A few years after Art Pistey received a multiple sclerosis diagnosis, his neurologist prescribed a promising new drug.
Sold under the brand name Ocrevus, the immunosuppressive drug had shown the ability in clinical trials to keep the unpredictable disease of the central nervous system at bay. MS has no cure.
The drug’s regimen called for Pistey, a longtime Upper Valley chiropractor, to go to Alice Peck Day Memorial Hospital’s emergency department once every six months for an intravenous infusion that takes most of a day.
It’s a relatively painless process (except for the getting-stuck-with-a-sharp-needle part). While the drug drips slowly into his bloodstream through an IV in his arm, Pistey passes the time reading a book. Afterward, he drives himself home to Canaan.
But before his initial treatment, Pistey received a call from an APD pharmacist.
“Do you know much this stuff costs?” Pistey recalled the pharmacist asking. “You can’t possibly afford it out of pocket.”
The drug’s list price: $32,500 per dose.
“The (APD) pharmacist wouldn’t even order it until I verified my insurance would pay for it,” Pistey told me.
Pistey’s private insurer, Blue Cross Blue Shield of Vermont, had already agreed to cover the bulk of the cost of ocrelizumab, the drug’s scientific name.
Pistey recently showed me his medical bills for the last couple of years. For the dose of Ocrevus that he received on June 28, 2018, Blue Cross paid about $22,500 to APD. Pistey’s out-of-pocket cost came to about $3,700.
The total tab for Ocrevus: $26,260, which was about $6,000 less than the drug’s list price. It’s likely that Blue Cross had negotiated a discount with Ocrevus’ manufacturer. (A Blue Cross spokeswoman said she would get more details for me, but I didn’t hear back.)
Now fast forward to July 9, 2019, when Pistey returned to APD for another of his twice-a-year Ocrevus infusions.
By this time, Pistey had turned 65, making him eligible for Medicare, the federal government’s health plan for older Americans. Pistey had also purchased private supplemental insurance to help with bills that Medicare didn’t totally cover.
In October, a few months after the infusion, Pistey received a Medicare “summary notice” of APD’s charges.
For a single dose of Ocrevus, APD had charged — and Medicare had approved — $178,750.
In one year, the line item for Ocrevus given on Pistey’s APD bills had gone from $32,500 to $178,750 — a 450% increase.
Michael Schroeder, who covers health care for Angie’s List Magazine, a consumer publication, wrote on the website healthjournalism.org that “so-called list prices routinely run many times higher than what’s actually paid by the insurer and patient. The amount inked on paper or quoted typically bears little resemblance to the money actually changing hands.”
That was certainly true in Pistey’s case. His Medicare statement showed the government didn’t fork over anything close to $178,750. Medicare paid $80,581.
Medicare also informed Pistey that he could be hit with up to $35,750 in out-of-pocket costs, which would bring the total amount for one dose of Ocrevus to more than $116,000. This is the same drug that cost about $26,000 a year earlier, including nearly $4,000 paid by Pistey.
Fortunately, Pistey’s supplemental policy, which is through American Retirement Life Insurance, a subsidiary of Cigna, paid the $35,750 that he could have been held responsible for.
Pistey is aware that many older Americans on fixed incomes can’t afford supplemental insurance, which can run into thousands of dollars a year, to help cover costs not picked up by Medicare.
Without the additional coverage, Pistey said, “I’d go broke.”
Or worse. The twice-a-year infusions of Ocrevus are keeping his MS in check. He’s able to continue his chiropractic practice, treating patients three days a week at his office in White River Junction, and remain physically active. On a recent Saturday, he stacked a cord of wood. A recent MRI turned up no signs that his MS was progressing, he said.
Before Pistey started the Ocrevus infusions, “I was going rapidly in the wrong direction,” he said. “Now everything is working out.”
Still, he’s left wondering how the tab for Ocrevus could leap from $26,000 to $116,000 in one year.
Where did that additional money go? Did it all end up in the drug manufacturer’s pocket? Did APD get a cut?
I shared Pistey’s billing statements with APD. Based on those documents, “it appears we did not follow our own pricing and billing policy for this drug and this patient: we erroneously billed gross charges in 2018 that were less than one-half of what should have been billed,” Peter Glenshaw, vice president of external affairs wrote in an email.
In other words, it’s not that APD billed Pistey too much in 2019; it’s that it didn’t bill him enough in 2018.
In 2019, APD converted to an automated billing system and “one of the benefits of this transition is that human error in the manual billing process is avoided,” Glenshaw wrote.
He called Pistey’s case an “extreme outlier” and APD’s “analysis shows that utilizing the (automated billing system) has been successful in lowering the charges of drugs and pharmaceuticals to APD patients and insurers.”
A spokesman for Medicare’s regional office in Boston told me that a financial management specialist with the Centers for Medicare and Medicaid Services would “reach out” to Pistey this week to review his billing statements.
Pistey is believed to be among the first MS patients in the Upper Valley to receive Ocrevus, which the Food and Drug Administration approved in March 2017.
The drug is “thought to help slow down nerve damage, reduce the number of relapses, and delay disability,” states a Medicare website. About 400,000 Americans have MS. Its cause is unknown.
Pistey was approaching age 60 when he began having difficulty with his balance and walking. “My legs would turn to rubber,” he said.
One medical test led to another. An MRI showed lesions on his brain and spinal cord, which led to the MS diagnosis.
Finding medication that was effective and didn’t have serious side effects was a challenge — until Ocrevus came onto the market.
Ocrevus’ manufacturer, Genentech, a biotechnology company based in San Francisco, is owned by the Swiss pharmaceutical giant Roche.
At the time of Ocrevus’ FDA approval, Genentech said it would charge a list price of $65,000 for two infusions of the drug a year, which lines up with the figures on Pistey’s medical bills of $32,500 each.
I brought up Pistey’s case with Genentech. The company set the price of Ocrevus to “reduce cost as a barrier to treatment,” a company spokesman said in an email. The drug’s current list price remains at $65,000 a year, he said. Like many drug manufacturers, Genentech offers assistance to some needy patients.
More than 150,000 people worldwide have been treated with Ocrevus in “clinical trial and real-world settings.”
In July, Roche reported that Ocrevus’ sales had topped $1.7 billion worldwide during the first six months of 2019.
In late January, Pistey underwent another infusion, his first since last July. This time, he was sent to Dartmouth-Hitchcock Medical Center. Pistey said he was told that APD doesn’t do Ocrevus infusions any more. APD and DHMC are both part of the Dartmouth-Hitchcock system.
He’s still waiting for the bill.
For the last couple of weeks, I’ve been asking people a lot smarter than me about prescription drug pricing. And, specifically, how the cost of Ocrevus could jump $90,000 in one year when the only noteworthy change was a patient switching from private insurance to Medicare.
Not that I was expecting one, but there’s no simple or single explanation. Health policy analysts who I talked with speculated it could have to do with how Medicare classifies so-called Part B drugs (see sidebar) or the bargaining power of private insurers.
One thing does stand out, however.
In the current U.S. health care system, private insurers — or pharmacy benefit management companies working on their behalf — negotiate prices with drug makers, which can lead to steep discounts for them and their customers.
Because they can refuse to cover a drug if the drug manufacturer doesn’t agree to price concessions, private insurers have a fair amount of bargaining power.
Medicare doesn’t have the same latitude.
A Nov. 2, 2019, New York Times editorial, which ran under the headline, “The American Way of Paying for Drugs Isn’t Working,” explained what Medicare is up against.
“Existing laws require the Medicare program to cover most drugs, no matter how much they cost, and prevent the federal government from using the full weight of its purchasing power to negotiate the best possible deal for its beneficiaries,” the Times wrote.
Last February, pharmaceutical executives appeared before the Senate Finance Committee to answer questions about how drugs are priced.
Sen. Maggie Hassan, a New Hampshire Democrat, sits on the committee and heard their explanations. “I feel like I need a Ph.D. in prescription drug pricing to understand how the heck this industry works,” she quipped.
I think it’s fair to say that Hassan was speaking for many Americans, myself included.
But one thing is clear: The way drug pricing currently works — or doesn’t work — is a prescription for endless vexation.
Jim Kenyon can be reached at jkenyon@vnews.com.
