Who’s Controlling the Cost of Prescription Drugs?

A recent headline in the business section of my local newspaper’s website reported that a large pharmacy benefit manager (PBM) had listed a number of drugs it would not cover in 2017. The accompanying article cited a press release in which the company explained it was acting in order to better control healthcare costs to employers and patients.

Great, right? Everyone knows the pharmaceutical industry overcharges for its wonder drugs, and it’s about time somebody put a stop to it. At least, that’s what some self-appointed experts put forth as common knowledge. Unfortunately, the basis of their claim often rests on a misunderstanding, or, misrepresentation, of the facts.

First, some clarification. Most of us who have health insurance carry two separate types of coverage, one for care delivered in a physician’s office or hospital, and another for prescription drugs. Many health insurers contract with a separate company to administer their prescription drug program, hence the partnership with a Pharmacy Benefit Manager, or PBM. The PBM represents the health insurance company and/or employer in negotiations with pharmaceutical manufacturers on pricing and availability of medications. The goal is to deliver safe, effective treatments at affordable prices. Drug manufacturers typically offer these purchasers substantial discounts and rebates in order to be included on the PBM’s preferred medication list. Optimally, this holds down drug costs, especially for newer, brand-name medications.

But this arrangement can make it difficult for the average consumer, or watchdog, to determine the actual cost of a particular drug. PBMs are notoriously reluctant to disclose the true cost of the medications they buy, while critics focus on a drug’s listed retail price, a pre-discount price that virtually no PBM ever pays. This puts pharmaceutical companies in the unenviable position of having to defend themselves from charges of price gouging, while negotiating their way onto a PBM’s approved list without losing their shirt. Through all this, the patient is clueless as to whether the price they’re paying for their brand-name medication reflects a good value for money spent.

Even additional savings offered directly to patients by pharma companies can experience tough sledding. Many pharmaceutical companies offer discount cards and/or rebates that patients can redeem at the point of sale at their local pharmacy or through mail order. A major obstacle is just knowing such discounts are available. Although sales reps often leave cards/coupons with doctors’ offices, the staff and prescribers are often too busy, or too confused by all the programs/materials to consistently distribute them to patients. Usually, these savings plans are also available at the companies’/products’ website, but patients may not even know such options exist.

Then there’s the roadblock sometimes thrown up by the PBM itself. These middlemen see direct-to-consumer rebates/discounts as an attempt by drug companies to bypass the negotiating  process. They argue, sometimes even via lawsuits, that their contractual agreements with pharmaceutical manufacturers preclude dealing directly with the ultimate customer. Some PBMs have gone so far as to announce they will not honor drug company discount programs offered directly to consumers!

While these battles rage, patients are often paying far more for their brand-name medications than they could be. We need a new approach to the marketing of prescription drugs. Either a more transparent process of drug purchasing by PBMs, so patients know the true cost of their medications, or allow the average consumer to fill their prescription directly with the manufacturer, so any discounts/rebates end up in the pocketbook of the person actually taking the medication.

Copyright 2016    Raymond T Kyle