Growing interest in more transparency for the prices of prescription drugs is reflected in a study published in the Journal of the American Medical Association (JAMA) that highlights disparities in pharma prices for patients, pharmacies, and payers

Consumer demand for increased transparency in the prices patients, health insurers, and others pay for healthcare services continues. The Kaiser Family Foundation (KFF) reports that patients are facing higher deductibles, higher premiums, and increasingly complex—and opaque—pricing for everything from medical laboratory tests and routine checkups to prescriptions and out-of-network care. (See Dark Daily, “KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services are Making Healthcare Increasingly Inaccessible to Consumers,” April 20, 2018.)

However, while reference pricing and pricing databases help savvy patients compare prices across a range of procedures, much about pharmaceutical pricing remains shrouded in mystery. This is why calls for greater transparency in how prescription drugs are priced are increasing as well.

The Trump administration, state governments, and advocacy groups have each targeted drug costs as a problem in the current healthcare system. And a March 2018 study published in the Journal of the American Medical Association (JAMA) may further fuel the fires facing big pharma.

Overpayments and the Silence Behind Them

Analyzing 9.5 million claims from Optum’s Clinformatics Data Mart over the first half of 2013, researchers found that approximately 23% of all claims involved overpayments—situations in which the co-pay charged to the patient exceeded what the insurer paid the pharmacy to fill the prescription.

While data from 2013 might not reflect the current state of pharmaceutical pricing, the study brings exposure to trends in both politics and media coverage surrounding the industry.

The study authors found that overpayments totaled $135-million in 2013. Generic medications saw a higher portion of overpayments with more than one in four generic prescriptions costing patients more than what payers paid the pharmacy. However, in the 6% of claims involving branded medication, overpayments were nearly twice as high with an average overpayment of $13.46 per claim.

The researchers also cited data from a National Community Pharmacists Association (NCPA) survey of 628 pharmacies in which 49% claimed to have seen 10-50 occurrences of “clawback fees” in the past month. A further 35% reported seeing more than 50 clawback fees in the past month. These “fees” are part of contractual obligations that payers can use to recoup such overpayments to pharmacies.

Other contractual arrangements, such as “gag clauses” (AKA, non-disclosure agreements), wherein pharmacists cannot disclose to patients when their copay exceeds the cost of filling the prescription without coverage, have garnered coverage in the media.

The Hill recently outlined efforts from senators to stop this practice for both traditional insurance plans and Medicare Advantage and Part D participants. “Americans have the right to know which payment method—insurance or cash—would provide the most savings when purchasing prescription drugs,” Senator Susan Collins (R-Maine) told The Hill.

Rebates, Secretive Deals, and Red Tape in Government Crosshairs

Rebates are another contested aspect of current pricing models. Traditionally, pharmacy benefit managers (PBMs) serve as a middleman between pharmaceutical companies and pharmacies to negotiate prices and maintain markets. PBMs negotiate deals for insurers in the form of rebates. Insurers, however, are using these savings to offer lower premiums, rather than forwarding the savings directly to the customer.

UnitedHealthcare unveiled plans to pass these rebates directly to consumers in early March, The Hill reported.

In a press release, Department of Health and Human Services (HHS) Secretary Alex M. Azar II stated, “Today’s announcement by UnitedHealthcare is a prime example of the movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing. Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy … to bring down the price of drugs and make healthcare more affordable.” (Photo copyright: Washington Post.)

The Trump Administration also recently outlined their new “American Patients First” plan for reducing drug prices and out-of-pocket costs for patients.

Key elements of their proposed approach include:

  • Eliminating gaming of regulations, such as the Risk Evaluation and Mitigating Strategies (REMS) requirements manufacturers use to avoid sending samples to creators of generics;
  • Promoting biosimilars;
  • Allowing greater substitution in Medicare Part D;
  • Including list prices in pharma advertising;
  • Restricting rebates through Anti-Kickback Statue revisions; and,
  • Eliminating gag clauses or clawback fees.

However, pharma industry coverage of the plan is mixed. MarketWatch sees little to worry about, predicting, “[the plan] isn’t expected to hurt drug makers or pharmacy-system middlemen.” Meanwhile, Forbes claims, “[the plan] represents a sea of change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”

Anatomic pathology groups, medical laboratories, and other diagnostics providers can view this as yet another example of healthcare providers trying to shore up financials and protect profits by protecting sensitive pricing information, as the industry faces increasing scrutiny. Nevertheless, regardless of the outcome, these latest trends emphasize the role that transparency is likely to play—and how clinical laboratories will be impacted—as healthcare reform progresses, both in terms of public relations and regulatory requirements.

—Jon Stone

Related Information:

Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs

Impact of Direct and Indirect Remuneration (DIR) Fees on Pharmacies and PBM-Imposed Copay Clawback Fees Affecting Patients

Copay Exceeds Drug Cost in 23% of Claims: JAMA Research

You’re Overpaying for Drugs and Your Pharmacist Can’t Tell You

Oregon, the Latest State to Tackle High Drug Prices, Pushes through Transparency Law

Governor Brown Signs HB 4005, Creating New Transparency in Drug Pricing

UnitedHealthcare Will Pass Drug Rebates Directly to Consumers

Senators Target ‘Gag Clauses’ That Hide Potential Savings on Prescriptions

FDA Commissioner Says ‘Rigged’ System Raises Drug Costs for Patients, Discourages Competition

FDA Puts Drug Supply Chain on Notice

The FDA Commissioner Just Laid Out How ‘Everybody Wins’ in the US Healthcare System except the Patients

Your Guide to the Trump Drug Price Plan: Who It Affects and How

The Trump Plan to Reduce Prescription Drug Prices Will Have a Major Impact

American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs

Secretary Azar Statement on UnitedHealthcare Drug Discount Announcement

Reference Pricing and Price Shopping Hold Potential Peril for Both Clinical Laboratories and Consumers

Consumers Now Use Medical Cost Websites to Price Shop for Clinical Pathology Laboratory Tests and Other Medical Procedures

KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services Are Making Healthcare Increasingly Inaccessible to Consumers