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Pharmacy Outlook: Stephen Ubl, PhRMA

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Stephen Ubl

Throughout 2021, lawmakers engaged in a robust debate over ways to lower the cost of prescription drugs. Our industry was at the center of this debate, fighting for reforms that would lower costs at the pharmacy while preserving patient access to life-saving medicines and future innovation. Unfortunately, Congress refused to take a holistic approach that would address the real affordability challenges patients experience, which means there is still a lot of work ahead to ensure every patient can access and afford the medicines they need.

Improving patient affordability issues requires an accurate diagnosis of the problem. For instance, net prices for brand medicines have increased under the rate of inflation for the past five years, and in 2020 they actually declined 2.9%, on average. That’s because biopharmaceutical companies provide rebates, discounts and other payments to middlemen known as pharmacy benefit managers, health plans, the government and other entities, savings that totaled $187 billion in 2020. In fact, roughly half of every dollar spent on brand medicines goes to the supply chain and other entities, not the biopharmaceutical company that developed and manufactured the medicine.

Take insulin as an example. In 2021, rebates, discounts and other payments lowered the net cost of commonly used insulins by an average of 84%. In fact, net treatment costs for these insulins are 20% lower today than in 2007. But if the cost of medicines is going down for health plans, why doesn’t it always feel that way for patients?

Rebates negotiated by middlemen are not always passed along to patients at the pharmacy counter: In a nationwide survey we conducted last year, 30% of insured Americans reported facing financial barriers to receiving care, like unaffordable out-of-pocket costs. And unfortunately, nearly half of commercially insured patients still pay based on the full, undiscounted price for medicines rather than the negotiated price that their insurer pays. These patients have health plans that subject them to deductibles and coinsurance.

Insurance practices can result in big differences in what patients pay at the pharmacy counter: Compared to patients with fixed co-pays, patients with deductibles and co-insurance taking brand medicines to treat HIV paid, on average, 10 times more out of pocket in 2019. Last year, more than half of patients with a high-deductible health plan reported that they had trouble taking their medicines as prescribed by a doctor.

It’s not right that patients with insurance can’t afford their medicines because PBMs and health plans refuse to share rebates and discounts with patients. Unfortunately, the way our health care system is structured gives middlemen and insurers every incentive to do so. A Senate Finance Committee investigation concluded that “PBMs have an incentive for manufacturers to keep list prices high, since the rebates, discounts and fees PBMs negotiate are based on a percentage of a drug’s list price — and PBMs retain at least a portion of what they negotiate.”

Insurance companies and PBMs argue that these rebates and discounts are used to lower monthly premiums for everyone. But sick patients should not be forced to subsidize costs for the healthy, and voters agree. When asked, 59% of adults with insurance coverage say they would prefer paying lower out-of-pocket costs compared to paying lower premiums each month. And for those with serious conditions like autoimmune and infectious diseases, that support grows to 78% and 74%, respectively.

Unfortunately, a system plagued by perverse incentives isn’t the only challenge patients face today. Health plans and PBMs also use various tactics, known as utilization management, to reduce their spending on medicines at the expense of patients. These tactics include requiring patients to get their health insurer’s prior authorization before they can pick up a prescription or to fail first on a medicine preferred by the health plan even if it wasn’t prescribed by a doctor.

A recent report from GoodRx found that the average number of medicines covered by Medicare Part D that are subject to utilization management restrictions increased from 27% in 2010 to 47% in 2020. And another study published in Health Affairs found more than half of the fail-first policies developed by health plans that they looked at were more restrictive than recommended clinical guidelines.

These insurer practices risk impeding access to medicines: A survey found that a quarter of patients reported waiting for their insurer to provide prior authorization before accessing a medication their doctor has prescribed, and one in five Americans reported that their insurer required their doctor to prescribe a different medicine than the one the doctor believed would be most effective.

Insurers shouldn’t make these kinds of decisions.

The increasing use of these restrictive tools is especially concerning considering recent research that shows utilization management restrictions are more likely to affect the sickest and most vulnerable patients in our health care system. For instance, Americans with autoimmune diseases, including allergies and diabetes, are more likely to report experiences with access barriers, including prior authorization and failing first, than other Americans who take prescription medicines. And Black and Hispanic Americans are more likely to report insurer-imposed barriers than white Americans.

We need patient-centered solutions that make insurance work like insurance, not payer practices like step therapy and prior authorization. Patients and providers shouldn’t have to overcome time-consuming hurdles before a medicine is covered.

When patients can’t adhere to the treatment plan prescribed by their doctor, they risk falling into a daunting cycle of compounding health complications and accumulating medical costs. According to a recent survey of voters, 85% of patients who were nonadherent to their medicines had to seek additional health care services as a result.

It’s time for policy makers to finally address the barriers between patients and their medicines that insurers and middlemen propagate so Americans can get a fairer deal at the pharmacy counter.

One way is to require rebates and discounts to be shared with patients at the pharmacy counter. West Virginia took the lead on this when it became the first state in the nation to enact legislation to do just that last year. This bipartisan solution should serve as a road map for other states and the federal government as they look to help lower costs for patients.

Another way to lower patient costs is to require insurers to cover more medicines from day one. People managing chronic health conditions — like those with HIV and diabetes — should not have to pay a deductible at the pharmacy counter. Instead, they should have at least some of their medicines covered by their insurance from day one.

A third way to improve the health care system is to end the perverse incentives that lead to high out-of-pocket costs in the first place. Rather than having their compensation and fees tied to the price of a medicine, middlemen should get paid based on the services they provide. By ending the practice of tying middlemen compensation to medicine prices, we can help ensure patients aren’t left paying more for their medicine.

But even in a world where these three solutions are enacted, patients may still face barriers to care. That is why instead of the partisan rhetoric we saw last year, we need a holistic solution that looks at the entire health care system. Our industry remains ready to work with lawmakers on both sides of the aisle on reforms like the ones outlined here to do the unfinished work of making medicines more affordable and accessible for patients.

Stephen Ubl is the president and chief executive officer of Pharmaceutical Research and Manufacturers of America (PhRMA).


ECRM_06-01-22


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