A Massachusetts Institute of Technology economist and Harvard oncologist have a proposal to get聽highly effective but prohibitively expensive drugs into consumers’ 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.
“Isn’t this why we have health insurance?” asked Mark Rukavina, a Boston-based health care consultant whose work has focused on affordability and medical debt. “Insurance used to protect people from financial ruin for these unpredictable, costly occurrences. Now, with large deductibles, we’ve got coverage for preventive care but not for treatment.”
This KHN story also ran on . It can be republished for free ().Andrew Lo, a financial economist at MIT’s 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’t enough protection these days.
“This is a private sector stopgap way to deal with something right now,” 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’s “distasteful” 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 “transformative” 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’s easier for insurers to cover maintenance drugs because they’re 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.
“There are miraculous treatments like Harvoni,聽but they’re out of reach” 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’t work or the patient relapses or dies, the patient isn’t obligated to repay the loan.
Are sick patients good loan prospects? Lenders might want to assess not only loan applicants’ 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’s a wrongheaded approach, said A. Mark Fendrick, director of the University of Michigan Center for .
Medical treatment isn’t always straightforward.聽Even highly “transformative” drugs such as Sovaldi aren’t 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’t finish their course of treatment, Fendrick said, referring to by the CVS Health Research Institute.
“In this situation, the person who does the right thing and gets the good outcome is penalized and has to pay the money back,” he said. Instead, he argued, patients who follow their doctor’s recommendations and “do what you’re supposed to do” should not be held liable for the loans.
The proposal doesn’t 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’s 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.
“It’s helped people, but it’s also driven prices higher,” he said. From a drug company’s perspective, “It just means that more people can afford this drug, so we can charge more for it.”
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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