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Finding a cure: The U.S. prescription drug pricing problem

Finding a cure: The U.S. prescription drug pricing problem

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Buck recently hosted a symposium focused on tackling the high cost of prescriptions drugs, featuring keynote speaker Ted Kennedy, Jr. and a robust panel discussion with Buck’s pharmacy, engagement, analytics and compliance consultants. This article highlights key insights shared at the event, including both the factors contributing to the high costs of prescription drugs as well as steps plan sponsors and individual consumers can take to manage costs and improve outcomes.

Event highlights and key insights 

Ongoing oversight and rapid response to issues found in the prescription benefit is necessary. Managing this component of a benefits program has become a game of whack-a-mole for employers. As soon as you address one issue, another new one pops up. Here are the key takeaways from the session:

  • Given the current atmosphere in Washington, the most likely place (and best hope) for action on soaring drug prices rests with individual states.
  • Mining medical, prescription, disability, and related data can support the development of tailored solutions for each employer.
  • Greater transparency in prescription drug pricing is needed to help people make informed decisions concerning their treatment.
  • Employers should offer both high-touch and high-tech solutions to support employees so they are equipped to use their prescription drug benefit effectively and can better manage their health.

What accounts for the rise in prescription drug costs?

The Kaiser Family Foundation reports the increase in drug spending can be traced to higher prices for existing drugs, fewer expired patents, and new brand name drugs.

Of the major initiatives being considered at the federal level, Mr. Kennedy stated that the only one not blocked or withdrawn by the Administration was a rule addressing Medicare Part D and Medicare Advantage plans designed to lower drug prices and reduce patient out-of-pocket costs. These changes, according to the Centers for Medicare & Medicaid Services (CMS), will ensure that patients have greater transparency into the cost of prescription drugs covered under Part D and will also enable Medicare Advantage plans to negotiate better prices for physician-administered medicines covered under Part C.

Other initiatives that are still pending at the federal level include an international pricing index, pharmacy benefit manager and prescription rebate reforms, and price transparency.

States taking a variety of actions to address drug prices.

Today’s pharmacy reality:

  • More than 60% of American adults live with a chronic condition requiring medication.
  • 80% of Americans consider prescription drug costs to be unreasonable.
  • The cost of 20 of the top 25 Medicare Part D drugs are increasing 3 to 9 times the rate of inflation.*

The greatest action on drug pricing initiatives is happening at the state level: Over 200 state bills have been introduced or passed regarding pricing transparency, importing pharmaceuticals, eliminating the pharmacist gag rule, and reforming Medicaid.

In California, for example, a 2017 transparency law requiring drug makers to disclose and justify price increases revealed an 8% annual increase in prescription drug list prices. Approximately 68% of manufacturers failed to provide explanations when submitting data. The law is facing legal challenges.

Meanwhile, the Trump Administration may approve a Florida plan to import lower-cost prescription drugs from abroad for use by residents. Florida submitted a conceptual plan to the Department of Health and Human Services (HHS) on August 20, 2019. Under the plan, Floridians could eventually gain access to cheaper prescription drugs imported from Canada. Supporters emphasize that these imported drugs would have to meet federal Food and Drug Administration standards and note that 80 percent of drug ingredients used in the U.S. are already foreign-made.

What strategies can plan sponsors take to manage prescription costs?

There are 2,300 new drugs in the pipeline, out of which over 2,000 are specialty medications, and thus likely to be high cost. By 2021, it is estimated that over 50% of prescription drug costs will be for specialty medications and by 2030, specialty medications will account for 50% of overall health care costs.”

To manage the growing costs, it starts with the data – understanding what’s actually happening with prescription and medical claims costs. That includes finding prescription claims that are paid from and reported within your medical costs based on the site of care. For example: The cost of an infusion medication, when administered in an outpatient hospital setting instead of in a provider’s office or in the home, can be exponentially higher.

Possible solutions include negotiating with your Pharmacy Benefit Manager (PBM), reviewing formularies, and managing specialty drugs’ site of administration.

A related strategy that some employers are already taking involves innovative analytics approaches to understanding pharmacy data. Monitoring in real time gives employers a timelier indication of trend, usage, and true patient engagement. And by taking part in large data-pool monitoring, machine learning applications can uncover longer term pricing and prescribing patterns for compound drugs, specialty pharma programs, and the like.

Today’s challenge is to find the right balance in value for pharmaceuticals – not to stand between the patient and their medications, or to stifle innovation by the manufacturers.

Learn more: Listen to our on-demand webinar “What’s hiding in your specialty drug claim costs?” Our blog “At what price life and who pays that price?” examines one recently approved specialty drug and the challenge it poses for plan sponsors given its hefty price tag.

We can help people make informed decisions about prescription drug costs.

Solutions can also be found at the individual consumer level.

At a minimum, employers should heavily promote the tools insurers offer as a first step to better transparency. In the past few years there have been significant advances in the self-service pricing tools from the insurers so it’s important that we get that word out to our employees.

Many PBM online tools, for example, let you type in the drug name to determine whether it’s in the formulary, and, when available, provides a generic or even therapeutic alternative; these tools will even inform the user of the price for mail order or local pharmacy pick-up. PBM scan also assist employees by alerting them of possible negative drug interactions, duplications in medications, and the like.

As good as these tools have become, in a completely transparent world individuals would also be able to see the cost without insurance as a pricing option so that they can, in consultation with their physician, choose wisely – and, where possible, obtain a lower-priced, therapeutically equivalent drug that will save both them and the plan money.

In some instances, rather than exploring alternatives, physicians may encourage patients to comparison shop for the prescribed drug, even if they are insured, to find prices at all local pharmacies. While this may seem to be a good option for the individual consumer, it can have negative consequences: By going around the PBM the individual loses out on the other services the PBM provides (as highlighted previously). Circumventing the plan benefit also impacts the view plan sponsors and their other vendors (such as disease management providers) have into actual drug utilization across the member population.

To get a good perspective on emerging technology, it’s probably best to look at the market disrupters, and no organization is more of a disrupter than Amazon. Since Amazon received approval to operate as a pharmacy in most states, we can expect the same degree of price transparency and competition that it brings to retail goods in general. And one day soon, we may be asking Alexa for the best deal on drugs – and then getting them shipped immediately.

Along with high tech, health care advocacy providers are ramping up “high touch” approaches. Their AI tools are helping providers develop a more tailored health care regimen for their members, guiding them to drug purchase and utilization recommendations based on available data. In summary, by combining precision medicine with precision engagement, plan sponsors can support the best possible outcome for both the individual and the organization.

Regulations will continue to impact the prescription drug landscape, so compliance issues will need to be continually monitored.

Employers also need to carefully review the impact of all proposed federal laws and regulations on prescription drugs to determine the impact on their efforts to control plan costs and provide benefits to employees and retirees. Even laws focused on Medicare and Medicaid can impact private plans and alter the prescription drug delivery system and marketplace.

For example, compliance with proposed regulations issued earlier this year on the treatment of manufacturer drug coupons under accumulator programs would have disrupted many employer efforts to control pharmacy costs. (Accumulator programs target specialty drugs for which a manufacturer provides copayment assistance, shifting a majority of drug costs to the plan sponsor (i.e., the employer). They can discourage the appropriate utilization of specialty therapies, thereby increasing costs to plans by not utilizing more lower cost therapies.)

The guidance would have also caused some employer high deductible health plan (HDHP) programs to no longer be complaint with the federal requirements for health savings account (HSA) programs. Similarly, proposed changes earlier this year in the treatment of rebates for Medicare, requiring sharing of manufacturer rebates with participants at the point of sale, would have had a significant impact on some employer retiree plans. The same is true for a proposed law for similar requirements for private, non-Medicare programs.

In both cases, input provided by employers and employer benefit associations have helped to inform the lawmakers and regulators, resulting in pulling their proposed guidance. However, it seems very likely that the Feds will issue revised guidance in the coming year on both these issues and employers will need to carefully review the new guidelines.

We must also focus on patient outcomes.

Also important to this discussion are change management strategies that support health engagement, education, and empowerment. Employers are focused not just on the cost of the medications but also patient outcomes. Efforts to control costs aren’t meant to interfere with getting the right prescription drugs to patients (at the right time, in the right setting), or not covering necessary costs. In fact, many patients with chronic conditions who use their medications in adherence to treatment protocols will better manage their condition – and quality of life – and in turn cost a health plan less.

Still, it’s clear that high pharmaceutical costs can have serious consequences on patients’ ability to stay on their medications and follow doctors’ orders. The goal is to lower employee distraction from the anxiety over drug costs that affect their performance on the job, so they can be healthy in coming to work each day. This is in fact the foundation for the new social contract between employers and their employees.

The challenge for all is finding a solution to the high cost of prescription drugs that ensures individuals can obtain the medications they need to be as healthy as they can be, at a price that both they and their employer can afford.


Mr. Kennedy is a passionate advocate for bi-partisan healthcare reform. A former Connecticut State Senator, he is a member of the Health Care and Life Sciences practice of Epstein Becker Green and the Board Chair of the American Association of People with Disabilities.

Joining Mr. Kennedy on the panel from Buck were Ruth Hunt, an engagement and communication principal, Gail Levenson, a pharmacist and benefit consultant, Scot Marcotte, Chief Technology Officer, Rich Stover, a health compliance consultant and team leader, and David Gillen, a data intelligence expert and health benefit consultant.

* SOURCES: Juliette Cubanski & Tricia Neuman, Assessing Drug Price Increases in Medicare Part D and the Implications of Inflation Limits, Kaiser Family Foundation (Oct. 18, 2019); Christopher J. Morton & Amy Kapczynski, Assessing Drug Pricing Reform Proposals: The Real Leverage and Benefits of Competitive Licensing, Health Affairs (Nov. 4, 2019); K. Blankenship, The top 20 drugs by 2018 US sales. FiercePharma (June 17, 2019); Barbara Feder Ostrov & Harriet Blair Rowan, California’s new transparency law shows staggering rise in wholesale drug prices, LA Times (Oct. 11, 2019) ; Alan Ikeya et al., Containing the escalating costs of prescription drug benefits, BizJournals (Apr. 1, 2019).