Pharmaceutical giant Eli Lilly is about to face some fierce competition — from itself. The company just announced plans to offer a generic version of its own insulin drug, Humalog, at half price. The move comes just weeks after another big drug company, Amgen, release an identical version of its novel high-cholesterol treatment, Repatha, with a different code than the version currently on the market.
What gives?
For drug companies, price reductions aren’t as simple as they are for, say, car dealers looking to clear out last year’s stock.
Most health insurers hire “pharmacy benefit managers” to design and manage their drug plans. Because PBMs decide which medicines are covered, drug companies offer huge discounts — typically via “rebates” — in exchange for formulary access and tier placement. In 2017, drug companies extended more than $150 billion in rebates to PBMs.
About 90 percent of these rebates make it back to insurers, who generally use the savings to keep premiums low for patients and cover administrative costs. The other 10 percent is where PBMs make a sizeable percentage of their profit.
So when list prices are high, health insurers and PBMs benefit mightily. That’s why both groups work hard to prevent drug manufacturers from cutting prices.
For proof, consider the recent actions of OptumRx, one of the three largest PBMs. In December, the insurer sent a letter to pharmaceutical companies asking for 21 months’ notice before any price cuts. The insurer also demanded that the value of their rebates remain “equivalent” if prices fell.
Or consider that on many formularies, branded drugs have preferred treatment over their cheaper, generic counterparts. As researchers at Johns Hopkins found when looking at 2018 drug coverage in Medicare, “almost every plan has at least one branded drug on the formulary that’s in a better place than the generic.”
This doesn’t make any sense for patients — and certainly doesn’t help with overall healthcare spending. But it does benefit the bottom lines of insurers and PBMs. They enjoy high drug prices.
Making matters worse, insurers typically peg a patient’s copay to the original, “list” price of a drug.
Consider, again, Humalog. The list price is $275. With insulin products like this one, rebates of 70 percent are common. So an insurer might acquire the drug for a net price of $82.50.
If that insurer requires a 25-percent copay, a patient should pay just $20. But most insurers would expect that patient to shell out nearly $70, thus covering 85 percent of the drug’s true cost.
It’s no wonder why more and more Americans fret about high out-of-pocket costs at the pharmacy. Rising pharmacy costs are especially problematic for patients with multiple chronic diseases who rely on numerous prescription drugs. Today’s system leaves the sickest patients with the largest bills — and motivates many to simply skip or ignore their prescriptions.
High pharmacy costs are a big reason why nonadherence to medication regimens has become such a costly, serious issue. Research shows that non-adherence causes at least 10 percent of hospitalizations and costs the rest of the healthcare system upwards of $289 billion annually.
Fixing the drug pricing system needn’t be complicated. PBMs and insurers essentially force drug companies to offer secret kickbacks. This isn’t right — and shouldn’t be legal.
Earlier this year, the Trump administration proposed a change to federal anti-kickback statutes that would prohibit drug makers from offering rebates on drugs covered by Medicaid and Medicare Part D — unless those rebates are shared directly with patients at the pharmacy counter.
That’s a good first step. But it needs to be expanded to the entire market. A new study from my organization, the Partnership to Fight Chronic Disease, found that making manufacturer rebates for diabetes medicines available at the point of sale would save patients more than $3 billion annually. That’s an extra $791, each year, for each of the 30 million Americans living with diabetes.
For Americans who rely on prescription drugs to stay healthy, every penny counts. Authorized generics will certainly offer some relief. But real change will only come when the whole system of drug rebates changes.
Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.