Technology Can Lift the Veil of Secrecy on Drug Prices
By Thomas Borzilleri
Thomas Borzilleri is CEO of InteliScript.
The recent story about the rift over prescription drug prices between insurer Anthem and its pharmacy benefits manager Express Scripts should anger — and frankly, befuddle — any physician or electronic health record (EHR) vendor. Providers and IT vendors should be fed up with payers and patients getting ripped off by inflated drug prices, taking a disproportionate share of the healthcare dollar. They also ought to be puzzled about why, with all of our advances, we are still living in a marketplace where no one knows what drugs really cost.
It’s particularly absurd because technology exists that can put an end to the opacity, overpayment, and oligarchy that characterize prescription drug purchasing today. Providers deserve and EHR vendors can offer tools that deliver the prices for any drug at the five cheapest pharmacies nearby. Doctors can have this data at their fingertips, within a few seconds, at the point of care, integrated into their existing workflow. These technology solutions can also track prescriptions to make sure they are picked up and refilled on a regular basis to gain new insight into which patients are at risk for adverse events due to medication non-adherence.
For years, insurers and patients have just accepted that the price they are getting is the best price, or the only price. However, allegations like Anthem’s — that Express Scripts overcharged the insurer by $3 billion — should make everyone in the healthcare ecosystem skeptical about the fairness of drug prices. But truly lifting the veil on drug prices will take a concerted effort by many stakeholders in the provider and IT vendor communities to take on the PBM juggernaut.
Strangely enough, when PBMs gained widespread popularity in the 1980s, there was an understanding that they worked on behalf of payers to lower prices, both by securing discounts and by steering patients towards lower-cost drugs. The truth, however, is that PBM “discounts” have always included heavy padding in the form of ingredient spreads and per-prescription fees. In fact, while PBMs are typically paying manufacturers 96 percent off the Average Wholesale Price (AWP) —the “sticker price” for drugs —the prices they charge insurers and employers are between 70 percent and 85 percent off the AWP. PBMs are skimming 10-25 percent off each prescription.
Insurers and employers have had little recourse, both because they did not know the true price of prescription drugs and because they did not have a way to easily shop around between competing pharmacies to get the best price on every medication. Instead, complex, opaque package deals with PBMs mean the payer might be getting good deals on some drugs and getting raked over the coals on others.
Drug price transparency and shopping tools are essential for payers to rein in costs and keep both premiums and co-pays from spiking. The urgent need for this data has also intensified recently because an increasing share of prescription drug costs are borne by consumers themselves. Patients simply won’t take their drugs properly, or at all, if they are out of reach financially. Affordability is now the number one reason for non-adherence to medications, which leads to poor outcomes, including avoidable hospital readmissions. A lack of medication adherence is estimated to cause approximately 125,000 deaths, at least 10 percent of hospitalizations, and cost between $100 billion and $289 billion a year.
In the past, some patients have looked to Canadian or other foreign mail-order pharmacies to try to lower drug costs. But these transactions are usually outside the doctor-patient relationship and may cause more harm than good to the patient, either by exposing him or her to dangerous drug formulations or by causing rifts in care continuity.
Doctors and patients, together, must come to the best decision about the right drug for their condition and price must be a part of that equation. We need technology solutions that enable doctors to find the best price on any drug, at local pharmacies that are convenient to the patient. Tools exist to address these concerns. The key is to embed these tools into existing EHR systems. By doing so, we can avoid disrupting doctors’ workflow and can ensure that all e-prescribing information is captured in the patient record.
These solutions must achieve savings for both the payer and the consumer. First, the solution must provide the lowest possible retail price while consumers are still paying off their deductibles, and then provide the lowest negotiated payer price to the insurer or employer once they start picking up the tab. These solutions can also be used to circumvent common PBM strategies, such as excluding low-cost brand and generic drugs from formularies to artificially increase co-pays on these cheaper drugs, which costs insurers and self-insured consumers billions of dollars each year.
Typically, consumers don’t realize that the cash price is in many instances lower than their adjusted co-pay, with the excess going right into the pocket of the PBM. Drug price transparency and shopping solutions should crunch the numbers for the doctor and patient, letting them know when it’s better to pay the cash price and when it’s more cost-effective to pay the co-pay.
Health IT solutions are typically geared towards one healthcare user: hospitals, doctors, patients, insurers, or employers. But drug price transparency technology is one of those rare innovations that will benefit each of those audiences. Doctors and patients, together, will be able to make the best decisions about medication management, at the point of care, during the prescribing process. Hospitals will enjoy better population health management through better medication adherence. Insurers and employers will be able to wring more value from each healthcare dollar.
What we need now is a commitment from EHR vendors to adopt this type of technology. The bottom line is that we can’t succeed in bending the cost curve in healthcare if we don’t know what the costs are in the first place. That includes prescription drugs. We in the health IT industry have the insight and ingenuity to draw the curtain back on drug price secrecy and we have a real obligation to do so.