Health insurance companies love to save money. But the calculations for what’s cheapest don’t always look the way you’d expect. Insurers will sometimes choose to cover a significantly more expensive drug or device, even when there’s a cheaper alternative on the shelf.

The choice has less to do with the medication itself, and more to do with the costs that come downstream.

When someone’s throat is swelling shut from an allergic reaction, an epinephrine injector is the first thing you should grab. The injectors are made under several brand names, the most well-known is EpiPen. 

“If someone has anaphylaxis, epinephrine is the medication that will save their life,” said Victoria Chadwick, a clinical pharmacist in pediatric and emergency medicine at Swedish First Hill hospital in Seattle. 

Chadwick said when someone’s in shock, people panic. “No matter how many times you’ve been taught how to use a device, you are freaking out because the person in front of you — or yourself — can’t breathe,” she said.

When a kid has a life-threatening allergy, their parents keep epinephrine injectors everywhere — home, school, daycare, babysitters. But not everyone is trained to use them.

That’s when an injector like AUVI-Q can make a difference under pressure. It literally talks you through the process of administering the medication with a calm voice, step by step.

“It might save someone’s life. We can’t rely on everyone always knowing the right thing to do,” said Chadwick.

The instructions could be life-saving, but it has a list price that is eye-watering — AUVI-Q costs over 10 times that of the generic alternative, Adrenaclick. AUVI-Q debuted at a list price of $4,500 for two injectors. 

The current version of AUVI-Q has been available for eight years but wasn’t commonly on formularies (a list of drugs and devices that health insurance pays for). But that changed this year, after insurers did the math.

“It’s a lot cheaper to cover even a more expensive device than it is to have someone admitted to the hospital or possibly intubated — or unfortunately pass because they don’t have any device at all or the device they have wasn’t used,” Chadwick said.

Hyunjee Kim, a health economist at the Center for Health Systems Effectiveness at Oregon Health & Sciences University, said insurance companies looked at “downstream” costs when making these decisions. “It can save a lot of money downstream by reducing emergency room visits or really lengthy hospitalizations,” Kim said.

According to Kim, insurers look at their own member data and compare two groups: those who got access to the drug or device, and those who didn’t. Then, they compare the total cost of care and mortality.

If they don’t have the data to analyze their own patient outcomes, insurers need good outside evidence — that could be “randomized control trials or a really strong, robust retrospective study that shows how the choice of certain drugs or medical devices can affect downstream costs,” Kim said. 

That’s part of how AUVI-Q started getting covered. A recent independent retrospective study found 50% lower health care costs and fewer emergency visits after anaphylaxis when AUVI-Q is used during a severe allergic reaction, compared to its competitors.

That was one factor in Aetna, the third largest insurance company in the U.S., making AUVI-Q its preferred epinephrine device for severe allergies. 

Kaiser Permanente, the large nonprofit health insurer, did the same, partially due to internal pressure from its own clinicians. “If doctors or hospitals strongly believe in the value of certain devices or drugs, I think that can put really huge pressure on the insurer,” Kim said.

Plus, don’t forget good old-fashioned free-market competition. 

“You always have to consider what other players do,” Kim said. “If my competitor does cover it, I better cover it, otherwise my member will switch.”

In other words, insurers don’t want to lose in a shot-for-shot competition. And higher upfront costs can make sense if they prevent bigger bills later.