Getting Insurance Coverage
for a
Newly Approved Drug
Christin L. Engelhardt
First things first
Before a physician can legally prescribe a
drug for a patient, the drug must be
approved by the Food and Drug
Administration (FDA).
– Until a drug is approved by the FDA, it cannot
legally be given to anyone except through an
approved clinical trial or through a drug
manufacturer’s compassionate-use program
approved by the FDA.
First things first (cont’d)
When the FDA approves a drug, it is approved
for certain conditions or indications. Those
indications are noted on the label to be included
with the drug.
– The FDA approves the language in the label; that is,
the FDA approves every word written on the label.
No matter what the drug’s label says, a
physician can legally prescribe the drug for any
reason.
– This is called prescribing the drug off-label.
– However, you may not be able to get insurance
coverage for using the drug off-label.
First things first (cont’d)
If the product is considered to be a
“supplement” instead of a drug, it does not
need to be approved by the FDA.
– However, supplement manufacturers cannot
claim that the supplements are intended to
treat a disease or disorder.
– As a rule, supplements are not covered by
third-party payers (although vitamins may be
covered in certain circumstances).
First things first (cont’d)
Third-party payers include the following:
– private insurance companies,
– public insurance programs like Medicare
and Medicaid,
– the Veterans Administration, and
– State Pharmacy Assistance Programs
(SPAPs).
Getting the Drug to Patients
After FDA Approval
Once the FDA approves the drug for a
specific indication or indications, the drug
then gets an NDC (National Drug Code)
number.
– Information about NDC numbers is on the
FDA’s website at
http://www.fda.gov/cder/ndc/.
Getting the Drug to Patients
After FDA Approval (cont’d)
The drug manufacturer begins to
produce the drug based on the
expected market.
– This process may take some time.
– Ingredient availability can be a problem
and cause delays, especially with
biologic drugs.
Getting the Drug to Patients
After FDA Approval (cont’d)
If the drug is to be administered or
given through a procedure such as an
infusion and is to be covered by a thirdparty payer, there must be a Current
Procedure Terminology (CPT) code in
order to process the claim for
administering the drug.
– A physician may be able to use an existing
code or a miscellaneous code for the new
drug.
Getting the Drug to Patients
After FDA Approval (cont’d)
If there is no code that can be used
for the infusion of this new drug, a
new CPT code is needed.
– There must be an application, usually
made by the drug manufacturer, to
request a CPT code from the American
Medical Association.
Getting Coverage for the Drug
After FDA Approval
Once the drug is approved, gets to
physicians and/or pharmacists, and
has a CPT code if needed, a thirdparty payer will not necessarily
automatically pay for it: third-party
payers may need to make a decision
about covering the drug or not.
Coverage by a Third-Party Payer:
Medicare
Medicare is a federal health insurance
program for all US citizens and legal
residents who have resided in this country
for a continuous period of five years who
either:
– are age 65 and older, or
– are under age 65 and
Coverage by a Third-Party Payer:
Medicare (cont’d)
– are under age 65 and
have received Social Security Disability Insurance
(SSDI) (and in some cases, Social Security
Insurance) benefits for at least two years, or
have been diagnosed with end stage renal disease
(ESRD) and who have received kidney dialysis for
at least three months or who have received a
kidney transplant (Medicare eligibility begins the
month of the transplant), or
have amyotropic lateral sclerosis (ALS, also known
as Lou Gehrig’s disease) and who receive SSDI
benefits (Medicare eligibility begins the month of
SSDI eligibility).
Coverage by a Third-Party Payer:
Medicare (cont’d)
There are different parts to Medicare:
– Medicare Part A pays for in-hospital treatment,
– Medicare Part B pays for out-patient services such as
physician office visits and some medications, and
– Medicare Part D (a new optional program) provides
prescription drug coverage, through private insurance
plans, to Medicare beneficiaries who enroll in a plan.
Part D plans cover many but not all prescription drugs and in
fact, by law, can not cover certain categories of drugs.
Not everyone on Medicare has all parts.
Some Medicare beneficiaries belong to a
Medicare Advantage plan (Part C) which
combines Parts A and B and usually D as well.
Coverage by a Third-Party Payer:
Medicare (cont’d)
Medicare Part A typically pays for any
FDA-approved drug that the physician
prescribes for an FDA-approved indication
that you receive as an in-patient.
Prescription drugs that are covered by
Medicare and that are not given to you as
an in-patient fall under Part B or Part D.
– Whether or not a drug should be covered
under Part B or Part D can be complicated.
Coverage by a Third-Party Payer:
Medicare
The Centers for Medicare and Medicaid
Services (CMS) determines what drugs are
covered under Part B and what under are
covered under Part D.
– If you can take the drug on your own without any
medical equipment, it is likely to be Part D but not
always.
Examples of Part B drugs include drugs that a physician
must inject, drugs that a physician must give to you through
an IV, and certain oral anti-cancer drugs.
Note: the rules are slightly different if you live in a
nursing home.
Coverage by a Third-Party Payer:
Medicare
Newly approved drugs are assumed
to be Part D until the Center for
Medicare and Medicaid Services
determines that the drug will be
covered under Part B.
Coverage by a Third-Party Payer:
Medicare
Medicare Part B typically pays for any
FDA-approved drug that a physician
prescribes for an FDA-approved indication
that the physician must give to you in an
out-patient setting.
Coverage by a Third-Party Payer:
Medicare (cont’d)
However, before Medicare pays for some new
services or drugs under Part A or B for the first
time, Medicare may require a new coverage
determination (national or regional) for it.
– Information about National Coverage Determinations
(NCDs) and Local Coverage Determinations (LCDs)
is on the website of the Center for Medicare and
Medicaid Services at
http://www.cms.hhs.gov/DeterminationProcess/
While Medicare of course covers only Medicare
beneficiaries, Medicare coverage policy
influences coverage decisions of private
insurance as well.
Coverage by a Third-Party Payer:
Medicare (cont’d)
For Part B drugs, Medicare beneficiaries in
traditional Medicare, after meeting any
deductible, typically pay 20% of the charges outof-pocket if the health care provider accepts
what Medicare pays him/her (i.e., if he/she
accepts assignment).
“Accepting assignment” means that the provider
accepts Medicare’s approved amount (the
allowable fee) and does not require you to pay
the amount that Medicare does not cover.
Coverage by a Third-Party Payer:
Medicare (cont’d)
For example, the doctor charges $200 for a
procedure but Medicare allows only $160. If the
doctor accepts assignment, he/she receives 80%
of $160 from Medicare and 20% of $160 ($32)
from you and writes off the $40 difference. If the
doctor does not accept assignment, you have to
pay 20% of $160 ($32) plus the $40 difference.
If you are in traditional Medicare and have a
Medigap policy (or other supplemental insurance
as an employee or retiree), the supplemental
insurance may cover the co-insurance and
deductible.
Coverage by a Third-Party Payer:
Medicare (cont’d)
If the physician does not accept
assignment from Medicare, the physician
can charge you up to 115% of Medicare’s
approved amount.
– You then file a request with Medicare to be
reimbursed for some of the charges, and
Medicare will pay to you 80% of what its fee
schedule allows.
If you are in traditional Medicare and have a Medigap policy
(or other supplemental insurance as an employee or retiree),
the supplemental insurance may cover the 20% co-insurance
and deductible.
Some Medigap policies also cover all or most of the “Part B
excess charges.”
Coverage by a Third-Party Payer:
Medicare (cont’d)
For Part B drugs, charges for any supplies should be
included with the charge for the drug.
– Providers of medical equipment and supplies, however, have no
limits on what they can charge if they do not accept Medicare
assignment.
Remember, if you have traditional Medicare, a few
Medigap policies can help cover out-of-pocket Part B
charges.
– There are several different types of Medigap policies that offer
different coverage and benefits.
The Medigap rules are slightly different for Massachusetts,
Wisconsin, and Minnesota.
– Information about Medigap policies is on the website of the
Center for Medicare and Medicaid Services at
http://www.medicare.gov/medigap/default.asp.
Coverage by a Third-Party Payer:
Medicare (cont’d)
Medicare beneficiaries in Medicare Advantage
plans will pay according to the Medicare
Advantage plans for Part B drugs.
– Generally you have to go to a provider in the plan’s
network to have the Medicare Advantage plan cover
the drug.
– If the drug is a Part B drug, the Medicare Advantage
plan must cover it.
– A Medicare Advantage plan that also provides
Medicare prescription drug coverage (Part D) is called
an MA-PD and can cover B drugs as D if it chooses.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with Part D
If the drug falls under Medicare Part D and you
have Part D, the Part D plan may or may not
include the new drug on its formulary.
– A plan’s pharmacy and therapeutics (P&T) committee
will decide if the plan will cover the new drug or not.
The P&T committee will look at the class of drugs to
which the new drug belongs and determine whether or
not it must cover this new drug.
The P&T committee must keep in mind that the law
requires Part D plans to cover "all or substantially all"
drugs that are in certain categories: anti-depressants,
anti-psychotics, anti-convulsants, anti-cancer, immunosuppressants, and drugs to treat HIV/AIDS.
– If the plan is not required to cover the drug, the P&T
committee will then look at the drug’s effectiveness and
at what other formulary drugs can be used to treat the
condition for which the new drug is prescribed.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with Part D (cont’d)
Even if the drug is on the formulary, it
may be subject to utilizationmanagement tools such as prior
authorization, quantity limits, and step
therapy.
– “Utilization-management tools” are
designed to manage your use of the
drug: you go through hoops to get the
drug.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with Part D (cont’d)
If the drug is not on the plan’s formulary,
you can ask the plan for an exception.
If the plan does not give you an exception,
you can file an appeal.
– This may be taken care of quickly if the doctor
requests an expedited re-determination but
can be a difficult process with several steps.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with Other
Drug Coverage
If the drug falls under Part D and you do not
have Medicare Part D but other drug coverage,
your other drug plan may pay for this drug.
Your other drug coverage may also have a
formulary and may or may not include the new
drug on its formulary.
– Even if the drug is on the formulary, it may be subject
to utilization-management tools such as prior
authorization, quantity limits, and step therapy.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with Other
Drug Coverage (cont’d)
If the drug is not on the formulary, you can
follow the plan’s rules to request that the
plan cover it.
– Typically you will have to file an appeal.
– This can be a difficult process and can take a
while.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with No Drug
Coverage
If the drug falls under Part D and you do
not have Medicare Part D or any other
drug coverage, you may qualify for
assistance from the drug’s manufacturer
or from another source of coverage such
as a State Pharmacy Assistance Program.
– Eligibility for manufacturers’ programs is more limited
because Medicare beneficiaries do have access to
Part D, so you may want to investigate enrolling in
Part D when enrollment is open to you.
Coverage by a Third-Party Payer:
Medicare Beneficiaries with No
Drug Coverage (cont’d)
If you do not have any drug coverage and
do not enroll in Part D during the initial
enrollment period of November 15, 2005
to May 15, 2006, the next time you may
enroll in Part D is during the annual open
enrollment period of November 15 to
December 31.
– You will probably pay a premium penalty for as long
as you have Part D.
– When enrolling in Part D, be sure to choose a plan
carefully so that you get a plan that covers as many
drugs that you need as possible.
Coverage by a Third-Party Payer:
Medicaid
Medicaid is a federal entitlement health
insurance program; both the federal and state
government pay for the Medicaid program.
Beneficiaries who apply for Medicaid must prove
that they are eligible, based on their income and
assets or resources (financially eligible) and
situation (category eligible).
Medicaid pays for certain health services such
as physician visits and prescription drugs for
low-income children and their parents or
caretaker relatives; low-income people with
disabilities and low-income adults age 65 and
older. Medicaid also pays for nursing home care
for qualified low-income adults.
Coverage by a Third-Party Payer:
Medicaid (cont’d)
As of January 1, 2006, people who have
both Medicare and full Medicaid (full
duals) receive most of their prescription
drugs through Medicare Part D.
– Duals still have Part B drugs paid for through
Part B rules.
– Medicaid can still cover, for full duals, drugs
that by law cannot be covered by Part D.
Coverage by a Third-Party Payer:
Medicaid (cont’d)
Medicaid typically pays for any FDAapproved drug that the physician
prescribes for an FDA-approved indication
that you receive as an in-patient or outpatient.
Some states, however, have recently
decided to limit Medicaid’s prescription
drug coverage and do not cover all drugs
for all Medicaid beneficiaries.
Coverage by a Third-Party Payer:
Medicaid (cont’d)
Many states, while covering all drugs (except
possibly those that states are not required to
cover), make it harder for beneficiaries to get
certain drugs through utilization-management
tools such as
– quantity limits,
– step therapy where you must “fail first” on less
expensive medications, and
– prior authorization for drugs not on a “preferred” list.
Prior authorization may be more difficult to get
when the drug is prescribed for an off-label use
and not for its approved indication.
Coverage by a Third-Party Payer:
Private Insurance
There are two types of private insurance:
group and individual insurance.
– Group insurance is often offered by employers.
Group insurance plans can be fully insured or self-insured.
– With fully insured plans, the employer or union that offers the
health insurance pays a premium to an insurance company
which has the responsibility to pay all claims the insured
members submit to them.
– With self-insured group plans, the employer or union that offers
the health insurance is its own insurer and is responsible for
paying all claims the insured members submit to them.
A self-insured plan may uses an insurance company to run
the plan (to set up a provider network, to process claims,
etc.)
– Individual insurance is typically purchased on
your own.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
Coverage by private insurance depends
first upon what type of policy you have.
– Think of an insurance policy as a stereo:
sometimes you buy one with the 5-CD player,
radio, turntable, and tape player, and
sometimes you buy one with just a 1-CD
player and radio.
– Sometimes certain coverage is required or
mandated by state or federal law.
For example, several states require insurance
companies to pay for diabetic supplies, including
certain medications.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
The policy may have specific exclusions
and not cover certain types of care such
as all or certain prescription medications,
cosmetic surgery, sleep disorders,
transplants, durable medical equipment,
and eating disorders.
– Look at your entire policy to see what is
covered: do you have any drug coverage?
If so, see if any types of drugs are not covered.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
If your insurance policy excludes
prescription drug coverage (a major
medical policy), your plan should still cover
certain drugs under major medical if your
diagnosis justifies or calls for that
coverage.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
When a drug is newly approved, private
insurance companies often must decide
whether or not to cover it.
– Once a drug is approved, the manufacturer
may meet with many insurance companies to
discuss how the drug works and to explain the
costs and benefits of the drug.
Private insurance companies often follow
Medicare’s coverage decisions but do not
have to do so.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
Your insurance policy may have a formulary or
list of drugs that it will cover and may or may not
include the new drug on its formulary.
– A formulary may be divided into preferred drug lists
with different co-pays or co-insurance requirements.
– Even if the drug is on the formulary, it may be subject
to utilization-management tools such as prior
authorization, quantity limits, and step therapy.
If the drug is not on the formulary, you can follow
the plan’s rules to request that the plan cover it.
– Typically you will have to file an appeal.
– This can be a difficult process and can take a while.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
If you have to appeal the denial, understand that
an insurance company may not pay for a drug
that is contra-indicated for you, that is, if the
FDA’s list of contraindications means that the
drug may not be safe for you.
– For example, some drugs are contraindicated for
people with high blood pressure, so if you do NOT
have high blood pressure, note that in your appeal.
The rules for appeals depend on whether your
plan is fully insured or self-insured and whether
you have a group plan or an individual plan.
– Some state laws may affect your appeal as well.
Coverage by a Third-Party Payer:
Private Insurance (cont’d)
If the drug is very expensive and covered by
your policy, you may be protected by the out-ofpocket maximum each year.
– The out-of-pocket maximum (or limit to what you
spend each year on covered benefits) is stated in
your policy and is often at least $1000.
At the same time, if the drug is very expensive,
you may be hurt by the policy’s lifetime limits.
– Any lifetime limits will be stated in your policy and
may be $1,000,000 or more.
Coverage by Miscellaneous ThirdParty Payers: The VA
The Veterans Administration pays for in-patient
and out-patient treatment, including medical
services, as well as prescription medications.
However, "(g)enerally, (medications) must be
prescribed by a VA provider and be available
under VA’s national formulary system" which is
available on www.pbm.va.gov/PBM/menu.asp.
– Information about VA coverage is on the VA’s website
at
www.va.gov/healtheligibility/coveredservices/medical_
benefits_package.asp
If a drug is not on the formulary, physician can
file a prior authorization to get the drug.
Coverage by Miscellaneous ThirdParty Payers: SPAPs
State Pharmacy Assistance Programs
(SPAPs) provide drug coverage or offer
discounted drugs to eligible residents in
the 35+ states that have an SPAP.
– Eligibility often depends upon income (and
sometimes assets or resources) as well as
lack of drug coverage.
Most SPAPs cover only seniors but some
cover those who are disabled and others
who need assistance.
Coverage by Miscellaneous ThirdParty Payers: SPAPs (cont’d)
Some SPAPs have a benefit cap, i.e., there is a
limit to how many drugs you can receive through
the SPAP.
Some SPAPs have “preferred drug lists” (PDLs)
and cover only certain drugs; other SPAPs have
open formularies and generally cover almost any
drug that you take yourself.
– Most SPAPs will not cover drugs that fall into the
category of Medicare Part B drugs (drugs that a
doctor usually must give you).
– SPAPs with PDLs have an appeal process that is
similar to the Medicaid-appeal process.
Appealing Denials of Coverage
No matter what kind of insurance you have, if
your care (or payment for your care) is denied,
you can appeal it.
The rules are different according to the type of
insurance you have.
– Medicare
– Medicaid
– Private insurance
Fully insured plan
Self-insured plan
Note: If you have a private insurance group plan that is fully insured,
you may have additional rights under your state’s laws.
Appealing Denials of Coverage
(cont’d)
If the drug is denied, first see if the denial
is based on coverage (or plan) rules or
medical necessity and then formulate your
arguments accordingly.
– If the denial is based on medical necessity,
you may want to ask for help from an
organization focused on your medical
condition, your health care providers, or other
advocates who understand the medical
reasons your doctor prescribed the drug that
is being denied.
Appealing Denials of Coverage
(cont’d)
– If the denial is based on your plan’s rules, you
may want to ask for help from a consumer
health assistance program (if there is one for
your situation), the state Medicaid agency,
your state’s Department of Insurance, or
another advocate who understands insurance
policies.
There is a State Health Insurance Assistance
Program (SHIP) to help Medicare beneficiaries in
every state, the District of Columbia, Guam, Puerto
Rico, and the Virgin Islands.
Appealing Denials of Coverage
(cont’d)
To find if there is a consumer health
assistance program in your state that can
help you, visit
www.healthassistancepartnership.org/prog
ram-locator/.
Note: this website address may change shortly
and/or may list only State Health Insurance
Assistance Programs (SHIPs) which serve
Medicare beneficiaries.