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What managed care executives should know about rising drug prices, how they impact the healthcare system, and advice on what to do about it.
John Bennett, MD, president and chief executive officer, Capital District Physicians’ Health Plan (CDPHP), Albany, New York, and Patricia Richards, president and chief executive officer, SelectHealth in Salt Lake City, Utah, shared their thoughts with Managed Healthcare Executive (MHE) on how high drug prices impact both insurers and the overall healthcare system.
MHE: What should be on the radar screens of managed care execs when it comes to the high-cost of drugs?
Bennett, MDBennett: In addition to the rising cost of specialty pharmaceuticals, like those used to treat hepatitis C and high cholesterol, managed care executives should also pay close attention to the ever-rising cost of generic medications, particularly those used to treat diabetes.
Richards: The rapid pace at which drugs are increasing in price is an issue for all of us. Executives should be aware of the volatility of drug price increases and have mechanisms in place to monitor these changes. Many of the drugs experiencing high cost increases have alternatives in the market. For example Glumetza, a branded for of metformin to treat type 2 diabetes, increased in price from $14.84 for one tablet to $133.59 per tablet over a 60-day period of time this past June and July. This is an increase of over 800%, when you can buy a month’s supply of generic metformin for $5.
MHE: How do high drug prices impact insurers and the overall healthcare system?â¨
Bennett: As drug costs continue to rise-and consume a greater percentage of the healthcare dollar-insurers are left with no choice but to pass these costs onto consumers. This often occurs in the form of higher premiums, higher cost-shares, and a reduction in benefits.
RichardsThe high cost of medications is raising the price we all pay for healthcare. For example, pharmacy costs are accounting for an increasing portion of the healthcare dollar. For SelectHealth commercial business pharmacy was 13% of total medical expense in 2012. In 2015, pharmacy costs were 17% of total medical costs, a 31% increase.
The rising costs of medication are the single biggest contributors to medical expense trend.
MHE: What are some recent examples of runaway drug prices?
Bennett: Following are cost increases for two common diabetes medications:
Humulin R U-500 (20 mL vial)
Cost Differential: $1,140
Glumetza (metformin extended-release) 1,000-mg tablet
June 2014 $15/tablet â³$890/month â³$10,685/year June 2015 $89/tablet â³$5,344/month â³$64,123/year
July 2015 $134/tablet â³$8,016/month â³$96,189/year
Cost Differential: $85,500
Richards: Praluent and Repatha to treat high cholesterol came to market at over $14,000 a year; generic drugs to treat high cholesterol cost between $75 and $150 per year. Drugs to treat multiple sclerosis now cost over $70,000 a year. In some instances this is six times higher than the price at which they entered the market. Drugs to treat hepatitis C cost between $85,000 and $95,000 for a three-month course of therapy.
MHE: How have high drug costs impacted your plan?
Bennett: As a not-for-profit health plan, our goal is to provide high-quality healthcare at an affordable price. For more than 30 years, that has been our promise to our members. Rising drug costs are making it increasingly more difficult to uphold that promise, and have forced our organization to make some very difficult decisions.
CDPHP recently launched a campaign aimed at reducing drug costs and shining a light on the pharmaceutical industry. We’re doing this to not only educate the community about rising drug costs, but also asking regulators to level the playing field when it comes to transparency. That is, every other sector of the healthcare industry is required to disclose where it’s spending money, but pharma gets a pass. That’s not only inconsistent, but it’s also anti-consumer.
Richards: For the 12-month period ending August 2015, pharmacy costs had an increase of 28% for SelectHealth commercial business over the previous 12 months. In 2014, members had an average member responsibility for specialty medications of $202.35. In 2015, this amount increased to $344.74, an increase of 70%.
Transparency is key. The more physicians and patients understand what medications cost, the more willing they are to seek low cost alternatives. SelectHealth has robust tools in place on our website to allow members and healthcare providers see what the exact costs of medications are.
Also, integration of care is important. As members of the healthcare team collaborate in identification of appropriate treatments and guidelines for use, more cost effective treatments are identified and care becomes more affordable.
Finally, what we can’t do is change the price that manufacturers charge for their medications. We can however, educate the public and policy makers about the impact of these high costs and the unjustifiable price increases that are being taken by many manufacturers.
MHE: What advice do you have for managing high-cost drugs?
Bennett: Education, awareness, transparency.
#1. Make sure you have a way to monitor prices increases of products and then react when increases are extreme or unjustified.
#2. Educate. Make everyone aware of the costs of medications. This includes healthcare providers and administrators, physicians, patients and policy makers.
#3. Collaborate with your pharmacy benefit manager and make sure they have processes in place to help manage drug spend.
#4. Integrate care and collaborate with providers. Everyone is looking to make healthcare more affordable, by working together we can identify the most cost-effective options.
#5. Openly discuss drug price issues with drug companies. The drug companies have provided us with many lifesaving treatments that have changed the way we treat patients and provided many benefits to society. We need to be willing to work together in exploring solutions.