IMPACT OF SPECIALTY DRUGS ON USE OF OTHER MEDICAL SERVICES

Abstract

Objective

To examine whether initiation of a biologic agent to treat two autoimmune disorders – rheumatoid arthritis (RA) and multiple sclerosis (MS) – affects use of other medical services.

Study Design

A longitudinal analysis from 1997 to 2005 examining linked pharmacy and medical claims from large, private employers.

Methods

The study sample included 30,761 individuals newly diagnosed with RA (92,660 person-years) and 8,961 unique individuals with MS (25,100 person-years). Negative binomial models were used to estimate changes in inpatient, outpatient and procedure use before and after initiating a biologic drug for each condition.

Results

Starting a biologic response modifier (BRM) was associated with a reduction in physician visits and use of expensive procedures for patients with RA within two to three years of initiation. Use of immunomodulatory therapy for MS was associated with a reduced number of hospitalizations and expensive procedures within two years of initiation. While biologics may reduce other types of service use, the savings do not come close to offsetting the full cost of these drugs.

Conclusions

Given the high cost of many specialty drugs, health plans may rightly focus on making sure only patients who will most benefit receive them. But once such patients are identified, it makes little sense to limit coverage.

INTRODUCTION

The unprecedented progress in biomedical and clinical research over the last half-century continues to drive a revolution in the practice of medicine. The result has been substantial improvements in both health and longevity. At the same time, technology is widely viewed as the principal driver of rising health care spending.¹ In response, both public and private payers are demanding more objective evidence of the value of new technologies in deciding whether and how generously to cover them. Perhaps the clearest example of this issue is specialty pharmaceuticals, which include most injectibles and biologic agents. Biotechnology-derived agents are often used to treat complex chronic conditions such as cancer, anemia, and autoimmune disorders for which there are few other viable treatment options, but at prices that can be substantially higher than traditional medications. Since only a small percentage of health plan members are afflicted with these conditions, the total population of specialty drug users is quite small. However, spending on biologics is increasing rapidly as broader uses are found for existing drugs and new drugs enter the market to treat more prevalent conditions such as diabetes and obesity.

Some biologics offer lifesaving and quality-improving benefits, while others offer more modest clinical benefits when compared with current treatments. The principal challenge facing public and private payers is to balance patients’ access to these technologies with the need to constrain health care expenditures. In order to do this effectively, payers need more information on their clinical efficacy, long-term safety and overall value.

The introduction of a new technology may substitute for or complement existing treatments. In the best case scenario, a new drug or medical device may improve patient health to such a degree over existing treatments that it reduces the need for expensive hospitalizations and ambulatory care services over time.^2–3 On the other hand, the introduction of powerful new medications may necessitate additional monitoring, contraindications and long-term intolerance that could increase overall spending.^4–5 Understanding the broader clinical and financial implications of expensive new therapies is important in designing appropriate coverage decisions.

In this paper, we examine the “cost-offset” hypothesis in the use of specialty drugs for the treatment of two autoimmune disorders: rheumatoid arthritis (RA) and multiple sclerosis (MS). These conditions provide a good test case because biologic treatments for RA and MS have been widely used over the past decade and cost $15,000 or more annually. While these drugs can be highly efficacious for patients who have failed traditional therapies, not all patients need them, nor respond to them. We follow service use for RA and MS patients up to three years before and three years after initiation of a biologic to estimate the impact of these therapies on the use of other medical services.

Rheumatoid Arthritis

The onset of RA usually occurs between 30 and 50 years of age and is more common among women.⁶ For some people, it lasts only a few months or a year or two and goes away without causing any noticeable damage. Other people have mild or moderate forms of the disease, marked by periods of flares and remissions. Still others have a severe form of the disease that is active most of the time, lasts for many years or a lifetime, and leads to serious joint damage and disability.⁷ Recent studies show that early treatment with more powerful drugs may be more effective in reducing or preventing joint damage, particularly for patients with severe, rapidly progressing RA.^8–11

Treatment options for RA historically have included analgesics, corticosteroids and nonsteroidal antiinflammatory drugs (NSAIDS) to treat pain and inflammation, as well as disease-modifying antirheumatic drugs, or DMARDs, than can promote disease remission and prevent progressive joint destruction. While effective for many patients, these drugs can have serious side-effects and are less effective as the disease progresses and with more aggressive forms of the condition. Because of their potentially serious side effects, immunosuppressive agents are used in low doses, usually in combination with anti-inflammatory agents.

Biologic response modifiers (BRM) represent a newer subclass of DMARDs and have proven effective in achieving remission, even for patients for whom other therapies have failed. In comparison with traditional DMARDs, biologics have more rapid onset of action and can have powerful effects on stopping progressive joint damage. While only about 1 in 4 RA patients takes a biologic, recent studies show that two-thirds respond favorably, with most of them achieving remission.⁶

Multiple Sclerosis

Multiple sclerosis (MS) is an autoimmune disorder characterized by inflammation of the central nervous system. Common symptoms of MS include fatigue, reduced mobility, bowel/bladder disturbances, optic neuritis, and changes in cognitive function, pain, sensory loss, and depression. MS affects approximately 400,000 people in the United States, with incidence peaking between the ages of 30 and 35. Females are 2 to 3 times more likely to develop MS than males and whites are more likely to develop MS than persons of Asian or African descent.

Like RA, treatment options for MS used to consist of physical therapy and pharmacological treatment for symptom management. Corticosteroids (prednisone, dexamethasone) and the hormone ACTH were given during flare-ups to help reduce inflammation and swelling, but did not prevent new attacks. Symptomatic management has been supplemented in the past decade by two new classes of immunomodulatory therapies. Evidence from randomized clinical and long-term follow-up studies have shown that these immunomodulatory therapies are effective in reducing relapse rates, slowing the progression of disability and reducing MS disease activity.^12–15 However, these therapies are not without risk. They have potentially serious side effects and their long term tolerance has not been established.

METHODS

Data

We assembled an extensive data set of de-identified administrative, claims and benefit information for 453 commercial health plans from 1997 to 2005. The data include more than 3 million beneficiaries continuously enrolled in a plan for an entire year. For this study, we restricted our attention to patients with at least two primary diagnoses for rheumatoid arthritis or multiple sclerosis as indicated by ICD codes.

The claims captured all health care claims and encounters, including prescription drugs, inpatient, emergency, and ambulatory services. Health care expenditures reflect total annual payments made by the enrollee (co-payments, deductibles, excluded expenses) and by all third-party payers (primary and secondary coverage, net of negotiated discounts).

Traditional oral pharmaceuticals were identified in the pharmacy claims using NDC codes. By contrast, many biologics are administered by a physician or nurse in a clinical setting and covered under the medical benefit. We used the medical claims to identify use of specialty products from physicians’ offices, home care agencies, and outpatient facilities such as outpatient hospital clinics.

Study Sample

We created two distinct study samples for patients newly diagnosed with RA or MS. We identified patients with each condition based on the existence of two or more inpatient or outpatient claims with the International Classification of Diseases (ICD-9) for RA (ICD-9 code 714) or MS (ICD-9 code 340). Patients were considered “newly diagnosed” if they had at least one year of data prior to the index date (date of first ICD-9 code) without a claim for the condition. For example, an individual with 2 ICD-9 codes for RA in 2000 would be considered newly diagnosed if they had no other ICD-9 codes for the condition in prior years, i.e. 1997–1999 if continuously enrolled. Similarly, we defined initiation of biologic therapy based on the absence of any use in prior years. The study sample included 30,761 individuals with RA (92,660 person-years) and 8,961 unique individuals with MS (25,100 person-years).

Statistical Analysis

Our goal was to assess the impact of biologics on the use of other medical services, controlling for differences in patient demographics and co-morbid conditions that can affect the demand for medical care. Therefore, we estimated multivariate regression models for the following dependent variables: number of hospitalizations, physician office visits and expensive procedures. We identified the most common procedures used in treating RA and MS patients and selected those procedures costing $100 or more. This roughly corresponded to the top quartile of the 100 most common procedures for each condition.

Because our primary dependent variables were counts, we estimated negative binomial models. The negative binomial is a generalization of the Poisson model that is appropriate when there is overdispersion of the data (i.e., when the conditional variance of the distribution exceeds the conditional mean). By allowing for overdispersion, the negative binomial helps to account for unobserved heterogeneity among the individuals in the study.

The key independent variables in the models were 7 binary indicator variables for the years pre- and post-initiation of a biologic. More specifically, we included three binary indicator variables for the three years prior to initiation, one binary indicator for the year of initiation, and three indicator variables for the years post-initiation. For example, an RA patient who used a BRM continuously after initiating use in 2001 would contribute up to three years of data pre-initiation (1998–2000) and three years post-initiation (2002–2004, in addition to the year of initiation. We excluded person-years post-initiation if the individual had stopped using a biologic over the entire year.²

The models also included controls for patient demographics (age, gender, employment status) and comorbid conditions, as well as geographic and socioeconomic measures such as residing in an urban area and the median household income in the zip code of residence. We used the coefficient estimates from the negative binomial models to obtain the predicted annual number of visits, hospitalizations and procedures per person for the three years prior to initiation of a biologic, the year of initiation, and three years post-initiation.

RESULTS

Tables 1 presents summary statistics for the sample of RA patients, separately for users and non-users of biologic agents. Users of biologics were slightly younger than non-users (58 vs. 62 years), more likely to be married and actively working. More than 70 percent of all RA patients were female. The prevalence of comorbid conditions varied across the two groups, with higher prevalence of hypertension, heart disease and osteoarthritis among non-users and higher rates of asthma among biologic users.

Table 1.

Sample Characteristics of Patients with Rheumatoid Arthritis, 1997–2005.

	Use of Biologic Agents
	Non-Users		Users
	Mean	Std. Dev	Mean	Std. Dev
Patient Demographics
Age (years)	62	16	58	13
Male	28	45	25	43
Married	63	48	69	46
Working	29	45	36	48
Primary Beneficiary	63	48	60	49
Median HH Income ($)	42,327	9,449	42,324	9,699
Comorbid Conditions
Anemia	9	28	9	29
Asthma	3	17	4	19
Cancer	7	25	6	23
Depression	5	22	4	19
Diabetes	9	29	7	26
Heart Disease	16	37	11	31
Hyperlipidemia	7	26	5	21
Hypertension	26	44	19	39
Kidney Disease	10	31	10	30
Osteoarthritis	18	38	12	32
Person-years	79,793		12,867

Table 2 presents similar statistics for the sample of MS patients. The average person with MS was young (mean=47 years), as one would expect given the prevalence profile. MS patients who used a biologic were more likely to be female, married and a primary beneficiary. Although MS patients taking a biologic tended to be at a more advanced stage of disease, they did not have higher rates of comorbid conditions. The prevalence of hypertension, diabetes and heart disease was similar or modestly higher among non-users of biologics.

Table 2.

Sample Characteristics of Patients with Multiple Sclerosis, 1997–2005.

	Use of Biologic Agents
	Non-Users		Users
	Mean	Std. Dev	Mean	Std. Dev
Patient Demographics
Age (years)	46	22	48	10
Male	32	47	23	42
Married	54	50	69	46
Working	53	50	56	50
Primary Beneficiary	46	50	60	46
Median HH Income ($)	45,546	11,343	44,162	10,395
Comorbid Conditions
Anemia	5	21	5	22
Asthma	3	18	2	14
Cancer	4	19	3	16
Depression	6	24	8	27
Diabetes	6	23	4	18
Heart Disease	7	26	4	19
Hyperlipidemia	4	19	3	18
Hypertension	12	32	10	30
Kidney Disease	6	23	6	23
Osteoarthritis	3	18	2	15
Person-years	15,294		9,806

Regardless of their drug therapy, treating patients with these conditions was clearly expensive. Table 3 shows the distribution of total and out-of-pocket health care expenditures for RA and MS patients, by service type. Mean annual spending for RA patients exceeded $18,000 per year, with 10 percent of patients incurring costs of $45,000 or more. Average spending for MS patients was modestly lower ($14,278).

Table 3.

Annual Distribution of Total and Out-of-Pocket Spending for RA & MS Patients

RA Patients	Total Spending ($)				Out-of-Pocket Spending ($)
Type of Service	Mean	S.D	90th Percentile	95th Percentile	Mean	S.D.	90th Percentile	95th Percentile
Inpatient	5,318	23,101	15,054	33,811	1,672	9,708	762	7,610
Outpatient	6,481	11,902	15,290	22,308	1,741	5,627	3,891	7,033
Rx Drugs
Biologics	1,757	5,792	6,887	13,816	109	910	52	272
Non-biologics	674	1,553	1,674	2,710	120	408	285	485
Non-RA drugs	4,277	10,179	8,842	14,516	877	3,129	1,727	2,808
Total	18,506	32,900	44,926	67,563	4,518	13,222	9,061	18,971

MS Patients	Total Spending ($)				Out-of-Pocket Spending ($)
Type of Service	Mean	S.D	90th Percentile	95th Percentile	Mean	S.D.	90th Percentile	95th Percentile
Inpatient	3,261	19,546	3,816	15,891	1,069	10,290	157	1,366
Outpatient	4,311	9,655	10,970	16,357	1,187	3,704	2,475	4,506
Rx Drugs
Biologics	3,546	7,487	13,773	17,100	125	1,652	233	432
Non-biologics	202	4,768	32	155	48	2,870	10	36
Non-MS drugs	2,958	8,442	7,022	10,668	644	3,803	1,322	2,100
Total	14,278	29,692	33,482	48,704	3,073	13,871	4,859	9,250

Annual spending in 2004–2005, in 2005 dollars.

Despite the high costs of treating these conditions, the financial burden faced by these patients was generally modest. Mean out-of-pocket spending ranged from about $3,000 per year for MS patients to $4,500 per year for persons with RA. All of the patients in our study sample were privately insured through large employers, so one would expect their drug coverage to be generous. Nonetheless, some individuals were still at-risk for substantial out-of-pocket spending. For example, 10 percent of RA patients had out-of-pocket costs that exceeded $9,000 per year and 5% incurred costs of $19,000 or more. Patients with MS were at less financial risk, with a 95th percentile of $9,250 in out-of-pocket costs.

The use of a biologic increased total expenditures and shifted the distribution of health care spending. Spending on pharmaceuticals represented just 20% to 30% of total health care expenditures in the years prior to using a biologic, but rose to 60% to 70% of total spending in the years after initiation (Table 4).

Table 4.

Distribution of Total Spending, Pre- and Post-Initiation of a Biologic^*

	Percent of Total Spending RA Patients		Percent of Total Spending MS Patients
Service Type	Pre-Initiation	Post-Initiation	Pre-Initiation	Post-Initiation
Inpatient	29.5	17.0	29.6	11.3
Outpatient	40.2	23.0	42.4	21.2
Prescription Drugs	30.3	59.9	27.9	67.6

^*Among patients who started a biologic for the treatment of RA or MS. All figures are in percentages.

Figures 1 and 2 summarize findings from the multivariate models that control for differences in demographic attributes, health risks, and area characteristics between users and non-users of biologic therapies. RA patients averaged 10 to 11 physician visits per year prior to initiating a BRM and about 8 visits per year within two years after initiation (Figure 1). Use of expensive procedures increased markedly in the year of initiation, presumably due to a flare up that often precipitates the use of a biologic. The number of procedures then declined post-initiation and remained slightly below pre-initiation levels three years later. The use of a biologic did not alter the rate of hospitalizations for RA patients, but that was expected given the pathology of the disease. If untreated, RA can lead to progressive joint damage that may require surgery, but for the most part, the primary manifestations of the disease (inflammation, joint pain, disability) are typically treated in ambulatory settings and borne by the patient.

Figure 1.

Predicted Use of Medical Services Before and After Use of a Biologic for Patients with RA*

* For the sample of patients who started a biologic for the treatment of RA.

Figure 2.

Predicted Use of Medical Services Before and After Use of a Biologic for Patients with MS*

* For the sample of patients who started a biologic for the treatment of MS.

By contrast, acute exacerbations of MS can lead to hospitalization. We found that use of a biologic in the treatment of MS was associated with a considerable decline in the number of hospitalizations and use of expensive procedures within three years of initiation. The mean number of hospitalizations fell from about 0.5 per patient, per year before initiation to 0.3 within 3 years after initiation. Similarly, the number of expensive procedures declined by about one-third within several years of starting a biologic. The use of immunomodulatory therapy was associated with an increase in the number of physician visits during the year of initiation, but returned to pre-initiation levels in subsequent years (Figure 2).

Given the episodic nature of these conditions, one possible explanation for a reduction in service use post-initiation is “regression to the mean”. This is a particular concern for MS, where recovery from a remission can be nearly complete in the early stages of disease. To test this, we re-estimated the models for a subgroup of patients who were diagnosed with RA or MS at least two years prior to initiating a biologic. The longer baseline period should provide a more stable measure of resource use prior to starting a biologic.

For both RA and MS, the reductions in use were robust to this specification change. For patients with RA, the number of physician visits and use of expensive procedures were stable prior to initiation and declined in the years after starting a BRM. For MS, the number of hospitalizations and expensive procedures were fairly constant in the three years prior to initiation and declined substantially after initiation (Results available upon request).

DISCUSSION

This study examined whether initiation of a biologic agent to treat two autoimmune disorders – rheumatoid arthritis and multiple sclerosis – affects use of other medical services. Although biologic agents for RA and MS have been shown to slow the progression of the disease for some individuals, they are considerably more expensive than traditional therapies and not appropriate, nor well tolerated by all patients.

We found that starting a biologic for the treatment of RA or MS was associated with lower use of some types of medical services within two to three years of initiation. Starting a BRM was associated with a reduction in physician visits and use of expensive procedures for patients with RA, whereas use of immunomodulatory therapy for MS was associated with a reduced number of hospitalizations and expensive procedures. While these results were robust to specification changes and alternative methods of estimation.

A full regimen of biologic agents for these conditions can easily cost $15,000 or more per year. Thus, while they may reduce other types of service use, the savings do not come close to offsetting the full cost of these drugs. This raises an important policy debate that typically pits payers against patients and their doctors – to what extent should treatments pay for themselves? Requiring evidence that a treatment reduces costs somewhere else in the system – regardless of the clinical benefit – alters the fundamental rational for medical care from improving health to reducing costs.¹⁶ Since RA, and MS in particular, affect individuals during their prime earning years, the major costs of these illnesses are borne by the patients and their families through decrements in functionality and quality of life, lost income and the need for informal care giving. For example, less than half of those with RA continue to work after 10 years with the disease.¹⁷ As such, making coverage decisions based solely on the extent of medical cost savings is shortsighted from a social perspective.

Virtually all of the costs of caring for patients with these conditions are the result of relapses and often irreversible disease progression. While use of biologics have been shown to delay disease progression and reduce disability, not all patients with RA or MS are at risk for joint damage and disability. As a result, not all patients need to be treated aggressively. For example, only one-quarter of RA patients in our sample ever used a BRM. Such heterogeneity creates an opportunity to reevaluate which patients are most likely to benefit from these therapies and to improve the response and long-term outcomes associated with treatment.¹⁸

Our analysis has several limitations. First, we could not estimate changes in disease-related service use due to the inherent limitations of claims data. Prior work has shown that many MS-related services cannot be reliably identified with ICD-9 codes.¹³ Second, we categorized patients as users of biologics once they initiated therapy, but excluded them from the analysis once they had stopped therapy altogether. As such, our results reflect potential cost-offsets associated with continuous therapy, which is clearly distinct from an intent-to-treat analysis. Third, we could not measure the severity of disease using claims data. However, reestimating the models for a subgroup of patients diagnosed at least two years prior to starting biologic therapy did not change our results.

Given the high cost of many specialty drugs, insurers would be better off finding ways to manage utilization so only patients who would benefit will get access to them, rather than restricting access through high patient cost-sharing or formulary requirements designed to deter use by all patients, regardless of clinical need. Management of these drugs may rightly focus on making sure only patients who will most benefit receive them and then monitoring their progress closely. But once such patients are identified, it makes little sense to limit coverage.

Summary.

Initiating a biologic for RA or MS was associated with lower use of some types of medical services within two to three years of initiation.

Take-away Points.

Newer biologic treatments for rheumatoid arthritis and multiple sclerosis can offer significant therapeutic benefits, but at substantially higher costs than traditional therapies. Payers are demanding more information on the overall value of these therapies in making coverage decisions.

• Starting a biologic for the treatment of RA or MS was associated with lower use of some types of medical services within two to three years of initiation.

• While biologics may reduce other types of service use, the savings do not come close to offsetting the full cost of these drugs.

• Health plans may rightly focus on making sure only patients who will most benefit receive them. But once such patients are identified, it makes little sense to limit coverage.