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Since the Presidential election, many have commented on expected legal and regulatory changes. One of them being  prescription drug pricing. It seems that Republicans and Democrats can all agree on the need for more transparency into the cost of drugs. As far as doing something to lower the cost, initially it seemed that with Republicans dominating both Congress and the White House, we might not see much action in this area. But Trump made it clear in his press conference yesterday that he plans to go after drug costs. While no specific plan has been announced, relief for rising drug costs would be welcomed by employers -- provided that pressure applied on Medicare drug costs does not mean cost shifting to private payers. We are keeping close tabs on this issue.

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The Kaiser Family Foundation recently polled Americans to identify their health care priorities for the next President and Congress. At the top of the list were issues related to prescription drug costs – specifically, making sure drugs to treat chronic conditions are affordable for consumers (74%) and government action to lower drug prices (63%). From an employer’s perspective, the latter is more important, as it would manage the total cost of the drug rather than simply limiting a member's out-of-pocket expense, which just shifts cost back to the plan. While drug prices will be a hot topic for lawmakers and the regulators to address when new leaders take office in January, employers might not want to wait and hope. Over the next five years, it is expected that 40 new specialty drugs will hit the market each year. Now is the time to develop a strategy to get in front of that influx of new high-cost drugs.

 

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As discussed in an earlier post, the EpiPen controversy has put issues surrounding drug pricing very much in the public view. But while ensuring the affordability of life-saving pharmaceutical products deserves attention, it’s a complicated issue with many stakeholders. There is little government guidance for employers and their vendors on benefit design, such as which drugs to include on high-deductible health plan preventive drug lists so that they bypass the deductible. While adding the EpiPen might seem like an obvious step, there are many drugs that fall into the gray area between prevention and treatment, and for any individual employer to try to draw that line could put them at risk. More guidance from the government would help in the short-term, but ultimately the affordability problem will only be solved by addressing underlying drug prices.

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Unless you’ve spent the last few weeks vacationing on an internet-free tropical island or remote mountain-top (if so, lucky you!), you’ve read something about the controversy surrounding the EpiPen, the severe-allergy drug injector sold by the pharmaceutical company Mylan. Since 2007, when Mylan acquired the EpiPen, the list price has risen from about $100 for a two-pack to about $600. There are virtually no alternatives on the market, and the medication is potentially life-saving – in other words, not optional. A grassroots social-media campaign, driven largely by parents of children with food allergies, pushed Mylan to offer a $300 “savings card” to commercially insured patients to reduce their out-of-pocket costs and to broaden the eligibility for uninsured patients to receive free EpiPens. What they didn’t do was reduce the list price for the drug, and the barrage of negative press continued, affecting Mylan’s stock price. The company responded by announcing they would introduce their own generic version of the product in a few weeks, at half the price. It will be the exact same product as brand-name version – which the company will continue to sell for the full price. Although drug companies have introduced generic versions alongside their own brand-name drugs to compete with other generics, it doesn’t appear that another generic epinephrine auto injector will be available in the short-term. 

 

Although this move may take heat off the company, the reason Mylan didn’t just reduce the price of the brand-name drug is because they hope and expect that sales of the brand-name version will continue – because (as this New York Times article suggests) some doctors will keep writing prescriptions for it by name, out of habit; because pharmacists will have a financial incentive to sell the more expensive, brand-name version; and because consumers with the $300 savings card might get the brand-name version for free but have a small co-payment for the generic version. On the other hand, some PBMs and carriers may have negotiated prices for the brand-name that are lower than the generic price! Employers will need to talk to their PBM or health plans to understand the current pricing structure and how, now that the target has moved and moved again, to get the best deal for their employees and their organization.

 

This story shines a spotlight on the urgent need for regulation to address pharmaceutical price-gouging and the extreme variation in prices paid by different purchasers for the same drug. On the defensive, Mylan’s CEO called out high-deductible plans as the real culprit; in fact, they exposed unfair price increases that might otherwise have gone unnoticed, as they do in so many cases. But the EpiPen story also highlights a problem with consumerism: you can’t be a smart shopper if there is no alternative to a product that your life, or your child’s life, may depend on.

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Opioid abuse. You’ve probably read lots of stories about it recently, but have you seen the stats? They’re alarming, to say the least: There has been a fourfold increase in opioid prescriptions from 1999 to 2010 and a fourfold surge in deaths due to overdose.

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This interesting piece in Kaiser Health News sheds some light on a real gap in healthcare: Physicians are barely trained in medical school on how to identify and treat addiction. In fact, only a few hours in the course of four years of medical school are devoted to teaching addiction medicine. Schools have been so slow to change that medical students at Harvard University, for example, have started conducting their own training on how to buy and administer drugs that reverse the effects of an overdose. And Stanford’s medical school adjusted its curriculum so that lectures on addiction will no longer be folded into the psychiatry series as a side note, but instead will be presented as a separate unit, relevant to future doctors in any subspecialty – and that training will continue when the students leave the classrooms for clinical rotations. As the story notes, medical schools have traditionally avoided teaching about addiction, partly because so many doctors have viewed it not as a disease but as a vice resistant to treatment in a medical context. But as this outmoded view fades, pressure is being put on medical schools to expand their curriculum in this area. While this is good news for employer sponsored plans, it will obviously take time for providers to be better trained on addiction treatment.

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This month, the International Federation of Health Plans (iFHP) released its 2015 Comparative Price Report, a look at medical prices per unit in private health plans in seven OEDC countries, including the US. While you can guess that most procedures, tests and scans cost more in the US, you might be surprised at the size of the discrepancies. Let’s take a look at the most common surgical procedure performed in the US – the appendectomy. According to the iFHP, the average cost of an appendectomy in the US is almost double the cost in the UK and quadruple the cost in Australia. While the report doesn’t explain the higher average US cost, it does offer a clue by showing how widely prices for this surgery vary within the US – from about $9,000 at the 25th percentile to about $33,000 at the 95th percentile. This degree of cost variation – when it doesn’t result in better outcomes – is why US employers have turned to transparency tools, reference-based pricing, and value-based care.

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In a new poll from Modern Healthcare, more than two-thirds of the 86 responding health care CEOs said they oppose a repeal and replace strategy for the ACA. Instead, they would prefer to improve upon the ACA. Their reaction does not appear to be political; they indicate concern over the Republican's "repeal and replace" because specifics are not known and only 9.3% favor the single payor system proposed by Bernie Sanders.

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Optum and Walgreens Boots Alliance (WBA) recently announced an alliance by which Optum Rx members can fill 90-day maintenance medication prescriptions at Walgreens stores at mail-order copays. Although cheaper, mail-order pharmacy benefits are not always popular with patients so this may be a welcome development for some health plans. Optum indicates that there will be two options. In one, there are higher copays if the member does not use Optum mail-order or Walgreens after two “grace fills.” In the other, the member would pay 100% of the drug’s cost if Optum mail-order or Walgreens is not used. Initial information indicates that mail-order pricing discounts would apply to these prescriptions. However, plan sponsors interested in this new arrangement should carefully review the arrangement to ensure pricing remains at, or below, current levels for both the patient and the health plan.

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This news item made a splash yesterday. We’ll be keeping our eyes on this.

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If you live in New York, the days of dropping off paper prescriptions at the pharmacy are over. The New York Times reports that electronic prescriptions will now be required by a 2012 state law meant to combat the rise of prescription drug abuse (Minnesota has a similar law, but New York will be the first to back it up with penalties, including fines and imprisonment, for doctors who fail to comply). Although many doctors have already made the transition to electronic prescriptions, this will create some extra work for those who have yet to do so. That being said, advocates of the law say that it will result in reduced fraud, improved legibility, and better coordination of care. In addition to preventing intentionally fraudulent behavior, the law will also reduce the number of good-faith errors that can occur when a pharmacist misreads a doctor’s chicken-scratch handwriting.

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Much of the pressure driving up pharmacy benefit cost comes from specialty drugs. While some new drugs represent important breakthroughs in the treatment of complex diseases, the spike in the specialty drug cost trend rightfully has employers looking for creative strategies to manage cost growth.

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