Which prescription drug policies control patient costs?

Dr. Kai Yeung and family

Americans worry about medication and health care costs. Dr. Kai Yeung studies policies and laws to reduce them.

Reducing health care costs, especially for prescription drugs, is strongly supported by about 80% of Americans. Kai Yeung, PharmD, PhD, a Kaiser Permanente Washington Health Research Institute (KPWHRI) assistant investigator, studies the impact of policies that aim to maximize benefits and minimize spending among patients and health plans for health care and prescription medications.

Dr. Yeung’s recent New England Journal of Medicine paper looks at the effects of state laws that cap patient payments for high-cost specialty drugs, for example for hepatitis C, multiple sclerosis, or rheumatoid arthritis. His coauthors are Douglas Barthold, PhD, and Anirban Basu, PhD, from the University of Washington and Stacie B. Dusetzina, PhD, from Vanderbilt University.

Dr. Yeung answers questions about the study, his research goals, and why he chose a career studying pharmaceutical economics.

How did you decide on a career studying health economics?

I went to pharmacy school at the University of Southern California, which has a strong emphasis on population-level thinking. There, I met Dr. Mirta Millares, a pharmacist who ran Kaiser Permanente’s drug information services department.

She took a chance on a first-year pharmacy student, providing me with an internship and my first exposure to how evidence-based decisions can positively affect patient medication use and spending. As a student, I explored many different aspects of pharmacy, including working in retail, at a county hospital, and in specialty departments for cancer, pediatrics, cardiology, and renal transplantation. I also joined research teams at government agencies such as the U.S. Food and Drug Administration and the drug manufacturer Allergan.

Having seen the perspectives of patients, clinicians, researchers, drug manufacturers, and the government through these experiences, I became acutely aware of the need for better economic evidence and for better application of such evidence to guide decision-making about prescription medications.

After getting a PhD from the University of Washington School of Pharmacy, I joined KPWHRI. I liked the structure of Kaiser Permanente Washington and KPWHRI. On the care delivery and payment side, Kaiser Permanente is nonprofit and has a capitated system, meaning providers are paid by how many members they care for instead how many procedures they order. This motivates providers and the health plan to keep members healthy, so the focus is on delivering the right kind of care.

In research, KPWHRI is a highly talented, passionate and collaborative group working with extensive data on a diverse set of questions. We’re all oriented around the mission of improving health and health care for all. Together, Kaiser Permanente Washington and KPWHRI have great potential for being a learning health system where research, care delivery, and payment can improve one another.

What did you discover in your NEJM study?

Our study looked at what happens when states make laws that limit monthly out-of-pocket payments for patients with commercial insurance who take expensive specialty medications. Examples are antiviral drugs for hepatitis C and antibody therapies for multiple sclerosis or rheumatoid arthritis that can cost $600 a month or more. The laws limit patient out-of-pocket costs to $150 a month or less.

People worried that if patients paid less, costs to health insurance companies would increase enough that they’d raise premiums for everyone. We compared three states (Louisiana, Maryland, and Delaware) that enacted caps with similar neighboring states that did not (Arkansas, Virginia, and New Jersey).

We found that when we compared states with and without the laws, capping patient out-of-pocket costs for specialty drugs did not change patient medication use. However, the laws were associated with $351 less in costs per month for patients at the highest levels of out-of-pocket spending (95th percentile).

For health plans, we found their costs didn’t meaningfully change. That’s probably because patients using specialty drugs who are at the highest levels of spending are a small proportion of the plans’ populations.

What else are you working on—including outside of research?

In general, I study which policies help insurance work the way it is supposed to: protecting us from the burden of especially costly care by spreading financial risks over a large population. Our NEJM study shows that state laws that cap patient costs for very expensive specialty drugs may promote that function of insurance.

Other projects that my colleagues and I are working on are the costs and cost-effectiveness of interventions such as treatment for opioid use disorder in primary care, and telehealth interventions to treat pain-related insomnia. I am also studying the effects of rebates that pharmaceutical companies offer to patients, and the impact of policies that encourage people to use generic and other low-cost but effective medications.

When I’m not at work, I’m usually with my family. Two of our favorite activities are reading together and getting towed in the bike trailer by Dad (me). Thankfully both activities are available during the current pandemic.​​​​​​