Pill Problems – Politicians vs. Pharmaceutical Company Price War | Who Wins in 2021?

Updated: Apr 27

The latest in pharmacy benefits & drug pricing Americans should know

It is no secret that the cost of prescriptions in America seem off the charts. But the share of cost paid by the patient is only scratching the surface of the complicated drug channel scaffolding in the United States. With a new administration in the White House and a Democratic-leaning Congress, there is renewed interest in impending issues, such as prescription cost and patient payment obligations, on the table. Legislative action could help, or harm, the current drug pricing system. So, let’s outline how 2021 could look for patients and employers in regards to current costs and forecasted changes at the federal level, should they pass the House and Senate to be signed into law.

$20 per month in out-of-pocket expenses is the current average for 80% of employer-insured patients. But some Americans are paying as much as $1,000+ annually for their medications. Those on Medicare programs can fare even worse. Understanding the positive correlation of prescription use with age, it is still startling to see that 20% of Medicare Part D participants pay over $500 annually. These costs have to do with current legislation, Medicare program design, and rebate programs that tend to favor pharmaceutical companies instead of patients.

Straightforwardly, the current system has many broken, and expensive, parts. In fact, the United States spends more on prescription drugs on a per capita basis than other countries in the Organization for Economic Co-operation and Development (OECD) and when the data was analyzed for all prescription drugs available in the United States and comparison countries, it was found that U.S. prices for drugs in 2018 were 256% higher than of those in the 32 OECD comparison countries combined. (This data is a result of a study published by Rand Corporation in 2021)

To that end, here are some moving parts to watch in 2021 that, if passed, could decrease patient and employer spend, helping to get drugs into the hands of patients that need it the most without devastating their wallets.

Coinsurance/Out-of-Pocket Expenses Result in Patient Overpayments

Many drug makers sell their products at a discounted cost for distribution. However, a patient’s coinsurance amount is often calculated on a higher rate determined by pharmacies. This higher rate is also “pre-rebate” and does not consider the formulary rebates that manufacturers will pay to plans or PBMs for choosing their drug. What does this mean? Patients are paying full price for a discounted drug, and don’t even know it. Patients may pay a “discounted” but not final rate at the point of sale – in which their employer or health insurance company receives additional discounts or credits on retrospectively. Legislation should be passed to simplify this process and increase transparency in the drug purchasing process.

Higher Priced Drugs Pushed for Medicare Part D Program Enrollees

With negotiations of prescription price happening between plan sponsors and pharmacies, Medicare Part D seniors are pushed towards higher cost prescriptions instead of lower cost drug alternatives. This means they reach a “catastrophic” limit quicker and must endure the 5% out-of-pocket expense entirely on their own. Why does this happen? Medicare Part D enrollees progress through the tiers of the program based on prescription price, leading to an incentive for PBMs and payers to push higher cost drugs, usually involving rebates that affect their bottom line, but don’t alleviate costs to the patient. In this broken system, the weight of expensive drugs lies solely on the shoulders of the patients. Is there any good news? Yes. There is legislation in the House and Senate that addresses the Medicare Part D infrastructure errors. If passed, it could help alleviate this cost structure.

Hospital and Pharmacy Profit from 340B Drugs

Drugs eligible for 340B pricing are heavily discounted. But, this discount does not necessarily reach the patient. Instead, an insured could pay hundreds, if not thousands, of dollars for a drug while a 340B hospital or pharmacy pockets profits. The math on this structure is quite complicated, but the overpayment by the patients is accumulated to generate 340B funds for hospitals and pharmacies, so they have an incentive to keep drug prices high for patients.

The Final Message

What does all of this mean? That pharmacy benefit plan designs are often poorly thought out and the legislation to fix them could be years away. At Arxcel, we advocate for proper plan design that protects the patient and the employer bottom lines. And, we push our contacts to fix a broken system to help the health and future of Americans everywhere.

The team at Arxcel is here to work with employers to navigate the complex world of prescription benefits. If you have questions about the above content, please reach out to our team.