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This post was contributed by Jennifer Hanscom, CEO of the Washington State Medical Association and a board member of the Physicians Foundation.
There’s rocket science and then there’s drug pricing. Maybe that’s a stretch, but it’s true that health care is complicated, and one only has to take a look at what drives drug prices to see just how complicated. The process of determining drug prices seems arbitrary and opaque, as evidenced in years past by the sudden and inexplicable increase of common drugs like EpiPens.
Unfortunately, when that happens, patients are caught in the middle.
I know this firsthand as a parent to three sons, two of whom have food allergies. Their allergies are not life-threatening, and Benadryl works at relieving their symptoms. But to be on the safe side, their physician also prescribes an epinephrine auto-injector (the most common is Mylan’s EpiPen two-pack), as standard practice. At the start of every school year, I dutifully fill the prescriptions and deliver to their respective school offices.
I’m grateful to have this medication at the ready, but it’s irritating to know that this medication experienced a 500 percent cost increase in 2015. Perhaps even more frustrating—according to the manufacturer’s label, that prescription will expire in 12 months and will need to be replaced.
On the bright side—I have good insurance, and the cost impact to me—while annoying—is minimal. But for many other patients who depend on the life-saving EpiPen, the impact of its extreme price increases may force a life-or-death decision to fill or not fill their prescription.
This is but one example in a series of exponentially rising drug prices. Out-of-pocket health spending on drugs in 2016 increased at the fastest rate in a decade. In fact, in 2017, the Commonwealth Fund reported that Americans spent more per capita on pharmaceuticals compared to other high-income countries.
Skyrocketing drug prices impact more than a patient’s wallet – it also impacts access to drugs their health depends upon. The costs are exacerbated by other drivers as well, such as insurance premiums, increased prior authorization requirements, and even increased taxes incurred when state budgets are impacted by unexpected cost hikes.
There are a number of factors that contribute to high drug prices in the U.S., two of which include the complexity and lack of transparency in the U.S. supply chain for prescription drugs. Commonwealth reports that unfortunately, important pricing information is often unavailable to physicians or patients at the point of care. This often leads to physicians unknowingly prescribing high-cost treatment plans to patients. What’s more, the current healthcare system involves many entities and a complicated flow of payments, which layers on the cost of care.
All these factors lead to frustrated physicians and patients and a drug marketplace that is inefficient. It also harms a patient’s access to drugs they need and destroys the potential for price competition.
All this said, in balancing drug prices, we can’t ignore the fact that other health care priorities may suffer. To control costs, insurance companies might implement ever-more burdensome prior authorizations that require physicians to justify a patient’s need for certain drugs. This impacts care, causes delay and reduces clinical time to provide that care.
What can be done?
The first step to mitigate rising drug prices is to shine a light on how prices are determined by key players : drug manufacturers, pharmacy benefit managers and insurers.
Next, we need more information on how and why drug companies determine when the price of a drug should change, in addition to full disclosure about how pharmacy benefit managers and insurance companies negotiate prices. Those negotiations must no longer be held behind closed doors, hidden from consumers who need these drugs.
Transparency and accountability would make a big difference in costs. When physicians and consumers are armed with an accurate expectation of a patient’s out of pocket costs, together they can make better decisions about which prescriptions are right for the patient.
Ultimately, if physicians have the information they need to prescribe the proper medications to their patients, patients are able to get the care they need. If these changes are not set in motion, and instead pharmaceutical costs go unchecked, our efforts to reduce waste and inefficiencies in health care will be for naught.
