Kaiser must cover Viagra in its health policies, says California Department of Corporations

Kaiser Foundation Health Plan must cover Viagra in the health insurance policies it writes within California, says a December 1998 order from the state’s Department of Corporations.

At the same time, the Oakland, CA-based HMO is making financial and other reparations, under an agreement reached with state officials, for previously restricting access to the drug.

Kaiser may request a hearing on the coverage decision. Meanwhile, the company is implementing a 50% copay for the drug in its 1999 renewal contracts, company spokesman Tom Debley says.

While disappointed with the coverage decision, Mr. Debley claimed a victory in sparking public debate over the coverage of so-called "lifestyle drugs," those that do not address an immediate threat to the life or health of an individual.

"There seems to be a debate, at least based on the number of calls I’ve gotten this week," Mr. Debley tells State Health Watch.

Drug access as a policy issue

The state’s order on the coverage question rejected Kaiser’s clinical and financial arguments for an exemption for Viagra. A statement from Dale Bonner, Commissioner of the Department of Corporations, maintains that state officials share "the growing concerns regarding rising costs" but says prudent public policy tips the scale "in favor of increased access to prescription drug benefits."

Specifically, Mr. Bonner noted that an HMO’s mandate to provide medically necessary drugs could not be waived simply when, as Kaiser argued in the case of Viagra, medical necessity is "difficult" to determine. While upholding the use of certain cost-saving measures, Mr. Bonner said state law regulating HMOs "discourages, and in some cases, prohibits limiting access to care based substantially on financial considerations." Finally, the state rejected Kaiser’s claims that Viagra coverage would increase rates and questioned whether a hike in rates would even be sufficient cause to exclude the drug.

HMOs required to pay for nonformulary drugs

A separate order, also announced in late December, outlines the remedial steps Kaiser must take for "certain management decisions" between April 1998 to September 1998 that "may have discouraged physicians from writing Viagra prescriptions in a manner requiring Kaiser to pay for it." Under California law, HMOs are required to pay for formulary drugs as well as non-formulary medically necessary medications. Although the Food and Drug Administration approved Viagra in April 1998 as a treatment for male sexual dysfunction, state officials say Kaiser did not approve the drug and put it on its formulary until five months later.

Under the order, Kaiser will:

• pay the state $250,000, part of which covers the department’s costs associated with the investigation;

• resolve all currently pending member grievances related to the coverage of Viagra;

• inform its members of its coverage policy regarding prescription drugs for sexual dysfunction before April 1, 1999;

• before Feb. 15, 1999, inform each of its members who received a prescription for Viagra that was filled by Kaiser’s pharmacy between April 8, 1998, and Sept. 21, 1998 (the period from the time Viagra was approved by the FDA until the drug was added to the plan’s formulary) about Kaiser’s current policy regarding prescription drugs for treatment of sexual dysfunction and resolve any grievances that result;

• maintain Viagra as a covered drug on its prescription drug formulary unless, in the normal course, it would be removed from the formulary.

Kaiser originally estimated the total annual cost of adding Viagra coverage at $100 million for its enrollees nationwide, the majority of whom are in California. Declining demand for the drug lowered estimates to $60 million, with the 50% copay dropping that figure to $20 million to $30 million, Mr. Debley says.

Contact Mr. Debley at (510) 987-3291 and the California Department of Corporations at (916) 323-7120.