By Marcus J. Hopkins, Blogger
“As a society we need a way of determining what is a reasonable price at the time of introduction of a new drug,” said Stephen Schondelmeyer, a University of Minnesota professor who specializes in pharmaceutical economics. “We have expanded coverage, but we haven’t done anything to control costs on the pricing side.” (Alonso-Zaldivar, 2015)
Truer words are rarely spoken in the world of healthcare coverage. In a time of unprecedented increases in “covered” Americans, the promised “savings” haven’t really materialized, either for payers or for consumers. Rather, the spending on specialty medications has increased so exponentially that both private and public payers are finding themselves faced with difficult choices, when it comes to what coverage can be offered for the amount that consumers pay.
For private insurers, the answers are simple: increase premiums, expand and strengthen prior authorization criteria to restrict access, and place the drugs in the highest available tiers with the highest drug co-pays. For public insurance programs, such as Medicaid, Medicare, and the AIDS Drug Assistance Program (ADAP), the solution is not so clear cut.
For Medicare, specifically, Federal law currently prohibits the program from negotiating with drug manufacturers for lower prices. As recently as February 2015, the Obama Administration requested authority to negotiate prices for Medicare, in large part because of the price of high-cost specialty drugs, such as Sovaldi (Gilead), Olysio (Janssen), Harvoni (Gilead), and Viekira Pak (AbbVie) (Morgan, 2015).
Both Medicaid and Ryan White programs can negotiate for drug prices, but even still, those negotiations are largely kept secret, and the true cost is rarely shared with the public. For that reason, we rely on two measures to express the cost of drugs on the American market: the Wholesale Acquisition Cost (WAC) and the Average Wholesale Price (AWP). Even with those standards in place, nobody actually pays those costs, due to various rebates, negotiations, and other pricing schemes, all of which is available only if you all but threaten them with the comfort of a nice set of thumbscrews.
In fact, getting actual pricing information based on what payers actually pay, often involves Freedom of Information Act (FOIA) requests from government agencies, and threats of lawsuits to get the same information from private insurers. Much of the problem is that no one really wants to show their hand, especially when it comes to the prices that they pay for specialty drugs, because doing so might disrupt some balance of the space-time continuum, creating a paradox, and the entire healthcare system would collapse.
…or maybe, something not quite so dramatic.
It’s likely because openly stating how much everyone is paying for drugs would result in one of two outcomes:
- Each payer would be able to compare and contrast what they were paying for various drugs, and would thereby be able start a “race to the bottom,” creating a low-bidding war. In addition, the public would be able to see how well payers were bargaining in their own best interests, rather than consumers. In this case, both insurers and drug companies would be on the losing end of the battle, and it behooves them to keep information about payment schemes private.
- It would be revealed to both the public and the payers exactly how much of the cost drug companies are willing to eat (through rebates and other scenes) just to get their drugs on the market, thus revealing that the whole pricing model companies use to determine drug prices is a farce. In this case, drug companies would be on the losing end, primarily, because they would finally have to publicly justify in quantifiable terms the costs of their medications.
In truth, either scenario could be nothing but a net “win” for consumers. So long as the American healthcare system continues to subsist in an insurance-based market, the only real weapon consumers have against being price gouged is open, honest, and accurate pricing information – a clear explanation of how drug prices are decided, a clear explanation of what each payer is actually paying, and how much drug companies are willing to forego in order to sell more of their drugs.
Without this information being made public, how can there really be a “free market?” How can consumers make a truly informed choice if this information is kept secret? That really is the crux to dismantling the insurance scam – making everyone reveal what they’re actually paying for drugs and services.
What Dr. Schondelmeyer asserted in the opening quote of this piece is absolutely correct: the Affordable Care Act has done a great job of forcing getting people into the health insurance market, but has done very little to deliver the “savings” it promised. We’re still paying more than virtually every other economic superpower for our healthcare, and still achieving subpar results.
Now, private insurers are arguing that the cost of covering these people has become so burdensome [to their profits and bottom lines] that they need to increase premiums by up to 40%. We have effectively handed over clients to private entities without ensuring that people will be able to pay their prices, leaving the “Affordable” part of the law’s title hanging in the wind.
For how much longer can our insurance-based healthcare system continue to operate without imploding upon itself? For how much longer will consumers continue to allow drug and service pricing scams to continue, before determining that there is a better way? Sadly, I don’t think there’s enough interest on the part of Americans to do anything about it…until they’re forced to foot the bill, themselves.
- Alonso-Zaldivar, R. (2015, July 13). Pricey Successor Overtakes $1,000-Per-Pill Hepatitis C Drug. Associated Press. Washington, D.C. Retrieved from: http://abcnews.go.com/Health/wireStory/pricey-successor-overtakes-1000-pill-hepatitis-drug-32407619
- Morgan, D. (2015, February 02). Obama administration seeks to negotiate Medicare drug prices. Rueters – U.S. Edition. Retrieved from: http://www.reuters.com/article/2015/02/02/us-usa-budget-medicare-idUSKBN0L61OW20150202
Disclaimer: HEAL Blogs do not necessarily reflect the views of the Community Access National Network (CANN), but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about Hepatitis-related issues and updates. Please note that the content of some of the HEAL Blogs might be graphic due to the nature of the issues being addressed in it.