How can President Trump and Health and Human Services Secretary Alex Azar deliver on their new “American Patients First” plan to reduce prescription drug costs?
By focusing their evolving blueprint on the needs of patients, not lobbyists, who spend hundreds of millions of dollars each year to exert control over the many levers of health care policy. Patients are counting on reforms that don’t break what is working in an attempt to fix what’s not.
This is especially true for the half of American adults living with chronic conditions, many of whom are actually receiving value from the current system even if it is in a Kafkaesque fashion. Disrupting their care delivery could have disastrous consequences.
Consider Lisa Viviano, a patient living in Springfield, Illinois, who was diagnosed with MEN-1, a rare, hereditary condition involving a non-malignant tumor, which has rendered her parathyroid gland non-functional. She takes five prescription medicines per day and one specialty medicine. The specialty medicine literally keeps her alive. It has a “list price” of around $10,000 per month, but Lisa does not worry about this because it is covered by her Medicare Part D plan and a copay assistance program for rare disease patients.
The key to successful reform will be to address such high costs to the system without disrupting the value that patients like Lisa are receiving. By following these five steps, the American Patients First plan can thread this needle:
(1) Bring prescription drug prices in line with the NET price or average sales price and phase out the complicated rebate system, which drives up list prices. Azar has started by asking the pharmaceutical industry to lower their prices. This is one of the best ways to do it. According to new data from IQVIA, the NET price paid for medicines has barely risen at all. It will not be easy to unravel the rebate structure, but a system that is constantly having to explain itself needs reform. As innovators, this is the moment to lead the change.
(2) Bring transparency to pharmacy benefit managers, which are middlemen that control and cartelize the prescription drug supply chain. PBMs are largely responsible for what Food and Drug Administration chief Scott Gottlieb calls “Kabuki drug pricing.” Prescription drug delivery is a Byzantine maze of backdoor deals that must be exposed through real transparency reforms — not just more streamlined secrets. As Azar articulated in his speech this week, PBMs must also stop placing pharmacists under a gag clause to prevent them from informing patients they could get their drugs cheaper by paying cash.
(3) Bring pricing transparency not only to prescription drug delivery but also to insurance companies to address the record premiums, deductibles and coinsurance — all of which reduce access and impede quality of life. Deductibles have risen by 300 percent since 2006 and coinsurance costs have nearly doubled. The number of privately insured Americans with high-deductible plans has risen by 40 percent since just 2011.
(4) End the abuse of existing drug discount programs. Hospitals are abusing the 340B drug discount program, which requires drug manufacturers provide outpatient drugs to participating hospitals at deep discounts. In theory, hospitals are supposed to pass these savings on to low-income patients. In practice, hospitals routinely charge market rates (or more) and pocket the difference. The same pricing transparency that Trump and Azar want to bring to the prescription drug delivery system can also be brought to hospitals. This will provide more information for patients, allowing them to be discerning consumers, putting downward pressure on prices.
(5) Focus on the road — not the street. How the stock market reacts to drug pricing proposals is not nearly as important as the patients who are being affected. Stock prices of PBMs and other industry players have increased rapidly in recent years. They have benefited from the cronyism and oligopoly in the market. Similarly, reformers must ignore — or deeply discount — the protests of lobbyists and trade groups who claim the sky will fall with every reform that disrupts their clients’ status quo.
Drug price reformers, led by Trump, should be applauded for addressing the broken prescription drug delivery system that too often overcharges and underdelivers. By keeping patients in mind and following these five steps, American Patients First reforms can bring down costs without placing more of a burden on patients who they are trying to help.
