April 18, 2017 at 5:00 am ET
When President Donald Trump and Sen. Bernie Sanders, (I-Vt.) see eye to eye on an issue, you know that it is politically volatile. That is the state of the current debate around prescription drug pricing, which has become a cause célèbre for lawmakers across the political spectrum.
The frustration is justified. For too long, patients have endured repeated price hikes for the medicines they need to go about their daily lives. An opaque pricing system and supply chain that effectively operates as a “black box” of rebates, clawbacks and middlemen only serves to exacerbate patient anger. Add in high-profile media attention around the rising cost of EpiPens and orphan drugs, you have the recipe for a toxic political situation.
The response from the pharmaceutical industry, including manufacturers, pharmacy benefit managers (PBMs) and other members of the supply chain, has unfortunately been inconsistent. Some players have addressed the issue head on, committing to pricing predictability measures that limit future price increases and promoting new approaches to the drug pricing question, with more to be done.
Others have engaged in finger pointing — “Drugmakers set prices, and we exist to bring those prices down,” said Express Scripts CEO Tim Wentworth earlier this year — or taken a head-in-the-sand approach: “Any suggestion that PBMs are causing prices to rise is simply erroneous,” said CVS CEO Larry Merlo.
The result has been scores of congressional hearings and thousands of news clips while real solutions that help patients languish. So what’s the prescription for America’s drug pricing problem? Step one is cooperation. It’s imperative that all members of the supply chain, from PBMs to manufacturers, large employers to patient advocacy groups, come together to address the legitimate concerns of the public and lawmakers. We’ve shown this is possible. In November we convened a roundtable in Washington that brought together health care professionals, patient advocates, and the pharmaceutical industry. While that event was focused on patient access to insulin, we need to replicate it more broadly, bringing together stakeholders to tackle this problem. Because if we don’t cooperate and work together to take action, the political finger-pointing will only get worse and patient-focused solutions will remain elusive.
The second step is increasing transparency in a pricing process that has purposefully been made complicated over the years as more and more middlemen have entered the system. Ask an everyday patient what goes into the price they pay at the pharmacy counter, and they’ll likely assume it’s the same as any other product, where the retailer sets a price based on what they pay the manufacturer. The truth is that the reality for prescription drugs is drastically different. Practices such as spread pricing (where patients, via their health plans, are actually charged more for some drugs than the true cost of filling the prescription at the pharmacy), clawbacks, rebates, and even the steering of patients to specialty or mail-order pharmacies have all contributed to a Byzantine pricing process that isn’t working for patients or their wallets.
Third, we must encourage innovation within the pricing system that leads to tangible results for patients. For life-saving and highly regimented medicines, such as insulin, is it truly necessary to have several middlemen affecting a patient’s ability to access the medicine they need? Can we find new approaches to encourage, such as the practices of new bespoke PBMs that charge a transparent, flat fee without hidden rebates or other markups?
On at least one front we’re already seeing this innovation in action as large employers seek to play a bigger role in ensuring that they use their heft to address the drug price issue. The Health Transformation Alliance, a group made up of more than three dozen major employers including Johnson & Johnson and Macy’s, said recently it would seek out group contracts to purchase prescription medications, ostensibly allowing them to win lower prices because of their economies of scale. Efforts like this, done on a broader scale, are what we need to address this debate.
While none of these steps is necessarily easy, they need to happen in order to better serve patients and be responsive to the growing chorus of criticism aimed at the drug pricing morass. Failure to act would be a monumental mistake, encouraging political action driven by voter anger rather than a thoughtful, innovative, collaborative approach that provides greater clarity and peace of mind to patients who just want to be able to access the drugs they need to live their lives. PBMs, manufacturers and other members of the drug supply chain have the power to act; the time to do so is now.
Larry Smith is president of the National Diabetes Volunteer Leadership Council and the past chairman of the board of the American Diabetes Association (2005-2006). Larry Ellingson is vice president of the National Diabetes Volunteer Leadership Council and the past chairman of the board of the American Diabetes Association (2004-2005).
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