Four years ago, Mikaela Farasyn thought she may have broken a bone while playing basketball. Then 14, she was an enthusiastic defender on her middle school team, regularly flopping on the ground or wrestling the ball away from opponents.

So when she started waking up each morning in pain, she figured she had cracked her collar bone or broken her arm. At times, the pain was so bad, she could barely sleep.

“I would wake up with this horrible, excruciating pain going down my arms and my shoulders,” she recalled. “So we just assumed I had fractured something.”

Her doctor suspected something else, and sent her to a rheumatologist, who diagnosed Farasyn with pediatric rheumatoid arthritis, an autoimmune disorder in which the body’s immune system attacks and damages the joints.

“I was so shocked. I never, ever, ever, ever heard of anybody (my age) having it. I didn’t even know there was a possibility,” Farasyn, now 17, said. “When I heard arthritis, I thought, like, 60-year-olds, all crinkly in wheelchairs.”

Her doctor started her on prednisone, which helped but caused significant side effects. Her doctor then prescribed methotrexate, part of a go-to class of drugs known as disease-modifying because of their ability to change the course of rheumatoid arthritis and prevent further damage. Again, the drug helped but left her battling the side effects after each injection.

“The next day I’m very nauseated and fatigued,” Farasyn said. “I feel like I need another medication to get rid of what this medication is causing.”

Despite sometimes excruciating pain, Farasyn attends school regularly at Redmond Proficiency Academy, living the life of a normal teen, albeit with pain and limitations. She is a cheerleader, but her joints can’t handle the strain of being at the bottom of a human pyramid. She loves to dance, both jazz and ballet, although she admits it’s difficult to dance on her toes.

“I always fight,” she said. “I fight to do what I want.”

Farasyn’s latest fight, however, is a financial one. Her doctor has recommended she try a biologic drug that has been life-altering for many rheumatoid arthritis patients. This new class of drugs emerged about 10 years ago with monumentally large price tags. Many cost more than $20,000 a year, and increasingly, insurance companies aren’t picking up the full tab.

Unlike lower-cost brand-name or generic drugs that require a fixed dollar amount copayment, insurance companies are putting these expensive biologic drugs into specialty tiers that require patients to pay a percentage of the drug’s cost, anywhere from 20 to 50 percent.

In 2009, more than three-quarters of workers were in private health plans that had specialty tiers, up from 27 percent of workers in 2000.

Patient advocacy groups maintain that such specialty tiers now represent one the biggest gaps in insurance coverage, often blindsiding patients who thought they were protected.

“For most people it’s a shock,” said Amy Melnick, vice president of advocacy for the Arthritis Foundation. “All of a sudden, you get diagnosed with this disease and you think it’s covered. Well, it’s covered, but you have to pay 33 percent of the cost of the drugs, which is going to be $600.”

Limited access

Farasyn is hoping to start a drug called Enbrel, which can often halt the progression of rheumatoid arthritis when disease-modifying drugs aren’t working or are difficult to tolerate.

Biologic drugs are produced from living cells rather than from synthetic chemicals. Enbrel, for example, is made by introducing human DNA into Chinese hamster ovary cells to produce a genetically engineered protein. The process is slow and technically complex, which drives up the cost for biologics.

“They’re extremely effective, and they’re quite well tolerated, but the cost becomes the huge issue,” said Dr. Dan Fohrman, a Bend rheumatologist who has been treating Farasyn.

Kim Farasyn, Mikaela’s mother, said the drug would cost them about $2,400 a month, of which her insurance plan would cover only half. And that’s only after she satisfies a $3,500 deductible.

“That would be like two house payments so she could have two shots,” her mother said.

The Farasyns have applied for a patient assistance program set up by Enbrel’s manufacturer, Amgen, that would help reduce their out-of-pocket costs. But if Farasyn is denied, she may not be able to afford the medication at all.

“If we can get her on the Enbrel, it can stop the joint damage and she won’t even feel like she had it,” her mother said. “We’ve talked to adults who take Enbrel and it makes a big difference. It’s like they live a full life and they’re not in that constant agony.”

Biologics are now commonly used to treat other autoimmune disorders. As these drugs came on the market, insurance companies took a cautious approach, requiring patients to jump through hoops to get coverage. Some required patients to try multiple lower-cost non-biologic drugs first. Others set up unrealistic standards before they would cover the drugs, said Sheila Rittenberg, a health policy advocacy consultant from Oregon.

“In the early years, we focused on these restrictions and to some extent we were able to relax those barriers,” Rittenberg said. “As a result of that, the insurers said, ‘OK, you want better access to these drugs, we’ll give it to you, but now you’re going to have to pay for it.’ ”

For the most part, the specialty tiers have included the most expensive drugs on the market, and many of them must be taken month after month for the rest of the patient’s life. It creates financial barriers so high that many patients can’t even get started on the drugs.

“When you take a (monthly cost) of $1,500 and you tell someone you have to pay 20 percent or 25 percent, it becomes tantamount to a denial,” Fohrman said. “Most patients can’t do it. So they are forced into a position, like Mikaela, where yeah, they’ve got insurance, but it’s not very good.”

When patients can’t afford the copay, sometimes they can revert to the older, less expensive drugs, and try to tolerate the side effects or make do with less treatment. In other cases, doctors can stretch the time in between doses to lessen the monthly financial hit.

But when patients don’t take their medication or take less effective drugs, it can allow the disease to progress, causing irreversible damage. Biologics have been shown to improve long-term outcomes, including reducing the likelihood of future pain, surgeries and hospitalization. In the long run, they can keep people out of wheelchairs and extend lives.

Fohrman has argued with insurance companies for years about these drugs and believes their decisions are based primarily on financial considerations. He cites cases in which health plans have shifted drugs in and out of their specialty tiers as they get better pricing on one product or another.

“They would like to tell you this is all evidence-based medicine and science, but it isn’t,” Fohrman said. “It’s purely economic.”

High growth

Josh Bishop, director of medical and pharmacy services for PacificSource Government Programs, said specialty tiers are the insurance industry’s reaction to the sudden spike in drug costs from biologics.

“We’ve seen huge increases in specialty drug costs,” he said. “It’s growing at an extremely alarming rate.”

Bishop said most plans follow Medicare’s lead and use a financial threshold for choosing which drugs fall into the specialty tier. Medicare currently allows Part D prescription drug plans to include drugs in the specialty tier if they cost $600 a month or more. Plans can then charge a coinsurance of up to 25 percent, or a higher portion if they offset it by offering a lower deductible.

The drug plans also cap out-of-pocket costs for drugs at roughly $4,700 per year, but there is concern that some patients may not be able to afford the initial outlays. The problem is exacerbated once beneficiaries exhaust their initial period of coverage and enter the so-called “doughnut hole” when they must pay the entire cost of coverage.

A recent General Accounting Office report on specialty tiers found that 55 percent of Part D plan holders prescribed at least one specialty tier drug reached the out-of-pocket cap, compared to only 8 percent who didn’t use a specialty tier drug.

To further complicate matters, Medicare beneficiaries are not eligible for copay help directly from pharmaceutical manufacturers. Instead, drug makers can donate to nonprofit funds that are tied to a condition, like rheumatoid arthritis, but not any specific drugs. Those nonprofits can then provide assistance to Medicare beneficiaries as long as the funds last. The funds, however, rarely last long for those conditions that are routinely treated with biologics.

The Patient Advocate Copay Relief Program, which provided up to $2,500 per year to rheumatoid arthritis patients, has exhausted its funds for that category as of May 2.

Meanwhile, there are few alternatives for patients who need biologic drugs. There are no generic drugs available. In fact, there aren’t even rules in place for how generic version of biologic drugs could be developed.

Seeking change

Farasyn and her mother recently traveled to Washington, D.C., to lobby Oregon’s congressional delegation in favor of a bill to ban the use of specialty tiers. The legislation is being promoted by the American College of Rheumatology, the Arthritis Foundation and other patient advocacy groups.

Those groups are also pressing the secretary of the Department of Health and Human Services to prohibit specialty tiers in the design of plans that will be sold through state health insurance exchanges starting in 2014.

A legislative proposal from the National Health Council, an umbrella group of patient advocacy groups, would also limit monthly out-of-pocket costs. The health reform bill includes a provision that limits out-of-pocket costs to $6,000 per year. But advocates fear many patients would face bills of $1,000 or more each month, essentially preventing them from getting the drug. The groups have proposed a $500 monthly limit instead.

Three states — New York, Delaware and Vermont — have already implemented bans on specialty tiers, and 10 others, but not Oregon, are considering bills that would ban the practice, according to the National Multiple Sclerosis Society.

Advocates argue that the bans would wind up saving money for the health care system in general and for insurers by improving access to biologic drugs, keeping patients healthier and avoiding significant costs later on.

“The problem is on average people are staying with their insurance company about 18 months,” said Marc Boutin, executive vice president and chief operating officer of the National Health Council. As a result, the savings don’t always accrue to the insurance company that pays for the drug.

“That’s why to some extent mandating those protections is important,” he said. “If everybody has to comply with it, then they will accrue the benefit, because everybody is providing these medications.”

It would eliminate the scenario of one plan paying for the drug and another plan reaping the later savings when that patient switches.

Shared cost

But insurance company officials argue that the problem is the high cost of the drugs. Drug prices are set by manufacturers, and they have no choice but to pass those costs on to consumers in one form or another.

“There’s a variety of benefit designs out there. There are some plans that have specialty tiers and there some plans that don’t,” said Sean Karbowicz, manager of clinical pharmacy services for Regence BlueCross BlueShield. “At the end of the day, the money’s got to come from somewhere.”

Karbowicz said one of the advantages of having a percentage-based coinsurance instead of a flat dollar amount copay is that members become more aware of the costs of the drugs. They can then shop around to determine where the medications might be provided at the lowest cost, saving the system money. And because plans that use specialty tier pricing typically also include an out-of-pocket maximum for drug spending, patients who can handle the initial payments might pay a lower percentage of the cost of specialty tier drugs than they do for drugs with a fixed copayment.

“So the patient may look at the January and February payments as being very high, but then a lot of these people by March through the end of the year, they’re actually paying nothing for these very high-cost drugs,” said Raulo Frear, general manager of RegenceRx. “At the end of the day, the plan tends to support a much higher percentage of the overall cost for these medications.”

According to the Pharmacy Benefit Management Institute, individuals with drug coverage pay nearly 25 percent of the cost of a retail prescription, 19 percent of a mail prescription, and 17 percent of a specialty tier prescription.

Advocates complain, however, that consumers rarely know they’ll need specialty drugs when they choose a plan, if they have any choice at all. And even in cases where patients choose a plan that covers a biologic drug with a flat-fee copay, there’s no guarantee the plan won’t switch the drug to a specialty tier midyear.

Unless the costs of the biologic drugs come down — either by pharmaceutical companies innovating less expensive production habits or through biosimilar competition — the debate over specialty tiers comes down to how to best spread the pain. Insurance companies use complex actuarial formulas to predict how much drugs and other medical services will cost in the coming year, then set premiums and cost-sharing at levels to make sure they cover their costs. Banning specialty tiers simply means all members will have to pay more in other areas, such as higher premiums or higher copays for other drugs.

Drug makers, who have lobbied for specialty tier bans, argue that developing and producing biologic drugs is tremendously expensive. Industry sources routinely cite $1.5 billion as the cost of bringing a biologic to market.

While advocates want to lower the costs for patients, they also want pharmaceutical companies to have an incentive to invest in research.

“We’ve got this really bizarre challenge of wanting to encourage development of better treatments but still wanting to provide access to what exists,” Boutin said.

The advocacy groups are trying to pull together the various stakeholders to change the way the system addresses biologic drugs.

“We aren’t saying it should be free. It’s a shared responsibility, and consumers and patients have a responsibility to pay for health care,” said Melnick, the Arthritis Foundation lobbyist. “But we look at it as a discrimination issue. If you have heart disease, your heart disease medication is covered. But you get RA or MS, you just pulled a bad lottery number, and you have to go bankrupt or your kids don’t get to go to college because you’re paying your monthly biologic bill.”

Farasyn is now entering her senior year of high school, and college seems just around the corner. But her higher education could depend on her getting copay assistance for Enbrel. Not only will that ease the financial burden, it may keep her healthy enough to follow through on her plans.

“I would like to be a pediatric rheumatologist because I’ve had it and I love little kids. I could relate and I could be on their level,” she said. “That was another thing that was really harsh. A lot of people don’t know what I’m going through with this.”