX5]; David Lazarus, How to Fight Back when an

Insurer Denies Your Healthcare Claim, L.A. T

IMES (Jan. 17, 2017), http://www.latimes.com/business/

lazarus/la-fi-lazarus-winning-insurance-appeals-20170117-story.html [https://perma.cc/G6V9-QVX7].

58 FOOD AND DRUG LAW JOURNAL VOL. 73

therapy program, insurers must complete internal appeals within 30 days.

156

Insurers

can then take up to 60 days after receiving a request to complete an external review.

157

During these months, the health of a patient who is receiving an inexpensive treatment

that is a poor fit for her may deteriorate significantly. Thus, even if the coverage denial

is ultimately reversed, the patient may suffer grave consequences from treatment

delays.

158

The ACA does not create a private cause of action for wrongful claim denials,

159

but ERISA does do so.

160

Therefore, as a last resort, after exhausting the administrative

remedies described above, enrollees covered by ERISA plans can sue insurers to

recover benefits to which they are entitled under their policies.

161

Other monetary

damages, such as compensatory and punitive damages, are generally not available.

162

Extensive research revealed no cases in which plaintiffs sued because of adverse

decisions associated with step therapy.

163

However, numerous cases involve another

cost-control strategy: medical necessity determinations.

164

A 2003 U.S. Department of

Health and Human Services report focused on 54 medical necessity cases and found

that most often, plaintiffs alleged that insurers arbitrarily and unfairly denied them

coverage while approving claims in equivalent cases.

165

According to the report,

insurers prevailed in 29 lawsuits and had their decisions reversed in 25 instances.

166

Litigation is expensive and can occupy many months if not years. It is an ineffectual

tool for obtaining swift overrides of step therapy policies. However, it can be helpful

156

Appealing a Health Plan Decision: Internal Appeals, HEALTHCARE.GOV https://www.healthcare

.gov/appeal-insurance-company-decision/internal-appeals/ [https://perma.cc/D8D7-RGUU] (last visited

June 26, 2017).

157

Appealing a Health Plan Decision: External Review, HEALTHCARE.GOV https://www.healthcare.

gov/appeal-insurance-company-decision/external-review/ [https://perma.cc/GL4K-JPHY] (last visited June

26, 2016).

158

See Kling-Levine, supra note 7 (relating the author’s experience with step therapy for ulcerative

colitis); Kopp, supra note 60 (discussing a pediatric pulmonologist’s frustration with step therapy for

children’s asthma treatments); see also infra notes 7–12 and accompanying text.

159

Letter from United States Government Accountability Office to Congressional Recipients

regarding Causes of Action under the Patient Protection and Affordable Care Act (Mar. 23, 2012) (“[W]e

do not believe that the implementation of the provisions identified in section 3512 of PPACA, including the

development, recognition, or implementation of related guidelines and standards, is likely to give rise to

new causes of action or claims.”); Christine H. Monahan, Private Enforcement of the Affordable Care Act:

Toward an “Implied Warranty of Legality” in Health Insurance, 126 Y

ALE L. J. 1118, 1123 n. 23 (2017).

The one exception is the ability to sue for discrimination in violation of Section 1557 of the ACA. See supra

notes 113–115 and accompanying text.

160

29 U.S.C. § 1132(a) (2010).

161

Id.; Miller v. Metropolitan Life Ins. Co., 925 F. 2d 979, 986 (6th Cir. 1991).

162

Mass. Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 144–48 (1985) (“[W]e do not find in § 409

express authority for an award of extracontractual damages to a beneficiary.”).

163

This does not preclude the possibility that there are unreported step therapy cases.

164

S ARAH ROSENBAUM ET AL., MEDICAL NECESSITY IN PRIVATE HEALTH PLANS: IMPLICATIONS FOR

BEHAVIORAL HEALTH CARE 19–21 (2003). For an explanation of medical necessity determinations, see

supra note 40 and accompanying text.

165

Id. at 21.

166

Id. at 20; see, e.g., Delmarva Health Plan v. Aceto, 750 A.2d 1213, 1218 (Del. Ch. 1999) (holding

that an insurer must cover a lung transplant).

2018 STEP THERAPY 59

for patients who opted to pay for an expensive drug out of pocket after receiving a

coverage denial and wish to be reimbursed for their costs.

IV. RECOMMENDATIONS

Patients and physicians have been vocal in expressing their frustration with step

therapy.

167

At the same time, it is undeniable that health care expenses are spiraling

upwards, and insurers have good reason to be concerned about treatment costs.

168

This

Part develops a balanced set of recommendations that consider the interests of all stake

holders. It proposes that 1) all states enact step therapy laws that, at minimum, include

the elements outlined below; 2) ERISA and the ACA address step therapy programs;

3) insurers improve transparency by disseminating clear information about step

therapy requirements in print and on their websites; 4) insurers monitor and

incorporate up-to-date scientific and financial evidence into their policies; and 5)

insurers implement step therapy programs in a non-discriminatory way.

A. All States Should Enact Step Therapy Statutes

Opponents decry step therapy legislation as an overly-rigid intervention and would

prefer to be free of legislative constraints.

169

In truth, however, it is step therapy itself

that is inflexible and a “one-size-fits-all” approach. It categorically requires patients

to take particular drugs before being approved for others, no matter what their personal

circumstances are.

170

State step therapy statutes constitute a measured response to concerns about step

therapy.

171

They do not prohibit it entirely or subject it to cumbersome requirements.

Rather, they generally provide patients with an avenue to obtain relief quickly when

needed without significantly undermining insurers’ decision-making powers.

All states should enact step therapy statutes. The laws need not be identical but

should include the following requirements:

 Approval or denial of requests for exemption within 72 hours of receiving

the request or 24 hours if the request is urgent and there is serious risk to

the insured’s health.

172

 Exemptions to be granted in the following circumstances:

o The drug is contraindicated (inappropriate because of the

patient’s medical history, attributes, or other circumstances);

o The patient has previously tried the first-step drug, and the

prescribing physician submits evidence that the drug was poorly

tolerated or ineffective (evidence can come in the form of a

physician statement or notations from the patient’s record).

167

See Kling-Levine, supra note 7; Kopp, supra note 60 (discussing a pediatric pulmonologist’s

frustration with step therapy for children’s asthma treatments).

168

See supra Part I. B.

169

Fischer, supra note 26, at 802.

170

See supra Part I. A.

171

See supra Part III. A.

172

See N.Y. PUB. HEALTH LAWS § 4903 (3) (2017).

60 FOOD AND DRUG LAW JOURNAL VOL. 73

o The patient is already stable on the drug selected by the

physician.

173

 Inclusion of a clear explanation and information about appeal mechanisms

and covered alternative medications when the insurer denies a request for

exemption.

174

 Approval of drugs for at least 12 months when the insurer grants requests

for exemption.

175

 A clear definition of what step therapy “failure” means. For example, the

law may require that patients be approved for the physician’s drug of

choice if they did not experience adequate improvement or symptom relief,

as judged by the physician, after 30 days.

176

It may also mandate that they

try only one alternative drug before approval of the physician-

recommended medication.

177

Step therapy laws with lucid guidance will assure physicians that time requesting

exemptions will be well-spent and assure patients that they can obtain treatments that

will fit their needs. By requiring timely responses, the proposed legislation will prevent

harmful treatment delays. Approving exemptions for at least 12 months will save

patients and physicians from having to submit waiver requests every few months, a

task that can be stressful and onerous. This may be especially helpful for patients with

mental health or cognitive difficulties who must ask friends or relatives to assist them

in interacting with doctors and insurers and may feel uncomfortable burdening these

advocates repeatedly.

Clearly defining step therapy failure is also important.

178

Insurers should not have

unlimited discretion to demand that patients try cheaper drugs indefinitely or try

multiple drugs that do not work well for them. Such trials can severely impact patients’

health, comfort, and ability to function.

179

State statutes should limit the duration of

first-step drug trials and the number of drugs that must be taken before approval of the

physician’s drug of choice.

A complicating factor is that it is not always clear whether a drug has “failed.” In

the case of drugs that treat pain, discomfort, or certain mental health problems, success

is judged by patients’ own assessment of whether they feel better. Does the drug

relieve the pain? Does the drug adequately reduce the symptoms of Parkinson’s

disease, such as tremor and rigidity? Is the patient less anxious or depressed? If the

answers are negative, patients will return to their doctors and seek further care. It is

therefore important that insurers rely on physicians’ attestations regarding the failure

of drugs instead of attempting to formulate objective criteria of their own.

173

215 ILL. COMP. STAT. ANN. § 134/45.1(c) (2018).

174

Id. at § 134/45.1(b)(2).

175

Id. at 134/45.1(e).

176

M ISS. CODE ANN. § 83-9-36(2) (2012).

177

See ASSEMBLY, NO. 1832, STATE OF NEW JERSEY, 215

LEG. § 1.a(2), ftp://www.njleg.

state.nj.us/20122013/A2000/1832_I1.HTM [https://perma.cc/BJ2C-W8MQ].

178

See Nayak & Pearson, supra note 3, at 1781 (stating that “what constitutes the failure of the first-

step drug can be one of the most contentious aspects of a step therapy policy.”).

179

See supra notes 7–12 and accompanying text.

2018 STEP THERAPY 61

B. Federal Law Should Address Step Therapy

As noted above, state step therapy statutes do not govern employer-provided self-

funded health insurance plans because of ERISA’s deemer clause.

180

The majority of

American workers and their families are enrolled in self-funded plans,

181

and thus state

law does not protect them. Consequently, step therapy provisions should be

incorporated into federal law as well.

ERISA itself could address step therapy in its “Claims Procedure” section that

mandates a “full and fair review” of adverse insurance decisions.

182

The provision

should be detailed and include the requirements described above.

183

While Medicare regulations already provide step therapy guidelines for Medicare

plans,

184

the ACA should do so for all other insurance policies. The law could furnish

step therapy guidelines in a new subpart of its “Appeals Process” provision.

185

However, given the current Congress’ efforts to repeal the ACA, the law’s future is

uncertain, and it is unlikely that any of its provisions will be expanded in the near term.

C. Improving Transparency

Insurers should be fully transparent about their step therapy requirements and

should disseminate clear and readable information about them through their websites

and printed materials. They should keep in mind that 50 percent of adults cannot

understand a book written at an eighth-grade level, and thus informational materials

should be written at a sixth-grade reading level.

186

Insurers should be careful to educate

both patients and physicians about step therapy policies. They should also ensure that

their websites include tools that enable users to search for restrictions that apply to

particular drugs. Medical appointments will be more productive if physicians and

patients know to take step therapy requirements into account as they consider

treatment alternatives. Physicians who feel strongly that specific drugs are best for

patients despite contrary step therapy constraints could immediately initiate waiver

requests in order to minimize delays and frustrations (and one hopes they will be

willing to invest the time in doing so). Physicians who have no objections to insurers’

preferences could explain them to patients and tailor their recommendations

accordingly.

Existing legislative guidelines already embrace the value of transparency. ERISA

requires insurers to furnish participants with “summary plan descriptions.”

187

The

180

See supra notes 136–139 and accompanying text.

181

See supra note 139 and accompanying text.

182

29 U.S.C. § 1133 (2010).

183

See Part IV. A.

184

See 42 C.F.R. §§ 423.568(b), 423.572(a), 423.578(b) (2016).

185

42 U.S.C. § 300gg-19 (2010). Note that federal regulations already require that insurers who

receive a request to review an adverse coverage decision do so within 72 hours or 24 hours in exigent

circumstances. 45 C.F.R. §156.122(c)(1)(ii), (2)(iii) (2016).

186

Staggering Illiteracy Statistics, LITERACY PROJECT FOUND. (last visited July 15, 2017),

http://literacyprojectfoundation.org/community/statistics/ [https://perma.cc/29Z8-DVAK]; Tiffany M.

Walsh & Teresa A. Volsko, Readability Assessment of Internet-Based Consumer Health Information, 53

ESP. CARE 1310 (2008) (“The literature indicates and the USDHHS [Department of Health and Human

Services] recommends that consumer medical information be written at the 6th-grade reading level.”).

187

29 U.S.C. §§ 1022, 1024(b) (2010).

62 FOOD AND DRUG LAW JOURNAL VOL. 73

provision details the “easily understood”

188

information that enrollees must receive

and could be slightly revised to require specific disclosure of step therapy programs.

189

If the summary plan description is lengthy and participants are unlikely to read it,

insurers would be wise to highlight the existence of step therapy policies in a separate

newsletter or brochure. In addition, the information should be posted on user-friendly

websites.

Several state laws also address transparency and disclosure by health insurers.

190

For example, a California law requires insurers that use a formulary

191

to post the

formulary on their websites.

192

A Colorado statute requires the insurance

commissioner to develop a website that discloses health insurance price

information.

193

State legislatures could similarly establish disclosure requirements

regarding step therapy.

Medicare empowers patients to determine whether specific drugs are subject to

insurance restrictions, including step therapy, through a simple search on its website.

It offers a page entitled “2017 Drug Finder: Search for Your Prescription Drug across

All Medicare Part D or Medicare Advantage Plans.”

194

Users can enter the name of

any drug and obtain a wealth of information about whether and in what manner it is

covered by various Medicare plans.

195

All insurers should enable participants to

conduct such searches.

Full disclosure serves not only patients’ interests but also those of insurers. Absent

sound reasons for disagreement, patients and physicians who are aware of step therapy

guidelines will comply and save insurers the trouble of processing requests for

exemption and appeals. By contrast, physicians who cannot easily learn of step therapy

restrictions are more likely to prescribe medications for which insurers will deny

coverage. Patients who are disappointed and distressed by insurers’ decisions that are

contrary to their physicians’ recommendations may then attempt to obtain reversals,

creating administrative work and costs for insurers.

D. Monitor and Incorporate Up-to-Date Scientific and

Financial Evidence

Insurers should frequently review emerging medical evidence to ensure that their

step therapy protocols are consistent with patients’ best interests. Step therapy

requirements should not become ossified and outdated. For example, if precision

medicine studies reveal that individuals with particular genetic mutations or other

188

Id. at § 1022(a).

189

Id. at § 1022(b).

190

Transparency and Disclosure of Health Costs and Provider Payments: State Actions, NAT ’L

CONFERENCE OF STATE LEGISLATURES (last updated Mar. 2017) http://www.ncsl.org/research/health/

transparency-and-disclosure-health-costs.aspx [https://perma.cc/DQ2X-FH2C].

191

A formulary is “a list of prescription drugs covered by [an] . . . insurance plan offering

prescription drug benefits.” Formulary, H

EALTHCARE.GOV., https://www.healthcare.gov/glossary

/formulary/ [https://perma.cc/USQ4-QJZD] (last visited July 3, 2017).

192

C AL. HEALTH AND SAFETY CODE § 1367.205(a)(1) (West 2016).

193

C OLO. REV. STAT. ANN. §§ 10-16-133, 10-16-134.

194

2017 Drug Finder: Search for Your Prescription Drug across All Medicare Part D or Medicare

Advantage Plans, Q1M

EDICARE.COM, https://q1medicare.com/PartD-SearchPDPMedicarePartDDrug

Finder.php [https://perma.cc/72EW-W4FR] (last visited Dec. 29, 2017).

195

Id.

2018 STEP THERAPY 63

characteristics (e.g. age, co-existing diseases, etc.) should take drug B rather than drug

A, insurers with step therapy programs mandating initial trials of drug A should

respond quickly and alter their coverage guidelines.

196

Another source of relevant data is comparative effectiveness research.

197

This

research, based on studies that compare drugs, devices, or other medical interventions,

aims “to inform health-care decisions by providing evidence on the effectiveness,

benefits, and harms of different treatment options.”

198

As just one example, a recent

study published in JAMA Internal Medicine focused on treatments for clostridium

difficile infection (a bacterium that causes diarrhea).

199

When researchers compared

the antibiotics vancomycin and metronidazole, they concluded that patients who took

vancomycin had a significantly reduced risk of death within 30 days, which suggested

that vancomycin should be used as the initial therapy for patients with severe forms of

the disease.

200

It is obvious that such a finding may require insurers to adjust their step

therapy requirements.

Likewise, insurers should review their own financial data to determine whether step

therapy requirements are cost-effective. If a first-step drug has a high failure rate or

raises overall costs because patients often seek treatment for side-effects and

complications, insurers should adjust the requirement in question.

201

To these ends, insurers can use their existing pharmacy and therapeutics (P & T)

committees.

202

Federal regulations detail standards for these committees, relating to

their membership, conflicts of interest, quarterly meetings, documentation, and other

obligations.

203

P & T committees are tasked with reviewing and approving step therapy

protocols

204

and should be sure to monitor new medical and economic data and modify

the protocols as appropriate.

205

196

See Part II. B (discussing precision medicine).

197

What Is Comparative Effectiveness Research, AGENCY FOR HEALTHCARE RES. & QUALITY,

https://www.ahrq.gov/cpi/about/otherwebsites/effectivehealthcare.ahrq.gov/index.html [https://perma

.cc/UC2J-XS3P] (last visited July 5, 2017).

198

Id.

199

Vanessa W. Stevens et al., Comparative Effectiveness of Vancomycin and Metronidazole for the

Prevention of Recurrence and Death in Patients with Clostridium Difficile Infection, 177 J.

AM. MED. ASS’N

NTERN. MED. 546, 546 (2017). For information about clostridium difficile infections, see Clostridium

Difficile Infections, U.S.

NAT’L LIBR. MED., https://medlineplus.gov/clostridiumdifficileinfections.html

[https://perma.cc/8U9A-SF3H] (last visited July 5, 2017).

200

Stevens et al., supra note 199, at 546.

201

See Nayak & Pearson, supra note 3, at 1781.

202

See F. Randy Vogenberg, The Changing Roles of P&T Committees: A Look Back at the Last

Decade and a Look Forward to 2020, 39 P

HARMACY & THERAPEUTICS 760, 760 (2014).

203

45 C.F.R. § 156.122(a)(3) (2016). Members must “represent a sufficient number of clinical

specialties,” be composed of a majority of individuals who are pharmacists or “health care professionals

who are licensed to prescribe drugs,” and be prohibited from voting on a matter concerning which they have

a conflict of interest. In addition, at least 20 percent must “have no conflict of interest with respect to the

issuer and any pharmaceutical manufacturer.” Id. at § 156.122(a)(3)(i).

204

Id. at § 156.122(a)(3)(iii)(F).

205

Id.

64 FOOD AND DRUG LAW JOURNAL VOL. 73

E. Avoid Discrimination

Step therapy policies should be equitable and non-discriminatory.

206

This is not to

say that insurers should subject every possible drug to step therapy requirements to

avoid allegations of discrimination. Rather, step therapy policies must be thoughtful

and well-supported by scientific and financial evidence. Thus, if patients question why

a particular drug is subject to restrictions while others are not, insurers must be able to

articulate sound justifications for their implementation decisions.

V. CONCLUSION

Insurers’ concern about the rapidly rising cost of medical care is warranted, and

they cannot be condemned for establishing cost-control measures.

207

In her best-

selling book, An American Sickness: How Healthcare Became Big Business and How

You Can Take It Back,

208

Elisabeth Rosenthal details myriad reasons for the United

States’ exorbitant health care prices. She also offers a variety of solutions,

209

as have

many other commentators.

210

Step therapy is an intervention that is favored by the majority of U.S. insurers.

211

Often, patients suffer no ill consequences from step therapy policies. For example,

many patients tolerate generic drugs just as well as they tolerate brand name drugs.

212

In other instances, however, step therapy promotes neither patient interests nor the

insurer’s economic goals. Patients may suffer grave harms when they do not receive

their physician’s drug of choice because of step therapy constraints.

213

These can

include medical complication as well as severely diminished functionality, which in

turn can result in an inability to work, financial difficulties, depression, and health

problems stemming from a sedentary and inactive lifestyle.

214

Thus, step therapy at

times is penny wise but pound foolish.

206

See Part II. C (discussing potential discrimination).

207

See Part I.B (discussing the need for cost control measures).

208

E LISABETH ROSENTHAL, AN AMERICAN SICKNESS: HOW HEALTHCARE BECAME BIG BUSINESS

AND

HOW YOU CAN TAKE IT BACK (Penguin Press 2017).

209

Id. at 241–327.

210

See, e.g., STEVEN BRILL, AMERICA’S BITTER PILL: MONEY, POLITICS, BACKROOM DEALS, AND

THE

FIGHT TO FIX OUR BROKEN HEALTHCARE SYSTEM (Random House 2015); ELIZABETH H. BRADLEY &

LAUREN A. TAYLOR, THE AMERICAN HEALTH CARE PARADOX: WHY SPENDING MORE IS GETTING US LESS

(PublicAffairs 2015).

211

See Part I. A (providing background information regarding step therapy).

212

See supra note 25 and accompanying text; FDA Ensures Equivalence of Generic Drugs, FOOD &

DRUG ADMIN. (Aug. 2002), https://www.fda.gov/drugs/emergencypreparedness/bioterrorismanddrug

preparedness/ucm134444.htm [https://perma.cc/EN65-PLMJ]; James McCormack & John T. Chmelicek,

Generic Versus Brand Name: the Other Drug War, 60 C

AN. FAM. PHYSICIAN 911, 911 (2014) (concluding

that “[a]ccording to the best available evidence, generic medications are bioequivalent and produce similar

clinical outcomes to brand-name medications.”).

213

See supra notes 57–74, 167–12 and accompanying text.

214

Id.; see generally Arthur Lazarus, Formulary Restrictions Sometimes Harm Patients, MANAGED

CARE, Oct. 2004, https://www.managedcaremag.com/archives/2004/10/formulary-restrictions-sometimes-

harm-patients [https://perma.cc/PDY8-5KBB].

2018 STEP THERAPY 65

This article has argued for a nuanced approach to improving step therapy programs

and reducing their risks.

215

Insurers should establish expeditious and uncomplicated

waiver mechanisms, guided by state and federal legislation, so that patients who truly

need a more expensive drug can quickly obtain it and doctors are minimally burdened

by administrative demands. Insurers must also enhance transparency, respond to

emerging medical and financial evidence that necessitates policy modifications, and

be wary of discrimination.

216

Finally, the health insurance industry should conduct further research to determine

if step therapy is in fact an effective cost reduction tool.

217

If the programs’ economic

benefits do not outweigh the burdens they impose on patients, physicians, and insurers,

they should be altered or abandoned. Step therapy should not constitute a bludgeon

that is used against patients and their doctors. Instead, it should be a vehicle for all

stakeholders to work cooperatively to reduce treatment costs without compromising

health outcomes.

215

See Part IV.

216

Id.

217

Rashad I. Carlton et al., Review of Outcomes Associated with Formulary Restrictions: Focus on

Step Therapy, 2 A

M. J. PHARMACY BENEFITS 50 (2010), http://www.ajpb.com/journals/ajpb/2010

/vol2_no1/review-of-outcomes-associated-with-formulary-restrictions-focus-on-step-therapy

[https://perma.cc/5ZP2-AUCX]; Motheral, supra note 47, at 143.