USA: 2 Things the Biden Administration can do Now to Lower Costs at the Pharmacy

main_img

PhRMA’s Stephen J. Ubl outlines two ways in which the new US presidency can help lower healthcare costs and why biopharmaceutical companies support changes to the system that can lower US patients’ out-of-pocket spending and continue to drive innovation.

 

By bringing an end to the pandemic and lowering out-of-pocket costs, our economy will finally be able to regain solid footing

 

For patients who need life-saving medicines, unpredictable out-of-pocket costs can be crushing. The Biden Administration has signaled it wants to lower US patients’ health costs. Here are two good places to start: reforming the broken rebate system and making coupons count toward annual out-of-pocket limits.

 

First, it’s important to understand the game that insurers and middlemen, known as pharmacy benefit managers (PBMs), play with rebates on prescriptions. Over the past several years, PBMs and health plans have consolidated, creating significant leverage to negotiate discounts on prescriptions. In 2018, nearly half of every dollar spent on brand medicines went to various supply chain middlemen like PBMs and insurance companies – not the research companies that develop life-saving medicines.

 

Rebates are based on a percentage of a medicine’s list price. It’s no surprise, then, that PBMs and the health plans they work for tend to favor brand medicines with high list prices and large rebates, nor that they exclude more affordable medicines from their health plan formularies. As a bipartisan report by the Senate Finance Committee recently noted, “PBMs have an incentive for manufacturers to keep list prices high.”

 

Given the steep discounts that health plans and PBMs receive, one might assume that patients’ out-of-pocket costs would decline as a result. But that’s often not the case. Insurers and PBMs do not always pass those savings on to patients at the pharmacy counter, as patients with deductibles and coinsurance often pay their out-of-pocket costs based on the list price of a medicine rather than on the discounted price their insurer receives.

 

This broken system hurts patients, particularly those with chronic conditions who rely on prescription medicines to manage their disease. Consider patients with diabetes. Last year, market dynamics lowered the net price of insulins by 83% on average, according to analysis of a SSR Health report. But insurers and PBMs often pocket those sizable discounts and rebates instead of passing them on to their customers. According to IQVIA, patients with deductibles and co-insurance who took brand-name diabetes medicines in 2019 paid 3.6 times more out of pocket, on average, compared to patients with flat copays.

 

Unable to afford high out-of-pocket costs, some patients simply can’t take the medicines their doctors prescribe. As one example, 34% of HIV patients abandon their newly prescribed medicines when the amount due at the pharmacy counter exceeds $250. The consequences spiral from there. Research shows that when people leave their prescriptions at the counter, it leads to worse health outcomes and more spending throughout the health care system.

 

Patients often turn to cost-sharing assistance provided by biopharmaceutical companies to better afford their out-of-pocket costs. This assistance can save patients hundreds to thousands of dollars each year.

 

But health plans are increasingly using what are known as “accumulator adjustment programs.” Behind the technical name is an insurance scheme that drives up costs for patients. These programs exclude cost-sharing assistance from patients’ deductibles and out-of-pocket maximums, leaving millions of Americans at risk for surprise costs. In fact, half of all individuals with commercial health insurance are enrolled in health plans that implement these harmful programs on at least some medicines. These insurance practices can leave patients at the same place they started – stuck at the pharmacy counter with unaffordable out-of-pocket costs.

 

America’s biopharmaceutical companies support changes to the system that can lower patients’ costs and continue to drive innovation. First, reforming the rebate system could help reduce patients’ out-of-pocket costs because health plans would finally be required to pass on negotiated savings to patients. When people are better able to afford their medicines, they will be better able to adhere to their doctors’ recommendations and enjoy better health outcomes. Second, rebate reform would shift incentives to favour lower-cost medicines, and it would help drive market competition. Those are key ingredients in jumpstarting the innovation that the biopharmaceutical industry thrives on – and that helps patients thrive, too.

 

We also need to stop the current assault on cost-sharing assistance. Accumulator adjustment program growth has tripled in the past year alone, and policies on this issue that are holdovers from the previous administration could increase patients’ financial burdens. Our current leaders in Washington should fully consider the negative impacts these changes could have on patients and require plans to make coupons count toward annual out-of-pocket limits.

 

These are two steps the Biden Administration can take to help provide patients immediate relief at the pharmacy. There are other steps we need to take as well, and our industry wants to be part of the solution to make sure people get quality, affordable health care when they need it. In addition to these issues, we’re focused on capping what seniors pay out of pocket every year for prescriptions and making those costs more predictable – an especially important factor for people living on fixed incomes. Insurance deductibles and high out-of-pocket costs should never interfere with the care patients need.

 

We also recognize that, right now, most Americans are focused on getting COVID-19 under control and bringing the economy back. We are, too. Over the past year, our industry has developed safe and effective treatments and vaccines for COVID-19. We are working closely with governments, insurers and others to make sure these life-saving innovations are accessible and affordable around the world. By bringing an end to the pandemic and lowering out-of-pocket costs, our economy will finally be able to regain solid footing.

 

As broad as these issues may seem, our industry knows that each of them can be a real-life worry for a family caring for a loved one suffering from COVID-19, struggling with job loss because of the pandemic or unable to afford cost of a prescription. Our industry is eager to be a productive partner with the new administration each step of the way to address the real challenges facing Americans.


Related Content


Latest Report