Low-income individuals and communities of color, already besieged by poor access to health care, limited insurance coverage, and other health inequities exposed by COVID-19, also suffer another health disparity – they are among the hardest hit by continually rising prescription drug prices.

Since 2017, states across the nation have taken action to lower rising drug costs, enacting 163 laws that include regulating pharmacy benefit managers, increasing drug cost transparency, importing drugs from Canada, and limiting cost-sharing by consumers. Many of these laws are most likely to combat rising drug costs for individuals covered by public and private insurance plans.

Because high drug prices disproportionately affect low-income, uninsured, and people of color, state laws that work to lower drug costs for these communities are important. Recent examples include a Minnesota law that extends insulin affordability measures to uninsured individuals, and states laws that target a discriminatory practice within insurance benefit design known as adverse tiering. Adverse tiering occurs when insurers place drugs – including those used to treat HIV/AIDS and hepatitis B and C that predominantly affect communities of color – in a drug formulary’s highest cost-sharing tier, forcing patients to pay more even when the drug is a generic.

Background

People of color are disproportionately impacted by chronic illnesses and certain health conditions, such as diabetes, HIV/AIDs, hepatitis B and C, hypertension, cardiovascular diseases, obesity, and asthma. Today’s increased rate of chronic conditions found in communities of color can be traced back to numerous discriminatory policies, including employment, education, and the practice of redlining, which placed loans and insurance out of the reach of residents of certain areas based on race or ethnicity. Systemic discriminatory practices have resulted in poorer households and neighborhoods, higher incidences of adverse childhood experiences, and limited access to quality health care, healthy food, parks, and public transportation. The combination of poor environmental quality, food scarcity, and limited access to health care increases the risk of asthma, obesity, and diabetes.

Not only are people of color more likely to suffer from chronic illness, they are also more likely to be uninsured and are therefore disproportionately hit hardest by ongoing rises in the list prices for prescription drugs. While insured individuals benefit from drug rebates negotiated for plans and drug coverage, the uninsured face higher prices for the same drugs – though they may be eligible for manufacturer coupons to help subsidize high costs. Other programs that help low-income patients obtain lower cost medications, such as MedAccess, require time-consuming applications, income verification, the cooperation of their providers, and computer access. The lack of ability to afford medication can result in under-usage of needed medications and overall poorer health outcomes.

In one study of Medicare beneficiaries without drug coverage, Black and Latinx individuals used 10 to 40 percent fewer medications than their White counterparts did for the same illnesses. Disparities are also seen in the under-use of insulin for the treatment of diabetes, a disease that is 60 percent more likely to impact Black adults than non-Latinx White adults.

Insulin Spending Caps

To make insulin more affordable and accessible, 11 states* have adopted legislation to impose spending caps on insulin for consumers. In most states, insulin spending caps affect only those covered by state-regulated drug plans. However, Minnesota’s recently enacted legislation also extends assistance to uninsured patients who cannot afford treatment for their diabetes.

Signed into law in April 2020, Minnesota’s Alec Smith Insulin Affordability Act caps insulin costs both in the commercial market and for the uninsured or under-insured. The legislation establishes two plans:

• An emergency plan that allows for a once-per-year, 30-day supply of insulin with a payment cap of $35; and
• A long-term plan that provides insulin supplies in 90-day increments for a capped payment of $50.

Both the urgent-need plan and the continuing safety net program are targeted towards uninsured populations, with the latter program requiring a household income less than 400 percent of federal poverty guidelines. Manufacturers who fail to comply with this bill face an administrative penalty of $200,000 per month for noncompliance, with the penalty increasing over time. Since passage of the Minnesota law, the Pharmaceutical Research and Manufacturers of America (PhRMA) has filed suit, claiming the act confiscates private property for public use without proper compensation to manufacturers.**

Adverse Tiering

People of color requiring expensive drugs to treat chronic illness also face a discriminatory practice within insurance markets known as adverse tiering. Adverse tiering occurs when insurance plans structure their drug formularies to require substantial out-of-pocket cost-sharing for drugs in a certain class, particularly for expensive-to-treat conditions such as HIV/AIDS. This discourages patients needing those drugs from selecting an insurance plan with adverse tiering, and forces those who do buy into the plan to pay hefty out-of-pocket co-pays for expensive, life-saving medications. Adverse tiering can cost HIV-positive individuals (of whom 87 percent were Latinx, Black, or of multiple races in 2018) enrolled in such a plan an additional $3,000 each year.

Adverse tiering became more prevalent between 2014 and 2015 for conditions such as HIV/AIDs, hepatitis B and C, and multiple sclerosis. In 2016, the US Department of Health and Human Services (HHS) released a regulation extending consumer protections from discriminatory practices found in the Affordable Care Act (ACA) to:

• All health entities receiving HHS funding;
• HHS-administered health programs; and
• Insurers participating in health insurance marketplaces.

The final rule also affirms the broad definition of “disability,” allowing for the inclusion of persons with chronic conditions that affect major life activities and bodily functions. In the final rule’s preamble, HHS lays out factors that the Office of Civil Rights (OCR) will consider when assessing potential discriminatory practices in plan benefit design on a case-by-case basis. One notable consideration is whether or not the covered entity utilized a nondiscriminatory rule or principle when adopting a certain plan design feature.

Insurers have taken advantage of this language by justifying their placement of all drugs in a given class on specialty tiers as resulting from high drug costs. While this approach avoids the regulation’s definition of discrimination, it none-the-less has the effect of deterring low-income patients needing high-cost drugs for chronic conditions from enrolling in their plans.

Because the chronically ill population is disproportionately made up by people of color, this practice is most likely to impact minority populations. Some states have taken direct action to combat adverse tiering:

• Delaware implemented legislation that prohibits insurers from placing all drugs in a given class on a specialty tier; and
• Both California and Colorado prohibit formulary designs that discourage enrollment by individuals with certain health conditions.

These laws, in addition to Minnesota’s insulin affordability law, provide first steps for policymakers who want to address drug affordability through a lens of racial justice by ensuring that affordability is extended to individuals beyond the commercially-insured market, and that benefit designs within commercial insurance markets do not have discriminatory impacts.

*States with insulin caps include New Hampshire, Colorado, Delaware, Illinois, Maine, Minnesota, New Mexico, Utah, Virginia, Washington, and West Virginia

**Track the status of this case and others on NASHP’s Rx Legal Resources page.