• February 19, 2019

GUEST VIEW: What really causes drug prices to rise? - Odessa American: Guest Columns

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GUEST VIEW: What really causes drug prices to rise?

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Posted: Sunday, February 10, 2019 3:30 am

Democrats and Republicans alike are lining up to criticize pharmaceutical companies for gouging customers and stranding sick patients.

President Donald Trump tweeted that drug companies “should be ashamed that they have raised drug prices for no reason.” Senator Dick Durbin, an Illinois Democrat who disagrees with the President on virtually everything else, is leading a charge to clamp down on drug prices, which he claims are the “#1 driver for increases in premiums” for health insurance.

These concerns are justified, but the blame is misplaced. Many patients do face high prices at the pharmacy, but that’s not because of drug company predation. The problem: the middlemen sitting between manufacturers and patients.

Pharmaceutical companies regularly negotiate substantial discounts with insurers, pharmacy benefit managers, and other supply chain players. These discounts shave down the price of the average brand-name drug by about a third.

Discounts have kept drug prices in check. In 2017, the average cost of brand-name pharmaceuticals increased just 2 percent — a percent increase well below that of doctor’s visits, hospital stays, and other parts of the healthcare sector.

Generic drugs have also curbed costs. Generics are cheaper than the brand-name drugs they’re copied from. Over the last decade, generic drugs have reduced patient health care costs by an estimated $1.67 trillion.

By preventing disease, patients don’t develop conditions requiring more invasive, expensive treatments down the road. Every dollar spent on drugs could save up to $10 in avoided ER visits and hospitalizations for patients with congestive heart failure, high blood pressure, diabetes, and more.

But then, the mystery: Given the heavy discounts on brand name products and the prevalence of low-cost generics, why do many patients still face high prices when they fill their prescriptions?

Because health insurers and other middlemen have steadily ratcheted up their cost-sharing requirements. The product price holds steady, but patients bare an increasingly large slice of the cost. Since 2006, insurance deductibles have increased by 350 percent and co-insurance has jumped 89 percent.

Instead of passing discounts to patients, insurers pocket them. More than half of the out-of-pocket requirements for brand name drugs in commercial health insurance are based on the full list price of the drug.

In other words, insurers act as if those discounts don’t exist.

This abuse fuels an odd phenomenon: for some patients, buying a drug with insurance costs more than paying for it directly out-of-pocket. Roughly 40 percent of brand name drugs are more expensive if patients use insurance.

The New York Times recently profiled a UnitedHealthcare customer who went to fill his prescription for a generic cholesterol drug. He was told he owed $84. That patient later searched online and found the same drug for just $45.

This mismatch happens all the time.

Voters and their elected officials have ample reason to be angry about sky-high drug prices, but pointing fingers at drug manufacturers isn’t helpful. Drug manufacturers have kept prices in check with substantial discounts and low-cost generics.

Sandip Shah is the founder and president of Market Access Solutions, a global market access consultancy, where he develops strategies to optimize patient access to life-changing therapies.

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