Posted on 02/12/2020 4:39:29 PM PST by Kaslin
Election season is here. And voters worry about prescription drug costs more than almost any other issue. Sixty-five percent of Iowans and 60 percent of Granite Staters expressed concerns about high prescription prices in a recent Morning Consult poll.
Politicians typically blame drug companies for soaring pharmacy prices. But a new report shows that insurers, pharmacies, and other middlemen are the real driving force behind rising drug spending.
These groups are incentivized to push for high sticker prices, as they're often able to keep the rebates and discounts they negotiate. Until political leaders address this perverse incentive, America's sickest patients will continue struggling to afford their medicines.
Americans spent almost $440 billion on brand-name drugs in 2018, up from around $269 billion in 2013. That's a 64 percent increase.
But those extra billions didn't all, or even mostly, flow to research companies or their shareholders. In fact, the share of spending on branded medicines that ended up in drug companies' coffers dropped by 12.5 percentage points between 2013 and 2018, according to that new report, which comes from Berkeley Research Group.
So where is the money going? To other entities in the pharmaceutical supply chain.
Insurers take a big chunk. Another portion flows to pharmacy benefit managers, the companies hired by insurers to design and administer their drug benefits. Together, these and other third-party groups pocket about half of all brand-name spending.
Here's how the process usually works. PBMs decide which drugs an insurance plan will -- and won't -- cover. This negotiating leverage enables them to extract hefty discounts from drug makers. Pharmaceutical companies offered up $166 billion in rebates and discounts in 2018.
Patients rarely receive these rebates, at least not directly. PBMs pocket a small share of the rebates, and pass the rest along to the insurers that hired them. Insurers use these savings to offer cheaper monthly premiums to all beneficiaries.
Lower premiums are a good thing, of course. But spread across tens of millions of people, these massive discounts only translate into a few dollars per beneficiary per month.
That's little help to patients with chronic conditions, many of whom rely on multiple prescriptions to stay healthy. In addition to their monthly premiums, these patients owe a co-pay or co-insurance fee every time they pick up or refill a prescription. And insurers base these cost-sharing payments on a drug's inflated sticker price, not the heavily discounted price secured by PBMs.
In other words, the status quo burdens the sickest patients with high out-of-pocket costs while slightly reducing monthly premiums for healthier beneficiaries. That's the exact opposite of how insurance is supposed to work.
This arrangement isn't just unfair -- it's also counterproductive. Close to half of Americans in fair or poor health struggle to afford their medicines. Roughly three in 10 don't take their medicines as prescribed for financial reasons.
When patients skip doses or abandon their prescriptions, they get sicker and often require expensive medical interventions. Prescription non-adherence costs the American healthcare system almost $300 billion annually and potentially contributes to 125,000 deaths each year.
That needs to change. If insurers and PBMs passed along all rebates to patients through lower co-pays and co-insurance, rather than lower premiums, individuals with diabetes could save $3.7 billion each year on insulin alone. That's close to $800 per patient.
Lawmakers from both parties want to reduce patients' pharmacy bills. But most proposals under consideration ignore our flawed insurance system. It's time for Washington to turn its attention to the real source of high drug costs.
Also not mentioned is the regulations imposed by the FDA to get a drug to market. It’s medicine so I understand the need for some oversight. Look at CBD oil and “supplements” for the disparity in costs for FDA compliance. Some of the FDA requirements for record keeping, documentation, facility standards, trials and reporting could be curbed with little risk to the public. Also, they have to offer some protection against the lawsuits for pharmaceutical companies. Finally, the Pharma industry needs to deny sales in nations that they are forced to take a loss in for price control reasons.
Many do not understand what drives the cost of medicine. It’s not just the cost of the manufacturing of the product. It’s the cost of the research and the cost of research and development of 4 or 5 other lines of molecules that did not make it to market. There is also cost in there to fund future research. It’s more complicated than it seems.
Here’s an idea. How about the government supplying us with drugs but leave other parts of medical care in the private sector, give or take social security, etc.
Interesting, as I’ve never heard that proposal/idea before.
And the fact that new drug discovery is a long unpredictable process that is highly regulated (generally for good reasons) and like all inventions, pharma companies only get 20 years of patent protection. So it’s a race to charge high prices for a few years to try to pay back the R&D costs before every competitor can just copy it and sell generics. There must be a way to cover the R&D costs or we get no more new drugs.
As with all medical products and services, it all boils down to 3rd party payers.
No third party payers and prices fall through the floor.
There would be a massively painful transition (which would not be necessary if we never started this 3rd party crap).
If there were NO 3rd party payers one can’t imagine what that would do to prices. Your $138 a month medicare part B payment would buy a lot of medical care.
To paraphrase Reagan, the answer is simple, it’s just not easy. Would it be more painful that what we’ve experienced for 40 years? No, not really.
How about the lawyers who sue the drug companies?
The FDA which makes it cost nearly a billion dollars to bring a drug to market?
Do they bear any responsibility for high drug prices?
Drugs can help many patients, but there is no 100% risk free medicine. Some drugs are only for limited needs and can’t be produced under FDA rules and be anywhere near profitable, nor even, “break even”.
One Viagra level success funds dozens of orphan drugs.
Research and development has to be funded by successful marketing of other commercially profitable medecine.
‘There must be a way to cover the R&D costs or we get no more new drugs.’
that’s exactly right.
I agree. After the pharmaceutical companies submit their data to the FDA and get approval, the companies should be off the hook when things go wrong, UNLESS they withheld data or manipulated the data.
There is a practice among insurance companies called “Clawback”.
This means that when an insured member utilizes insurance at a pharmacy, the insurance company (can) set(s) the required copay at a higher dollar that the prescription actually costs. The pharmacy sends the extra payment to the insurance company and is not allowed to tell the customer what has happened.
This a “clawback” of money directly from their insured members.
It happens to me. The insured person ends up not using their insurance and paying cash instead and/or using GoodRx, and paying a third of what it cost through insurance.
There are a lot of articles out there, here’s one: https://info.rxsafe.com/blog/new-clawbacks-coming-in-2019
You are spot on. Every 3rd party payer you have contact is getting a salary/benefits. You are paying everyone from the receptionist to the janitors to the person who mails the statements. You are paying people to write your checks for you (and skim off the top too).
Why are people taking all these drugs? They are completely unnecessary
Lets not forget congress has their fingers in the pie just like Ukraine deal.
Some fixes are cost less. Take my Type 2 diabetic strips, they come in the bottle CODE side up, touch them they error. Reverse them to blood intake right side up, few if any errors. The pricker can be made without the shooting mechanics smaller, cheaper, any one can prick a finger with out that spring loaded thing. I do as it leaves bruises. Which congress Critter has interest in the diabetic pie??
Instead of a new script being a full month or 90 days for retired Military, use samples especially, for drug sensitive patient to see if you can tolerate the expensive drugs. Not all generics are equal in the medication part. Especially those that go OTC. My Name brand Synthroid is 100% while the generic is 30% less medication. Military will NOT use generic it has so many issues. Truth to tell you don’t need to see the doc just have lab work run in most cases. PCP’s don’t do the small stuff any more. Ears were hurting, he looked said 65% EAR WAX.. instead of removing it, he said see your ENT, 2 weeks later a 2 hr + wait round trip for a 2 min his PA took to remove it, $600 office bill. I’ve never laid eyes on him. I see his Audiologist for my hearing aids, she doesn’t remove ear wax. PCP bill was over $500, 2 mins he could of removed the ear wax. Little Clinic at Kroger’s charges $175. IDIOT’s have a big racket going on.
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