Deborah Abrams Kaplan

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The good news is that generic drug prices are continuing to decrease. As for the rest of the news about generics and biosimilars and their practices, it is complicated. For some classes of drugs, generics remain a price-lowering, cost-saving success. For others, prices are so low that manufacturers may leave the marketplace, creating an opportunity for monopoly pricing. For still others, there is an untapped opportunity for cost savings. “You cannot look at the generic drug and biosimilar markets as homogenous marketplaces,” says Martin VanTrieste, president and CEO of Civica Rx, a nonprofit company formed in 2018 to manufacture generic drugs.

For many generics critical to patient care, there are no more savings to squeeze out, says VanTrieste: “If we continue to do that, they will go away.” Some manufacturers already produce them at a loss, he adds. But for drugs just coming off patent, “there’s a great opportunity to drive the price down to a more affordable level.” Generic manufacturers need to file extensive FDA abbreviated new drug applications (ANDAs) and potentially fight off patent lawsuits from brand-name manufacturers first.

Then there are biosimilars, with a more extensive FDA approval process requiring clinical trials, and a more expensive manufacturing process. That lemon is not yet squeezed.

Almost 40 years ago, the Hatch-Waxman Act, known formally as the Drug Price Competition and Patent Term Restoration Act, ushered in a new era at the FDA, speeding up approvals and creating a pathway for approving generic medications. Before Hatch-Waxman, less than 20% of prescribed drugs were generic. Generics now comprise 89% of all prescriptions, according to the Association for Accessible Medicines, a trade group for the generics and biosimilars industry. The FDA has approved some 16,000 generic drug applications since passing the Hatch-Waxman Act. Amendments to the law in 2012 that created a user fee program for generic approvals have also been a major factor in getting more generics on the market.

Generics saved the U.S. healthcare system $293 billion in 2018 alone, according to the FDA, and various other tallies show the savings over the past decade as totaling almost $2 trillion. Although prices have shifted over the years, the Express Scripts overall Price Prescription Index showed generics prices falling 37% between 2014 and 2018, while branded drug prices increased more than 60%. According to 46brooklyn Research, a nonprofit drug pricing research organization, generic drug prices have fallen this year compared with last, notwithstanding some predictions that the pandemic would have the opposite effect. 46brooklyn says driving the overall trend are falling prices for Concerta (methylphenidate), Colcrys (colchicine), Suboxone (buprenorphine-naloxone) and Tamiflu (oseltamivir suspension).

Not surprisingly, supply and demand have an influence on generic drug pricing. An FDA report showed that if the generic has no competition, its average manufacturer price — the price that wholesalers pay to manufacturers — is 39% lower than its brand-name equivalent. If there are two generic competitors, the prices are 54% lower and with four, 79% lower.

There’s a common misperception that a brand-name drug’s price drops when a generic is coming on the market, says Leigh Purvis, director of health care costs and access at the AARP Public Policy Institute. Instead, the brand usually increases its price or stays the same. “That makes it even more important to switch to the generic, because there’s an even greater price differential,” she says.

One reason for the brand increase is that companies sometimes raise the price of the brand-name drug in the months before the generic is available. As a result, the generics may end up with higher pricing than that of the brand-name drug, according to an analysis by GoodRx.

In the generic marketplace, about one-third of generic drugs lose money, one-third break even and one-third make money, according to VanTrieste. “The ones that are losing money still make those products to absorb capacity in their manufacturing plants to spread overhead around. It’s better to lose a little than lose a lot.”

But as soon as they can produce a money-making product, they’ll stop manufacturing the
money-losing one. That can cause drug shortages. Avoiding drug shortages is one of the reasons seven health systems and three philanthropies teamed up to start Civica in 2018.

“Civica produces on a cost-plus basis,” VanTrieste says. “Our prices are completely transparent and every member in Civica pays exactly the same price.” The organization works with other manufacturers to produce 41 generic medications in multiple dosage forms, with a goal of manufacturing 100 drugs by 2023.

Drug pricing in general is a black box, Purvis says, with little to no transparency in what it costs to produce drugs and how pricing is determined. It’s also difficult to pinpoint why prices increase. Prices may be driven up because of higher ingredient pricing or a shortage of ingredients, or prices are raised because the product would not be financially viable to produce otherwise. These and other factors affect generic availability and pricing.

The FDA’s Drug Efficacy Study Implementation (DESI) and Unapproved Drugs Initiative programs offer an optional abbreviated FDA approval process for generics that entered the market before 1962. In return for the approved application, the manufacturer is awarded a monopoly on marketing the product. Although initially companies did not abuse the program, some eventually increased prices to resemble branded pricing, according to VanTrieste. 

Generics competitors can file an ANDA, but he says it takes about a year to get the paperwork together and another year for the FDA to process it. That gives the initial manufacturer an artificial monopoly for at least two years. Some manufacturers find ways to extend that monopoly, exclusively contracting with all active ingredient manufacturers, for example. Companies making DESI-approved products sometimes lower the product price when competitors are gathering their FDA application data, so they won’t have a profit motive. “Knowing that will happen, other generics don’t enter those markets,” VanTrieste says. One example of the jump in pricing is vasopressin. In the hospital sector, vasopressin costs rose almost 700% between 2014 and 2018, after getting DESI approval in 2014.

More than 500 drugs without patent protection have no generic competition. “Because they (are for) small populations, there may not be enough incentives to create a generic version. They have a monopoly forever because the generic manufacturers aren’t attracted to that product,” Purvis says.

When the patent life runs out, companies may look for ways to continue their monopoly. “If anything, companies are getting more innovative in finding ways to extend their monopoly,” Purvis says. AbbVie obtained more than 100 U.S. patents for manufacturing processes and other issues with Humira; the initial patent expired in 2016. The company mounted legal defenses against companies that wanted to launch biosimilars to Humira for alleged secondary patent infringement for the drug’s formulation or delivery. Six biosimilars for Humira have been approved by the FDA, but none of them will be on the market until 2023 because of legal settlements with AbbVie.

Some companies change their brand-name drug formulations in attempts to maintain market share. That works for some manufacturers, says David Ridley, Ph.D., a professor and faculty director for health sector management at Duke University’s Fuqua School of Business. But “payers and pharmacy benefit managers have been tougher on the drug markets by declining to put drugs with small tweaks on formulary. The games that drugmakers have tried in the past have been thwarted by some of the managed care practices,” he says. There are exceptions, including Teva Pharmaceuticals’ Copaxone, a daily injection for patients with multiple sclerosis. Teva changed the 20-milligram daily injection to a 40-milligram dose, injected three times a week. “They were able to hold on to much of the market and hold off competitors,” he says.

In June 2020, New Jersey’s attorney general and a multistate coalition sued 26 drug companies, alleging conspiracy to artificially inflate the prices of 80 topical generic drugs. The lawsuit claims a violation of federal and state antitrust and consumer protection laws. This is one of at least three price-fixing lawsuits filed in recent years. “It’s not worth it (to collude) because you’re going to get caught and your company will be embarrassed and have to pay a massive fine,” says Ridley. “When you defraud the federal government, you face potentially enormous penalties. They can threaten to exclude you from doing business with the government, which is a major customer in healthcare.”

Biosimilars are the equivalent of generics for monoclonal antibodies and other large-molecule medications. But the biosimilar market and the dynamics of competition on price have been slow in developing for many reasons, including the “patent thickets” that drugmakers have used to protect their brand-name products and to keep biosimilar competition at bay. Since 2015, 29 biosimilars have been approved for nine reference products and 20 are on the market. “Biologics are living organisms and are substantially more expensive” than other drugs, says Purvis. “A lot of what’s coming on the market are products that won’t face generic competition in the way we’re used to seeing it.” 

The biosimilar market has been slow to grow, partly because the FDA was slow to give manufacturers guidance, she says. Although costs are generally lower for generic biosimilars compared with the brand, prices are still high. If a drug is $100,000, dropping it by 90% still means a $10,000 bill. “It’s not like where people can get their $5 generic,” Purvis says. The highest discount she’s seen for a biosimilar is 30%. That may change as more biosimilars come on the market and there’s more competition. 

FDA approvals for biosimilars require the manufacturer to complete a drug trial. “Although that is costly and painful for the biosimilar manufacturers, it’s good for them in the long run because it helps persuade providers and patients that the products are truly safe and effective,” says Ridley. Longer term, the FDA might relax those requirements, especially if technology allows molecular comparisons to show they’re sufficiently similar. Physicians and other providers currently don’t have much of an incentive to select a cheaper biosimilar when administering drug. Value-based payment models and other payment changes could alter the incentive so use of biosimilars would be to their advantage.

Is there more juice to squeeze from the generic lemon? Yes for biosimilars. Yes to artificial monopolies. Yes to those on extended patent protection. But no to standard generics. “Payers have done an exceptionally good job at driving patients toward generics when available,” Purvis says.

Deborah Abrams Kaplan writes about medical and practice management topics.

Articles

Low prices and some gaming of regulations can drive out competitors and create monopolies that allow generic makers to jack up their prices. Experience has shown that it often takes multiple generics to achieve the promised-for downward pressure on prices.

Generic Drug Price Tags: Too High. And Too Low. Competition Can Help Create an In-Between.

t’s hard to think back to Amazon’s origin story, a website launched in the summer of 1995 that only sold books. Now that bookseller has 200 million Prime members globally buying not just books but food, clothing, appliances and most anything else that can fit in a warehouse. The company rakes in $50 billion a year from Amazon Web Services (AWS), quietly storing data, including medical records. Its 2021 first-quarter earnings were $8.1 billion. And if Amazon’s latest venture works, companies will soon be contracting with the retailer for telehealth and primary care services as well.

If Amazon wants to continue growing at 25% to 30% per year, as it has done the past few years, it needs to generate large revenues, says Robin Gaster, a visiting public policy scholar at George Washington University and the author of “Behemoth, Amazon Rising: Power and Seduction in the Age of Amazon.”

“Some can see Amazon casting around for a business that will get really big really quick for them. I’m sure this is the reason they’re in groceries,” Gaster says, adding that groceries are a low-margin, high-capital business and there’s no evidence Amazon will do better than others in this space. “That brings us to healthcare, which of course is much bigger than groceries. One can imagine them looking at healthcare and seeing a far bigger opportunity to be disruptive. Amazon thinks on an entirely different scale. Healthcare is their biggest opportunity.”

Amazon Care launched as a pilot project in September 2019, a virtual health program for some of the company’s Seattle-area employees. Along with its ownership of PillPack, Alexa’s use in healthcare, and its Haven collaboration, Amazon seemed to be connecting the healthcare dots last summer, says Bryan Niehaus, a vice president with the healthcare consulting firm Advis in suburban Chicago.

“We thought Haven may be a large piece of that puzzle. But with Haven not moving forward, and then finally folding, we’re seeing the new directions Amazon is taking,” Niehaus says. “Amazon is pushing into direct-care delivery more aggressively and combining some of those disparate elements.”

The push for increased telehealth acceptance because of the COVID-19 pandemic may have accelerated this move, and Amazon Care is a natural extension of the current in-house pilot. The company plans to offer it to its 1.2 million employees nationwide and to other companies as well.

Although there have been a few announcements about Amazon Care, details are scant. The app-based care platform is designed to provide primary care through telehealth and pharmacy, with some in-home visits. Although Amazon’s legions of warehouse workers may have access to on-site clinics, “Amazon is preparing for this voice-driven health future by creating a primary care system that is not bricks and mortar,” says Gaster, who also has a consulting business called Incumetrics that measures and assesses innovation. “Our phone is our gateway into healthcare in the future, and it doesn’t mean going to the doctor.”

Established healthcare institutions might be worried about Amazon targeting them; however, Gaster thinks Amazon won’t be coming at them directly but rather from below: “There’s a huge subprimary area of healthcare where we don’t actually go to a primary care physician.” The subprimary area is wellness and chronic disease management, as well as minor or preliminary healthcare initial diagnostics, he says, and these increasingly can be done at home. For example, some cellphones can do electrocardiogram testing and diabetes monitoring. In late 2020, Amazon piloted its health-tracking Halo Band that can monitor physical activity, sleep, temperature and even body fat composition.

“We’ll see this pretty drastic change in which people are not tied to the healthcare their job provides, and it’s a radical opportunity for a disruptive entrant,” Gaster says. AWS is already used for healthcare; PillPack’s at-home prescription delivery relies on Amazon’s established logistics network; and Alexa can order supplies, refill prescriptions and answer insurance-related questions. “I believe Amazon will eat healthcare from below, not above,” he says.

Niehaus envisions Amazon targeting companies that are contracting directly with healthcare systems to provide comprehensive coverage. It may focus on core services to increase access to appointments. He doesn’t anticipate all healthcare organizations feeling an immediate Amazon presence, especially if their core services are inpatient and outpatient services, along with specialty care.

Amazon is coming into the home-based health scene at a time when President Joe Biden’s American Jobs Plan is proposing $400 billion for home or community-based care over eight years. Amazon, like other companies, will need additional workforce to execute a national presence, says Niehaus. Although there’s an opportunity, there’s competition as well. Existing telehealth companies built up a telehealth presence during the pandemic. 

There are legacy home-health companies too. Amazon could build on its own or buy up existing companies, but rapid scaling can be difficult. The country has a shortage of providers, including physicians, nurses and advanced care practitioners, observes Niehaus. Amazon would be facing stiff competition for qualified providers who are in an entirely different segment of the labor market than the people it hires to pack and deliver boxes.

Amazon’s business and labor practices have plenty of critics, but it has won over American consumers with a buying/delivery experience that is fast, easy and reliable. Would that reputation — and its scale — help in the delivery of healthcare? “There’s a big opportunity to continue to use omnichannel to curate in a way that’s customized, but I don’t think you’re going to see Amazon disrupt the health system as much as people may think,” says Bird Blitch, co-founder and CEO of Patientco, a payment technology company in Atlanta. One reason is that many people still trust the existing healthcare system as a way to get much of their care.

Alexa is connected to more than 100 million smart home devices, according to CEO Jeff Bezos’ 2020 letter to shareholders. Providers can already build HIPAA-compliant tools to schedule appointments, find nearby providers, answer health questions and refill prescriptions. Gaster envisions a future where people ask Alexa what to do for a sprained knee, and Alexa will ask a few questions and give advice like wrapping and elevating it. 

“There’s a huge subcritical area that is just wide open,” he says. Healthcare systems are traditionally set up to focus on what happens after the patient enters the office, because that’s where they get paid. “Before that is where most healthcare concerns exist,” Gaster says. “I think Amazon is incredibly well positioned, and it will acquire enormous amounts of data through (Alexa) and its Amazon Care projects, through PillPack and through AWS.”

Digital health company Sharecare partnered with Amazon to add 80,000 health and wellness questions to its Alexa database, along with medical-vetted content. Given its HIPAA compliance, “Amazon has the potential to change how patients navigate their care,” says Blitch. A 2019 survey showed that 52% of people were interested in using voice assistants for healthcare. “I think we’ll see more providers rolling out voice assistant experiences,” something that Blitch says his company’s customers use with their payment system.

Alexa Care Hub allows the device to monitor the activity of older relatives. It can be set up so the caregiver knows whether the relative asked a question about the weather, watched a movie or went outside. “Because it can be connected to Ring, you can get a lot of information,” says Gaster. “This is obviously with consent at both ends, and this is far beyond traditional healthcare, but it’s clearly about health.”

Amazon already has a presence in the majority of U.S. homes. Around 62% of U.S. households hold a Prime membership, according to 2019 data. “They have a massive loyal customer base,” says Blitch. “They have a lot of data they can identify and respond to, including the consumers’ latest preferences and demands.”

These factors may allow Amazon to leverage their technology and their ability to remove customer obstacles to give people more control over their healthcare.

After Amazon Care rolls out and presuming it is successful, Niehaus anticipates that the next step would be to layer on services. That could be expanding a physical healthcare footprint or developing or acquiring insurance products. Consider CVS Health, which is a drugstore chain, an insurer, a PBM and a provider (the MinuteClinics and the HealthHUBs). From what’s known publicly, Niehaus says, Amazon Care isn’t set up to bill insurers. It’s possible that employers will directly contract with them or they’ll offer a self-pay consumer option.

But Amazon may also need to step gingerly. If the company’s healthcare profile grows, there will be pushback against the “Amazonification” of healthcare from current stakeholders. It may invite scrutiny and oversight about whether additional regulations are needed and what those might look like, though. That includes the home health space, which the Biden administration has highlighted for additional funding through the infrastructure bill, even if details are not yet available. “Regulations are our checks and balances working as intended,” observes Niehaus.

Another way Amazon insinuates itself into healthcare could occur behind the scenes. Amazon has launched HealthLake, which aggregates healthcare data and standardizes it into required interoperability formats, with “HIPAA-eligible service that enables healthcare providers, health insurance companies, and pharmaceutical companies to store, transform, query, and analyze health data at scale,” says the website. Given the CMS mandate for interoperability and patient access, this will likely be a growth area.

Gaster spins an extended metaphor to explain Amazon’s perspective and possible role in health: The existing healthcare systems are formidable castles with enormous moats and cannons pointing in all directions. There are lots of lawyers at the battlements ready to take on the company, but Amazon is spreading out over the countryside, taking areas the castle can’t protect. In the end, castles will surrender when they don’t have supplies.

The search for areas of opportunity may allow Amazon to expand into other areas of healthcare, with almost no recognition or interest in the collateral damage the company sometimes causes, says Gaster. “That’s true in ware-houses. It’s true on the Marketplace platform. It’s true in AWS,” he says. “Being obsessive is dangerous. They don’t care about the impact of what they do. They just focus on the customers.”

Deborah Ann Kaplan writes about medical and practice management topics.

Predictions that the company would make a major move to dominate American healthcare have not come to pass. So far. 

Amazon vs. Traditional Healthcare: Who Will Win?

Although the hospital price transparency final rule took effect in January, it will take time for it to get its sea legs, whether that means 100% hospital compliance, inspiring patients to use it for their own healthcare decisions or for hospitals to reevaluate their pricing based on their competition. Eventually, though, “I think it will open up the market and, hopefully, reduce the cost of healthcare,” says Sally Pipes, president of the Pacific Research Institute.

The rule requires hospitals and those meeting applicable licensing requirements to post standard charges and negotiated insurance rates for 300 “shoppable” services in a prominent place on a publicly available website. The format should be machine readable and contain plain language descriptions. Hospitals with existing price comparison tools can use those instead of creating all new files. Although the American Hospital Association sued, citing First Amendment issues, the federal courts have upheld the rule as constitutional.

The price transparency rule affects hospitals, payers and patients differently. But one thing is clear from gaining access to the numbers: Healthcare rates for the same services diverge wildly not only across the country but also sometimes in the same or similar markets. An analysis of Crowe Revenue Cycle Analytics data of pricing for 100 common outpatient procedures (each listed at $500-plus in gross charges) revealed a 297% average price differential between the lowest and highest gross charges per procedure. It also showed an average 236% differential nationally in allowable expected payment.

A review of Atlantic Health System’s data for its New Jersey hospitals by 

® showed large differentials. For example, here are some prices for cesarean section without sterilization, without major complication or comorbidity:

Morristown Medical Center and Newton Medical Center are 37 miles apart, and the drive time between them is about 45 minutes.

Determining whether hospitals are complying depends on what data and analysis you’re looking at. According to a Guidehouse analysis published in early February, 60% of providers published a consumer-friendly file and 48% provided a machine-readable file, but about 30% of hospitals did not comply with either. Guidehouse noted that larger health systems and hospitals were more likely to comply. The problem, however, is that those using machine-readable files do not provide consistent formats and content, so it is harder for others to easily gain insights without transforming the data.

 analyzed compliance of 100 hospitals from late January to early February. Of the 65 that were “unambiguously noncompliant,” 18% posted no files or links to searchable databases. The researchers also found that 82% of those hospitals didn’t include payer-specific negotiated rates with the payer/plan identified, or they were noncompliant in another way. Of the other 35 hospitals, 22 met or exceeded compliance requirements.

ADVI Health, a consulting firm, reviewed 20 of the largest hospitals, finding that they all posted at least some pricing information. However, they did not all include procedural codes, making cross-facility comparisons difficult.

Price comparison site Turquoise Health reviewed more than 6,000 hospital websites and awarded four or five stars to 2,000 hospitals for their compliance levels. Those levels included hospitals with a shoppable file or service tool including negotiated rates for cash and commercial plans (five stars), or those with a shoppable service tool/file but without a key element like codes, cash rates or key services the hospital offers (four stars).

 looked at Atlantic Health System, its “shoppable services” document included 771 lab tests with procedure codes, and charges were broken down by payer and plan. However, the “standard listing of charges” showed procedure names (e.g., “CESAREAN SECTION W/O CC/MCC MS”) and list prices for up to 8,838 procedures per hospital, but no breakdown of negotiated rates or procedure codes.

Even if hospitals comply by providing the files, some are making it difficult to find them on a web search. 

 noted that hundreds of hospitals use “no indexing” coding that prevents search engines from finding and displaying their price transparency pages.

The government can fine hospitals up to $300 a day for noncompliance. According to management consultant Guidehouse, some hospitals say they’re not complying because of lack of resources due to the pandemic or lack of compliance understanding, or they’re waiting to see what other hospitals do.

“If you hear a hospital saying it costs them hundreds of thousands of dollars, or COVID-19 was a barrier to complying with this, it’s untrue,” says Chris Severn, CEO of Turquoise Health. His company is offering the service for $10,000 per hospital, and he says it has helped some hospitals comply within a few days. “We talked to a few large health systems that said it’s too difficult to comply. If that’s the case, it speaks to the underlying brokenness of their infrastructure and revenue cycle.” CMS doesn’t expect perfection, he says.

Hospitals are not always used to providing rates for bundled services as a flat rate. “There’s a lot of math behind each service the patient gets at the hospital,” Severn notes. “The CMS rule forces hospitals and payers to quote rates like a case rate or flat rate” when those rates may be dependent on the amount of time the patient spends in the operating room or the type of device used.

Although hospitals may not like quoting list price and negotiated rates, “I think the industry is starting to accept it because they realize the rules are here to stay,” Severn says. If the prices are out of line with the market, or the value proposition isn’t there, it may make it tough for the hospital. “A one-star hospital with the most expensive orthopedic surgeon in town probably won’t be able to compete in the new managed care market,” he says.

Hospitals are curious to see how they compare in the market and how they drive volume to their facilities based on this rule. “Maybe you have the quality or clout in the market to demand these rates, maybe not. Maybe it’s an artifact of the old system,” Severn says. He recommends hospitals not wait until the next cycle to renegotiate rates.

Comparing apples to apples can be difficult, whether individually looking up hospital rates or using price comparison sites. That’s because CMS didn’t specify what columns must be included, Severn says. “There’s variance with some providing all-inclusive rates with professional fees and lab fees,” he says. Rates may also vary based on location, like emergency room, inpatient or outpatient surgery. “For shoppable imaging, it’s mostly apples to apples,” he says.

“Payers” can mean health plans, but it can also refer to individuals who pay for their own healthcare or employers with self-funded plans. Hospitals and insurance companies may not be excited about the price transparency rule, but Pipes says, “knowledge is a very important thing. The insurance companies need to realize that people want to know (prices).” Just as consumers know their mortgage rates when taking out a home loan, Pipes says, they want to know this information to make their healthcare decisions.

Revealing the price of care and the amounts different payers and hospitals negotiate for a service can change future negotiating strategies, says Nisha Kurani, senior policy analyst for the Program on the ACA at Kaiser Family Foundation. An insurer may see that another insurer has a higher negotiated rate and ask to adjust accordingly, she says: “It will be interesting to see how hospitals and insurers respond to the price information.”

The current price transparency rule is only the tip of the iceberg for carriers, though. By Jan. 1, 2022, carriers must make standardized and updated data files available for research and healthcare innovation improvement projects. Broader rules requiring disclosure of prices are scheduled to go into effect in 2023 and 2024, although in late April, the Biden administration CMproposed canceling a requirement that would have made hospitals disclose the prices they negotiated with Medicare Advantage plans. Whether the administration might attempt to pull back or modify other price disclosure requirements is unclear.

Consumers seem largely unaware of the price transparency rule, and price is not the only factor people consider when choosing a provider. “Uptake has been really low,” Kurani says. Patients may be able to use the tool only for services they can shop for in advance, which eliminates the usefulness of the figures for many emergency services.

The price tools also may not give the patient the full financial picture. “There are so many different aspects that go into the price of care,” Kurani says, including provider and hospital fees, and insurance co-pays and deductibles. “The rule requires hospitals to publish the payer-negotiated rates for a given service, but that doesn’t necessarily tell the patient what their out-of-pocket cost will be.” It also may not include additional services the patient will receive on top of what they’re shopping for. If they don’t get estimated charges for related services, they may be surprised later at the additional costs. Plus, she says, the tools don’t necessarily inform patients if their providers are in or out of network.

The disclosed hospital data includes primarily facility fees and negotiated rates for those fees, Severn says. “The facility fees are the lion’s share of what patients will owe,” he says, though the professional services component is often missing for most services. Therefore the negotiated price on the files should represent the minimum the patient will pay for a service, and they can at least use that as a guide.

Severn says he knows patients are using Turquoise Health’s price comparison software, as he sees website traffic spikes when the company gets press, and patients email questions, asking why their provider or a specific service isn’t listed. “That signals to us that patients are using this,” he says.

Deborah Abrams Kaplan is a freelance writer who covers medical and practice management topics.

Providers are moving toward acceptance; the rules are here to stay. Payers recognize that people need to know prices.

How the New Price Transparency Rules are Affecting Stakeholders

t the start of the COVID-19 pandemic last year, physicians were unsure which medications would effectively treat the disease and there was no vaccine. The race to find both novel and repurposed therapeutics and develop vaccines has been a multinational effort, although heavily funded by U.S. government dollars. Several therapies have now been granted emergency use authorization by the FDA. About 60 million doses of the Pfizer-BioNtech and Moderna vaccines have been administered, and the pace of vaccination is increasing to about 1.4 million doses a day. The Johnson & Johnson vaccine will be available this month, so the pace of vaccination may pick up even further.

But who is paying for these treatments and vaccines — and at what price?

So far, governments around the world have been the only purchasers of the COVID-19 vaccines, so the price has been set by government contracts. But different countries are paying different prices. South Africa, for example, reportedly paid $5.25 per dose for the Oxford-AstraZeneca vaccine in January, more than twice the price of $2.15 per dose paid by the European Union (EU), according to a report in 

. The South African government has announced that it is holding back on administering that vaccine because it may be less effective against the country’s namesake variant.

The EU is also paying less for the Pfizer-BioNTech vaccine than the U.S., $14.70 per dose versus $19.50, according to figures reported in BMJ. On the other hand, the U.S. is paying less for the Moderna vaccine (about $15) than the EU (about $18), according to the 

 piece. The contribution governments have made toward vaccine research is the explanation for the price differences. Moderna is charging the U.S. less for its vaccine because the U.S. government funded research that led to the vaccine’s development. Similarly, the EU supported research that led to the development of the Pfizer-BioNTech vaccine, thus the lower price for that vaccine for the EU.

There’s no question that the
Pfizer-BioNTech and Moderna vaccines have altered the course of the pandemic and, notwithstanding all the early problems with distribution, the vaccines have seeded some hope that herd immunity can be reached and transmission, slowed down if not stopped altogether.

But as time goes on, those two vaccines may be seen as pricey frontrunners. The Oxford-AstraZeneca and J & J are likely to present a trade-off: less efficacy but a much lower price. The phase 3 clinical trial results for the single-dose J&J vaccine showed that it is 66% effective at preventing moderate to severe cases of COVID-19 compared with the 95% effectiveness of the Pfizer-BioNTech and Moderna vaccines. But J&J is expected to price its single-dose vaccine at about $10 per dose, which would make it roughly a quarter of the price of the Pfizer-BioNTech vaccine, presuming that it stays a single-dose vaccine and the price stays the same.

But the long game of the companies that have thrown themselves into getting COVID-19 vaccines on the market may be quite different from the one they are playing now. It is entirely possibile that COVID-19 vaccination will become as routine as flu vaccination. There might be some downward pressure on prices as payers other than governments get involved. On the other hand, during an earnings call in early February, Pfizer CFO Frank D’Amelio described Pfizer’s $19.50-per-dose price as “pandemic pricing” and “that’s not a normal price like we typically get for a vaccine, $150, $175 per dose.”

D’Amelio said just a bit later during the call, “Now let’s go beyond a pandemic-pricing environment, the environment we’re currently in. Obviously, we’re going to get more on price. And clearly, to your point, the more volume we put through our factories, the lower unit cost will become. So clearly, there’s a significant opportunity for those margins to improve once we get beyond the pandemic environment that we’re in.”

Like Pfizer, Moderna has indicated that it may raise its prices after the pandemic ends, anticipating that COVID-19 will be endemic. The Moderna CEO said during a conference call last year that the pandemic pricing would be “well below value.”

But should the vaccine developers profit off their efforts? During a House Committee on Energy and Commerce hearing last summer, manufacturers were asked whether they would sell the vaccine at cost. Moderna and Merck (which announced in January that it was dropping out of the COVID-19 vaccine development race) said they would not sell their vaccines at cost. J&J said it wouldn’t make a profit from the vaccine during the pandemic. AstraZeneca said its U.S. deal would not make a profit.

The first vaccine pricing announcement came in July, when the U.S. government contracted with Pfizer and BioNTech to purchase enough vaccines for 50 million Americans. It’s no coincidence that the price of $19.50 per dose was similar to the pricing of the flu shots. Pfizer has said the research and development costs of its the vaccine approach $1 billion, and the company declined to take direct government funding.

But other companies have accepted huge government checks. AstraZeneca received up to $1.2 billion upfront, in exchange for at least 300 million doses. J&J is also receiving government money from the federal government’s Biomedical Advanced Research and Development Authority (BARDA). Early in the pandemic, BARDA agreed to provide $456 million toward the company’s research and development effort. In August, the federal government agreed to pay J&J $1 billion for 100 million doses of its vaccine, thus the $10-a-dose price.

As of mid-July, Boston-based Moderna had received $955 million in U.S. funding. The company said in August that it would charge between $32 and $37 per dose for its vaccine, although company officials also said the price would be adjusted depending on the amount ordered. That may explain the price of $15 per dose price charged to the U.S. for its order of 100 million doses. Still, the company has been criticized for its pricing, partly because it has received so much government research support. The Lown Institute in Boston gave Moderna one of its Shkreli Awards in January. The awards are for the ”worst examples of profiteering and dysfunction in health care.”

Kaplan writer about medical and practice management topics.

Governments are the only buyers so far, and the amounts they are paying varies.

Deborah Abrams Kaplan

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