Buying Expensive Drugs On The Installment Plan: Could It Work?

An economist from the Massachusetts Institute of Technology and an oncologist from Harvard have a proposal to bring highly effective but prohibitively expensive drugs into the hands of consumers: installment loans for healthcare.

In the diary Science Translational Medicine, who like academics Drug loans to mortgagesboth of which may enable consumers to purchase high volume items that: a high prepayment which they could not otherwise afford.

Some consumer advocates and health insurance experts see it very differently.

“Isn’t that why we have health insurance?” asked Mark Rukavina, a Boston-based health advisor whose work has focused on affordability and medical debt. “Insurance used to protect people from financial ruin for these unpredictable, costly events. Now we have preventative but not treatment coverage with high deductibles.”

Andrew Lo, Professor of Finance 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 these days this is not enough protection. Insured persons can also count on high deductibles.

“This is a stopgap solution for the private sector to deal with something right now,” Lo said.

Their proposal calls for the loans to be funded by a pool of investors who buy bonds and stocks issued by an organization that makes the loans to consumers.

While it might be “disgusting” to talk about patients pledging their lives for treatment, Lo said, they hope the suggestion will spark change.

The healthcare installment loans that Lo, Weinstock, and their co-author Vahid Montazerhodjat, a former MIT graduate student who worked with Lo, propose, are designed to help people find “transformative” therapies to cure potentially fatal diseases such as cancer or hepatitis C .

They are not intended to be used to pay for maintenance medications that help people deal with chronic illnesses. It is easier for insurers to cover maintenance drugs because they are bought over a longer period of time, they said.

In contrast, Breakthrough in hepatitis C drugs Sovaldi and Harvoni, for example, can cure people of the liver-wrecking disease in a few months, but the price tag of $ 84,000 or more has led many insurers to limit coverage to those whose disease is well advanced and showing signs of liver damage.

“There are miraculous treatments like Harvoni, but they are out of reach for a lot of people,” Lo said.

Someone wanting treatment with Harvoni could take out a nine-year health care loan with an annual interest rate of about 9 percent, the authors suggest. In contrast to conventional loans, the patient is not obliged to repay the loan if therapy fails or the patient relapses or dies.

Do sick patients have good credit prospects? Lenders may want to assess not only the credit applicants’ creditworthiness but also their health to determine if the applicant is likely to live long enough to pay them off.

The study authors say that repayment is only possible if the treatment is successful, protecting patients and providing an incentive to develop more effective drugs.

That is a wrong approach, says Dr. A. Mark Fendrick, Director of the University of Michigan Center for Value-Based Insurance Design. Medical treatment is not always easy. Even highly transforming drugs like Sovaldi aren’t guaranteed to work, Fendrick says, and other factors play a role.

For example, about 10 percent of people prescribed Sovaldi for hepatitis C haven’t completed their treatment, Fendrick says, referring to one analysis from the CVS Health Research Institute.

“In this situation, the person who does the right thing and gets the good result will be punished and have to pay the money back,” he said. Instead, patients who follow their doctor’s recommendations and “do what you should” should not be held liable for credit.

The proposal does not address drug prices other than addressing the potential for increases due to increased demand for previously unaffordable therapies.

Price increases are a real problem, says Paul Ginsburg, director of public policy at the Schaeffer Center for Health Policy and Economics at the University of Southern California. The Health Act has made it easier for people to buy expensive drugs. It expanded Medicaid coverage to millions of low-income adults and limited the amount consumers generally spend on care to about $ 7,000 a year.

“It has helped people, but it has also raised prices,” he said. From a pharmaceutical 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 later this year to bring together drug manufacturers, insurers, patient advocates, financial engineers, and others to discuss strategies to make expensive drug therapies more affordable. Health loans will be on the agenda, he said.

Kaiser Health News is an editorially independent news service that is part of the non-partisan Henry J. Kaiser Family Foundation. Michelle Andrews is on Twitter:@ mandrews110

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