In last week’s guest blog, Do Consumers Deserve Rx Savings?, I discussed the various issues surrounding pharmaceutical pricing, as well as the possibility of the Centers for Medicare and Medicaid Services (CMS) switching where drug rebates are applied by requiring sponsors to pass on a minimum percent of the cost-weighted average of rebates on to consumers. Essentially, who deserves the drug rebates more: health insurance companies, pharmacies, and pharmacy benefit managers (PBMs), or consumers?
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In November 2017, CMS put out a Request for Information (RFI) about a proposed rule that would revise the Medicare Advantage program (Part C) and the Prescription Drug Benefit program (Part D) that would require payors to pass on a percent of the drug rebates negotiated with pharmaceutical manufacturers on to consumers at the Point of Sale (POS). This would, ostensibly, lower the out-of-pocket costs to consumers by reducing the amount they pay at the register when purchasing a medication during the deductible phase of their insurance plan, when they pay the full cost of the co-pay/drug.
A personal example of this is my prescription for the HIV combination drug, Genvoya (Gilead). Under my current insurance plan, Highmark BlueCross/BlueShield (BC/BS), my monthly co-pay for this drug is $250 until I reach my deductible and/or out-of-pocket maximum. Luckily, West Virginia’s Ryan White program uses the Part B AIDS Drug Assistance Program (ADAP) funds to pay my co-pay, or I’d be considerably financially stressed, each month. Highmark BC/BS has negotiated a price discount for this drug and may also receive rebates that they can apply to each purchase of the drug each month (neither of which are publicly available per the trade secrets laws I mentioned, last week).
Now, imagine if I, as a consumer and client of Highmark BC/BS went to pick up my medications (or ordered them over the phone to be shipped, as is the case), and instead of the normal $250 co-pay, I received the rebate (let’s say $50) rather than Highmark BC/BS receiving it at the end of the month. My co-pay would be reduced to $200 (which is still a stretch if you’re on a tight budget), and Highmark BC/BS doesn’t. Any consumer who cares more about their pocketbooks than insurance companies’ profits would jump at the chance to pay less.
And that’s where Highmark BC/BS, represented by America’s Health Insurance Plans (AHIP) disagree. Despite any discounts they may negotiate with Gilead over the cost of Genvoya, they have also grown to expect access to significant drug rebates on top of not having to pay the list prices. So, let’s say they pay for 100 fills of Genvoya (which comes in a standardized bottle, so the number of pills is irrelevant) at a 50%-60% discount off the list price (let’s use $250/bottle as that cost). On top of that, they also have negotiated to get a $50 rebate per bottle sold. They would spend $25,000/month on those 100 bottles and expect to receive $50/bottle rebate for an extra $5,000/month back into their pockets. Essentially, they’re paying $20,000/month, and pocketing $5,000/month.
It isn’t just insurance companies and PBMs who are doing this – it’s also certain pharmacies and AIDS Service Organizations (ASOs) who operate their own pharmacies.As an ADAP program, they negotiated significantly lower prices than even the health insurance programs and get rebates back on top of it. It is no wonder, then, that these organizations are staunchly against passing on these rebates to consumers: they do their financial planning based upon the belief that they’re going to receive these rebate dollars. They argue that consumers will actually pay more if they don’t get the rebates. They argue that, because they know that they will pass along those costs to consumers, if they don’t get their way.
Pharmaceutical companies, ironically, are arguing that consumers should receive the rebates, rather than their opponents. This may have to do with the fact that there have been several Congressional hearings and inquiries into the considerably overinflated prices of their drugs. Therefore, it behooves them to appear to support anything that would ostensibly save consumers out-of-pocket costs. Moving these rebates to the POS would, essentially, cut out the middlemen in the process – the payors – and would allow those rebates to passed directly to the register when you buy your drugs.
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So – do consumers “deserve” this? Yes. But, that’s not all they deserve; it’s not the single solution to the astronomical costs of drugs. It has to be part of a bigger plan to reduce costs. There need to be multiple rebates at play – the ones for the payors and ones for consumers that they can receive directly to further lower the price. So, on top of the negotiated $50 back foe Genvoya on the payor side, I’d like to stack on top of that another $10-$30 consumer rebate I can download off their website or receive in an app that can be activated at the POS to take my $250 co-pay down to potentially $180. That would be much more manageable, particularly for people on fixed incomes. It’s still not great, and an overall overhaul of how drug prices are determined is still needed. But, it’s something.
Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.