A Massachusetts Institute of Technology economist and Harvard oncologist have a proposal to get聽highly effective but prohibitively expensive drugs into consumers鈥 hands: health care installment loans.
Writing last month in the journal聽,聽the authors liken drug loans to mortgages, noting that both can enable consumers to buy big-ticket items聽requiring a hefty up-front payment that they could not otherwise afford.
Some consumer advocates and health insurance experts see it differently.
鈥淚sn鈥檛 this why we have health insurance?鈥 asked Mark Rukavina, a Boston-based health care consultant whose work has focused on affordability and medical debt. 鈥淚nsurance used to protect people from financial ruin for these unpredictable, costly occurrences. Now, with large deductibles, we鈥檝e got coverage for preventive care but not for treatment.鈥
Andrew Lo, a financial economist at MIT鈥檚 Sloan School of Management, and Dr. David Weinstock, an oncologist at the Harvard-affiliated Dana-Farber Cancer Institute, agree that insurance would be a better option. But for many consumers that isn鈥檛 enough protection these days.
鈥淭his is a private sector stopgap way to deal with something right now,鈥 said Lo.
Their proposal calls for the loans to be financed by a聽pool of investors who would buy bonds and equities issued by an organization聽that makes the loans to consumers.
While it鈥檚 鈥渄istasteful鈥 to talk about patients mortgaging their lives for treatment, Lo said, they hope the聽proposal will聽spur change.
The health care installment loans that Lo, Weinstock and their co-author Vahid Montazerhodjat, a former MIT doctoral student who was working with Lo, propose would be aimed at helping people afford 鈥渢ransformative鈥 therapies that cure potentially lethal conditions such as cancer or hepatitis C.聽They’re not designed聽to pay for聽maintenance drugs that help people deal with chronic illness. It鈥檚 easier for insurers to cover maintenance drugs because they鈥檙e purchased over an extended period of time, they said.
In contrast, breakthrough hepatitis C drugs Sovaldi and Harvoni, for example, can cure people of the liver-destroying disease in a few months, but the聽price tag of $84,000 or more has led many insurers to limit coverage聽to people whose disease has significantly progressed to聽show signs of liver damage.
鈥淭here are miraculous treatments like Harvoni,聽but they鈥檙e out of reach鈥 for many people, said Lo.
Someone who wanted that Harvoni treatment might take out a health care loan with a nine-year term at an annual interest rate of about 9 percent, the authors suggest. In a twist on conventional loans, if a therapy doesn鈥檛 work or the patient relapses or dies, the patient isn鈥檛 obligated to repay the loan.
Are sick patients good loan prospects? Lenders might want to assess not only loan applicants鈥 creditworthiness but also their health聽to determine whether the applicant is likely to live long enough to pay it off.
The study authors say that聽requiring repayment only if the treatment works will protect patients and provide an incentive for the development of more effective drugs.
That鈥檚 a wrongheaded approach, said A. Mark Fendrick, director of the University of Michigan Center for .
Medical treatment isn鈥檛 always straightforward.聽Even highly 鈥渢ransformative鈥 drugs such as Sovaldi aren鈥檛 guaranteed to work, Fendrick said, and other factors come into play. For example, about 10 percent of people who were prescribed Sovaldi for hepatitis C didn鈥檛 finish their course of treatment, Fendrick said, referring to by the CVS Health Research Institute.
鈥淚n this situation, the person who does the right thing and gets the good outcome is penalized and has to pay the money back,鈥 he said. Instead, he argued, patients who follow their doctor鈥檚 recommendations and 鈥渄o what you鈥檙e supposed to do鈥 should not be held liable for the loans.
The proposal doesn鈥檛 address drug prices, except to say that the potential for increase due to higher demand for previously unaffordable therapies聽needs to be addressed.
Price increases are a real concern, said Paul Ginsburg,聽director of public policy at the University of Southern California鈥檚 Schaeffer Center for Health Policy and Economics. The health law has made it easier for people to afford expensive drugs. It expanded Medicaid coverage to millions of lower income adults and capped at roughly $7,000 the amount consumers generally spend annually out-of-pocket for care.
鈥淚t鈥檚 helped people, but it鈥檚 also driven prices higher,鈥 he said. From a drug company鈥檚 perspective, 鈥淚t just means that more people can afford this drug, so we can charge more for it.鈥
Lo said the MIT Laboratory for Financial Engineering and the Dana-Farber Cancer Institute will host a conference this winter to bring together drug manufacturers, insurers, patient advocates, financial engineers and others to discuss strategies to make expensive drug therapies more affordable. Health care loans will be on the agenda, he said.
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