Insurance Coverage of Experimental Drugs and Alternative Treatments

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Aug 13, 2020

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To answer this question it is important to understand what an experimental, technically called an investigational, drug is. The Federal Food, Drug and Cosmetic Act is the United States of America law that assures “drugs and devices are safe and effective for their intended uses”.

To ship a new drug across state lines, without a federally approved marketing application, to clinical investigators in many states, an exemption must be sought by the drug sponsor. That exemption is an “Investigational New Drug Application” (IND). When a new drug has been tested in animals and the sponsor wishes to do further testing in humans an IND application must be applied for. There are 3 kinds of applications:

  • An Investigator IND is submitted by a physician who wants to propose studying an unapproved drug or an approved drug for a new use or type of patient.
  • Emergency Use IND authorizes use of an experimental drug when time is not sufficient for the usual application process.
  • Treatment IND is submitted for investigational drugs showing promise in clinical testing, for serious and life-threatening conditions, while the final clinical work is done and the FDA review takes place.

Once an IND is submitted the drug sponsor must wait 30 days for the FDA make certain that subjects of the research will not be subjected to unreasonable risk.

In 1987 the FDA first issued regulations allowing the use of investigational new drugs for the treatment of severely ill patients who were not part of a clinical trial. In August of 2009 a new rule required a patient’s doctor to have a probable expectation that the risk of taking the drug is not greater than the risk of the illness for which it is being taken. The new rule also requires that the patient can not gain access to the drug by participating in a clinical trial instead. A second final rule prohibits drug manufacturers from asking patients to pay a profit or for research and development costs.

There is a special status for a drug intended to treat rare diseases. An orphan drug is an already approved or experimental drug for treatment of conditions affecting less than 200,000 people in the country. Orphan drug status allows the sponsor tax credits and marketing incentives from the federal government in exchange for developing the drug.

The new health care reform bill HR3590 contains a provision prohibiting a health plan from discriminating against participation in clinical trials “for treatment of cancer or any other life-threatening disease or condition”.

The final step in drug development is FDA approval. Once the clinical trials are completed and the sponsor submits a New Drug Application [NDA], the Federal Drug Administration determines whether the drug is reasonably safe and effective to issue its seal of approval for the drug to be sold through pharmacies.

At this point your health insurance provider can add the drug to their Formulary. A Formulary is a constantly updated list of approved prescription medications. Coverage for non-Formulary drugs is subject to preauthorization and not guaranteed. Each health insurance provider has its own Formulary.

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