Can Drug Costs Be Contained?

Pharmacists, with their firsthand knowledge of pricing and insurance issues, can play a key role in reining in costs thanks to their direct access to patients and ability to provide medication management services including preventive treatment. In an op-ed in The Hill last year, AACP EVP & CEO Dr. Lucinda L. Maine wrote, “The importance of saving lives through better prevention and treatment cannot be overstated. The American Association of Colleges of Pharmacy has long advocated for legislative and regulatory changes to professional practice that would help some 200 million Americans better manage their chronic diseases so that more lives could be saved. Increasing public access to and coverage for pharmacists’ medication management services is an essential component of the formula for achieving a healthier and more productive society. As the nation’s third largest health profession with frequent direct contact with patients, pharmacists are well situated to intervene on patients’ behalf.” As the administration moves toward greater regulation, the pharmacy community can advocate for itself by touting its role in helping patients understand why medication adherence leads to better health outcomes and lower costs.

Pharmacist-Patient Communication Key to Lowering Costs

Launched in 2009 as a partnership between the University of Southern California School of Pharmacy and the USC Price School of Public Policy, the USC Leonard D. Schaeffer Center for Health Policy & Economics provides action-oriented, evidence-based analysis to inform policy to address the nation’s healthcare challenges. Dr. Dana Goldman, the center’s director and a professor at the USC School of Pharmacy, noted that the United States is spending a larger fraction of its GDP on healthcare than any other nation by a considerable amount. Drugs are one of the most visible components of that spending. “People are facing high co-payments with their prescriptions. Everything is expensive in healthcare in some ways, but there’s this visceral response to the fact that patients are paying a disproportionate share of drug costs out of pocket,” Goldman explained.

The Trump administration is exploring how to tweak Medicare Part D and prescription drug costs. “How do you reduce costs to consumers—making sure you have reasonable coverage and out-of-pocket maximums—and then looking at how to make the supply chain more efficient? You have very expensive and sometimes rare products and it’s not clear where the rebates are going,” he said. Meanwhile, pharmacists are caught in the middle. “A good example is gag clauses,” he continued. “The market for generics is very competitive. In a lot of cases the price of the generic is actually less than the co-payment. Some pharmacists had gag clauses stating that they would not be able to tell the patients that the cost was much less. It puts them in a very awkward position. [Congress] just signed legislation that would ban that practice. That type of transparency will be very helpful to the pharmacist.” The two bills signed into law late last year ban the use of gag clauses by PBMs and pharmacies. These clauses prohibited pharmacists from telling customers when they could save money by paying cash instead of their insurance co-payment.

With bigger players having more market power, independent pharmacists are being squeezed. “It’s a challenge to be able to secure dispensing fees and other payments that are necessary to provide the level of support patients need,” he said. “As drugs are an important part of patients’ management of chronic disease, it creates a very important role for pharmacists. We have these practitioners who can help manage this and we need to figure how to utilize that. Looking at the scope of practice is very important because pharmacists can be a solution to this health policy conundrum.”

Goldman said pharmacists should be allowed to suggest substitutions and switch from a brand-name drug to a generic if the evidence supports it. “My doctor doesn’t know which statin is going to be cheaper,” he pointed out. “But we know that when people pay less they’ll be more adherent. The pharmacist knows all of this information and should be able to make care recommendations.”

Dr. Inmaculada Hernandez, assistant professor, pharmacy and therapeutics, University of Pittsburgh School of Pharmacy, agrees that patients often need help navigating complicated cost and insurance issues and that affordability can be a barrier. “We need to teach students to be familiar with how the healthcare system works and how it pays for drugs so they understand if they need to deal with prior authorization, co-pays and deductibles,” she said. “We need to expose student pharmacists to the research we are doing so they serve as advocates for the profession and understand how the whole system is paying for drugs, which is also tied to how pharmacists are paid. It’s crucial that we provide strong education in all of these areas so they can advocate for patients and also for our profession.”

More Transparency in Pricing Data

Hernandez’s research examines trends in drug prices and drivers of drug price increases, including to what extent it is due to new products entering the market. She found that with brand-name drugs, year over year inflation is the main driver of rising prices. Moreover, in certain markets, the entry of new drugs increases prices rather than leading to lower costs. “Often drug prices hit the headlines because of astronomic prices of novel therapies, however, inflation in the prices of widely used drugs also plays a very important role in rising prices, burden for payers and out-of-pocket costs,” she said. “The results are very contingent on what market we’re looking at. It also relates to the social pressure and specifics of the pharmaceutical market of each drug.”

Her research focused on pricing leads Hernandez to believe that there isn’t a single piece of regulation that can help the country control healthcare spending. “The U.S. healthcare system is very fragmented. Different markets are subject to different financial incentives,” she pointed out. “Europe hasn’t seen large price increases, so we should look at what they are doing. [European] countries have many policies to stop prices from going up, and it is this regulatory environment, not a single policy, which prevents price increases. It should be acknowledged, however, that most European countries have some sort of national healthcare system.” Given the fragmentation here, she added, the negotiating power is much lower, so some European policies may not be as effective in the United States.

Going forward, Hernandez said she wants to concentrate on figuring out to what extent net prices are changing compared to list prices. “Every time we present findings, we get heavy criticism because most of our research is related to list prices, but that’s the data we have,” she said. “We want to look at net pricing data. In what markets is competition happening? In what markets do list prices translate into net price increases? We need to provide transparency about what we’re paying for drugs. The current system relies heavily on rebates, but it’s hard to fix the drug pricing problem without trying to increase transparency.”

Elsewhere, research by pharmacy school faculty is focused on the value that medication brings. Goldman believes more attention should be devoted to the reimbursement side. “This move toward personalized medicine means we need to integrate economics with pharmacogenomics and epidemiology to understand who benefits from what treatment,” he said. “Pharmacy schools need to take a leadership role in saying we’re spending too much and in some cases we’re spending too little. We are undertreating some things and overtreating others.”

He sees schools starting to focus on outcomes research, which is an important part of how products are covered, priced and reimbursed globally. “It’s exciting to me that we’re starting to see these changes in the United States,” he noted. “Pharmacy schools can start to be part of the solution in figuring out which drugs to cover and who benefits. We can move away from the traditional formulary design to ensuring that patients have better outcomes.”

Pharmacists on the Front Lines

Discussions around drug pricing include taking a hard look at Medicare, which is expected to account for 18 percent of federal spending by 2028, according to the Schaeffer Center. There is a particular sense of urgency about addressing Medicare Part D, the Medicare prescription drug benefit. A proposed plan to end kickbacks in the pharmacy distribution chain would lower the list prices of drugs in the Medicare Part D system. PBMs argue that eliminating rebates could result in higher costs for seniors who have Part D insurance. But earlier this year, Goldman and his colleague Dr. Erin Trish estimated that beneficiaries would be responsible for only a small portion of the increase (an average of $4.31 per month, which is in line with the estimate from HHS) and most would be insulated from the costs.

“The Affordable Care Act was a success in starting to close the donut hole, but with the program as a whole there was a lot of concern about making sure that plans would participate,” Goldman explained. “We set it up with the government providing reinsurance. In some ways you can think of it as a policy program on training wheels. It’s time to take the training wheels off. There are a lot of plans playing in the space and we need to update the features they are offering. We’ve created some perverse incentives rather than have the plans truly compete. We need to revisit it.”

As the election approaches and healthcare spending continues to be in the spotlight, Goldman urges pharmacists to emphasize their crucial role in controlling costs. “Pharmacists have access to some of the most effective tools for managing chronic illness,” he said. “The key to saving money is keeping people out of the hospital. That puts pharmacists on the front lines. They play a role in making sure patients are adherent and are on the best regimens for their condition. They are part of the solution to the high cost of treating chronic illness.”

Hernandez said there has been a lot of talk without much action when it comes to controlling costs, but she is optimistic that change is coming. “I’m hopeful we’re in the best environment for something to happen on drug prices,” she said. “Around 80 percent of the public agrees that drug prices are too high. Both political parties recognize that this is a problem that needs to be addressed. With the Senate investigation on insulin prices, we have been talking to senators and it’s interesting to see people on both sides of the aisle want to work together. So I think we’re in the greatest time to get some regulation around this.”

Jane E. Rooney is managing editor of Academic Pharmacy Now.