Market Barriers to the Development of Pharmacotherapies for the Treatment of Cocaine Abuse and Addiction: Final Report. Sources of Payment for Cocaine Treatment

09/12/1997

One of the major questions in developing a new cocaine medication is whether there will be sufficient and reliable payment for the medication. Payment for substance abuse treatment, including for cocaine abuse, remains heavily dependent upon government sources. Government provided almost 80 percent of the financing for substance abuse treatment in 1992 (Harwood et al., 1994). This represents only a modest shift to private sector sources since the 1982 NDATUS, which estimated that private sources (insurance plus out-of-pocket) accounted for about 6.5 percent of payments for specialty provider substance abuse treatment (Rice et al., 1990).

The limited sources with reliable data about payment sources in the substance abuse population suggest that only a fraction of patients seeking care for substance abuse treatment have either private insurance or sufficient earning capacity to reasonably afford a medication that would be taken for an extended period of time (e.g., several months or more). According to 1995 TEDS data (Figure 11 below), more than two-thirds of all enrolled cocaine abusers had no health coverage, and another 17.6 percent had Medicaid coverage. Only 9.1 percent of enrolled cocaine abusers had coverage through private insurance (e.g., Blue Cross/Blue Shield, HMO). Wages or salaries were the primary source of income for only 28.1 percent of enrolled cocaine abusers, while 51.9 percent were either on public assistance or had no income. More than three-fourths of the enrolled cocaine abusers were either unemployed or not in the labor force, and nearly 40 percent had not graduated from high school.

Figure 11: Ability to Pay for Treatment Indicators, TEDS, 1995
Indicators of Ability to Pay for Treatment
Total
Cocaine
Heroin
Expected Source of Payment
Percent
Self-pay 33.9 30.3 27.6
Private Insurance 8.7 5.1 5.4
Medicaid 14.3 20.1 27.9
Medicare 0.9 0.8 0.9
Other Govt. 24.0 22.9 22.7
No Charge 11.2 14.9 8.2
Other 7.1 5.8 7.2
  100.0 100.0 100.0
Type of Health Insurance    
None 67.0 68.9 61.0
Medicaid 13.4 17.6 23.7
Private Insurance 7.4 4.2 3.9
Blue Cross/Shield 3.5 2.2 2.1
HMO 3.1 2.7 3.4
Medicare 1.6 1.1 1.8
Other 4.0 3.4 4.1
  100.0 100.0 100.0
Primary Source of Income    
Wages/salary 38.5 28.1 22.3
Public Assistance 17.7 24.6 33.4
Retirement/Pension 0.9 0.3 0.3
Disability 4.5 3.5 3.3
Other 20.1 16.2 23.6
None 18.3 27.3 17.0
  100.0 100.0 100.0
Employment Status      
Unemployed 26.7 34.4 26.7
Employed 32.8 22.7 19.7
Full-time 26.1 17.7 14.4
Not in Labor Force 40.5 42.8 53.7
  100.0 100.0 100.0
Not in Labor Force      
Homemaker 9.1 12.6 8.8
Student 22.3 4.3 3.4
Retired 2.6 0.9 1.0
Disabled 18.9 15.0 23.1
Inmate 4.9 6.1 4.3
Other 42.3 61.0 59.3
  100.0 100.0 100.0
Education      
Less than HS Grad 36.6 38.1 39.2
HS Grad (or GED) 42.9 41.6 42.7
Source: TEDS, Office of Applied Studies, 1997.

The Drug Abuse Services Research Survey (DSRS, Brandeis University, 1993) produced similar findings to those of the TEDS data and are arranged by site of care (Figure 12 below).

Figure 12: Expected Primary Source of Payment for All Drug Abuse Services, Employment & Education; Drug Abuse Services Research Survey, 1990
   
Hospital
Residential
Outpatient
Primary Payment Source (Phase I)
Percent
  No Payment 15.5 28.6 17.6
  Self Payment 7.2 17.9 35.0
  Private Health Insurance 44.3 10.2 15.2
  Medicaid 12.0 8.2 14.6
  Medicare 4.0 0.1 1.1
  Other Public 17.0 35.0 16.5
    100.0 100.0 100.0
         
Employed (Phase I) 47.2 19.1 51.6
Educational Attainment (Phase II)      
  Less than High School 33.4 37.7 44.6
  High School Graduate 26.4 36.1 28.4
  Beyond High School 25.2 19.5 22.8
  Unknown 14.9 6.7 4.2
Age        
  <18 years 5.7 4.7 10
  18-24 years 12.7 21.5 24
  25-34 years 44.7 48.9 44.5
  35-44 years 25.8 20.7 17.8
  45 + years 11.3 4.2 3.8
    100.0 100.0 100.0
Source: DSRS, Brandeis University, 1993a, 1993b.

Thus, the source and magnitude of funding for cocaine are key variables to consider in our market analysis. Payment for a new pharmacotherapy may come out of the $2.1 billion now being spent, from additional funds that could be made available, or from funds derived from a combination of existing and new sources.

The potential impact of the cost of a new medication for cocaine abuse may be perceived relative to the current cost of care. The wholesale price of certain commonly used psychotropic medications currently fall in the range of $2 to $4 per daily dose. If the wholesale price of a new cocaine medication is in that range, then its retail cost to payers would represent a large increase relative to current payments for cocaine treatment, particularly the average daily per-patient payment ($9.00) for the majority of cocaine patients in outpatient care (Figure 13 below). As for any health care intervention, the cost of a new cocaine pharmacotherapy should be considered in light of development costs as well as any health and economic benefits that may accrue from its use.


Figure 13: Average Wholesale Price for Typical Daily Dose, Selected Medications for Addiction and Mental Illness
Medication
Indication/Disorder
Average Daily Dose
Average Wholesale Price for Daily Dose
Methadone Opiate addiction 50 mg $0.50
LAAM Opiate addiction 80 mg/2 days equal to 40 mg/day $4.00/2 days equal to $2.00/day
Naltrexone Opiate addiction, alcoholism 50 mg $4.50
Diazepam Antianxiety 20 mg $0.25
Fluoxetine (Prozac) Antidepressant 40 mg $4.50
Chlorpromazine (Thorazine) Antipsychotic 600 mg $3.00
Haloperidol Antipsychotic 50 mg $3.00
Risperidone Antipsychotic 6 mg $8.00
Clozapine Antipsychotic 500 mg $17.00

Source: 1996 Drug Topics Red Book. Medical Economics, Montvale, NJ, 1996.