LMS President’s Message, November, 2019
The Mysterious World of Drug Prices
By Charles L. Papp, MD
One of the essential elements of most physicians’ practices is the ability to prescribe well-tolerated, effective medications that patients can afford. When I started practice, most of the core medications I prescribed satisfied these criteria. Over the last two decades this has slowly changed. Medications that were once affordable are now expensive, effective medications require time-consuming prior authorizations, and some medications mysteriously become affected by shortages.
Physicians and staff find themselves unnecessarily and significantly burdened with the byzantine task of getting the right medicine for the right cost. Recently I went to renew a prescription for a nasal spray. I had used it for years, and it worked better than others I had tried. This year, because of a change in health plans, its cost was over $500. If you are wondering, I have not picked it up yet. I have seen this same problem affecting my patients who use a form of mesalamine for colitis. There are over a half-dozen types with different methods of delivery. Most are now generic. For many years these were affordable. Now a large number of prescriptions are over $250 or need prior authorization. Hours are spent by my staff trying to find a cheaper substitute only to find out it doesn’t work as well. I asked my two children who live in Europe to find the cost of mesalamine in Sweden and Germany. In both countries it was around $20 with no prior authorization. Why has it gotten this way in our country?
Drug pricing has become a complicated and secretive process. The pharmaceutical supply chain involves more than just pharmacies and manufacturers. One group of intermediaries are the pharmacy benefit managers or PBMs. Fifty years ago, they were established to help health plans control pharmacy costs by managing high-volume, low-dollar value claims. The original intent was simple enough, try to find ways to keep costs down for health plans and patients. They were able to do this by pioneering electronic claims and discounted mail order pharmacies. They then developed formularies with a tiered system defining which patient would receive which drug at what level of payment. Drug formularies started having from 3 to 5 different tiers. Like most businesses, over time they discovered ways to increase revenue and expand their business models.
Today about 70% of all prescription claims are processed by just three PBMs, and all three own large mail-order pharmacies and three of the four largest specialty pharmacies. PBMs now use drug tiers and other mechanisms to obtain financial concessions from drug manufacturers. Often this is done through rebates. A manufacturer will give a rebate to a PBM to obtain a better tier rating. These rebates are ostensibly to lower costs, but a 2016 study in Drug Channels suggests some or all the excess profits from higher than projected rebates are retained by the PBM. Offering an attractive rebate encourages the manufacturer to set an ever-higher list price so they can increase the rebate they give back to the PBM. This leaves a patient who pays list price and has a high deductible stuck paying ever-increasing prices.
In my practice this has been made clear by the cost of the lowly steroid hemorrhoid suppository. For years this was a cheap, first-line medical approach for hemorrhoid symptoms. Over the last few years we have been stymied by the number of patients who call, saying the prescription costs over $250. That averages out to about $25 per suppository. After some clever research by my staff, we found that a local pharmacy could make them for $3 apiece. I find it astonishing that a local independent pharmacy could sell the product for about 12% of a major manufacturer’s price.
Another example relates to cardiovascular drugs. In 2018, JAMA published a study that suggested cardiovascular patients frequently pay a copayment that actually exceeds the true price of certain generic drugs. These include amlodipine, simvastatin, lisinopril, hydrochlorothiazide, and metoprolol. The overpayments range from $6.33 to $13.21 per prescription.
There are many other players in the drug pricing process beside PBMs. These include the manufacturer, wholesaler, pharmacy, and health plans. There is little transparency in the way the complicated rebates, chargebacks, reimbursements, dispensing fees, and processing fees are negotiated between them. As patients, we are left hoping the right thing is being done as we pay list prices, insurance premiums, and copays.
One suggestion to deal with high drug costs has been to buy from Canada or other foreign countries. The problem with this is that they are not subject to FDA standards. For this reason, a patient could be purchasing counterfeit, substandard, or adulterated medicines. For almost ten years the Secretary of Health and Human Services has had the authority to permit medications to be imported from Canada if it could be certified they didn’t add risk or cost. To date, none of the Secretaries, both Republican and Democratic, have been able to make these certifications.
Rather than importing drugs from other countries, the solution is to fix our own system. Currently there are too many middle managers, not enough transparency, and inadequate competition. The system needs less spent on management and more invested in lowering prices. Competition needs to be simplified. The pharmaceutical industry needs to be more like traditional retail businesses and less like the Wall Street brokerages of the 1990s. There should be risk taken by all the players in the distribution channels if patient costs are not minimized. Profits should not be decoupled from lower patient costs.
This year there have been many politicians proposing bills to lower drug prices including President Trump, Speaker Pelosi, Senator Grassley, and Rep. Guthrie from Kentucky. Right now, the iron is hot. The need is recognized, and bills are being written. The last thing we need though is to trade one bad system for another. The legislators need our input. Let them know the struggles you are having with prescription drugs in your practice and the hardships experienced by your patients. I know some patients have gone so far as to skip their medications because of high prices.
If you want to have a bigger voice, get involved with the Lexington Medical Society, the Kentucky Medical Association, and the American Medical Association. You can visit state legislators on Physicians Day at the Capitol, federal legislators at the AMA Advocacy Conference in Washington D.C., and you can always email or call anytime. Medications are one of physicians’ most powerful tools. Let’s protect our ability to use these tools effectively.