In the debate over prescription drug prices, health insurers and biopharmaceutical companies have, for years, been entrenched on opposite ends of the spectrum. On the one hand, insurers decry endlessly rising prices and a lack of transparency from manufacturers. On the other, manufacturers point to increasing access challenges for patients and are quick to draw attention to the fact that drug spending represents just 14 percent of every health care dollar spent in the United States.
As a consequence, over time, the U.S. health care system has become one that is driven by divergent incentives that can often work against a patient’s best interests. Patients requiring drug treatments have experienced increasing financial burden as high deductible plans multiply and out-of-pocket costs rise. Administrative hurdles like prior authorizations and step therapy requirements have also become more prevalent and restrictive, resulting in delays to treatment, prescription abandonment and potentially worse health outcomes. According to the American Medical Association, 91 percent of surveyed physicians reported that their patients experience care delays due to prior authorization. Moreover, for medicines with a copay of $250 or more, 69 percent of patients do not fill the prescription.
Solving these problems requires moving away from this usual blame game. Instead, we must work toward creating a sustainable system that benefits all stakeholders and puts patients at the center.
At Novartis, we see a path forward built around a simple, common-ground solution, where a manufacturer’s use of value-based pricing is then linked with value-based access from an insurer – in other words, value-based price for access.
Under this approach, individual biopharmaceutical companies would voluntarily set drug prices with reference to value-based thresholds as determined by independent third-parties. These third-party entities can take a variety of forms. Regardless, it is important that the methodology behind these value assessments is fair and transparent, taking all healthcare stakeholders, especially patients, into consideration.
Critically, this is only half of the equation. We know from experience that, in today’s environment, even when a medicine is priced in line with its value, patients often continue to face substantial barriers to access in the form of both administrative and financial requirements. The key is then to link patient access to these value-based prices. Just like drug prices, patient access should also be determined based on the clinical and social value that a drug provides. In our proposed approach, when a medicine is priced according to value, patients would experience better, more affordable access from insurers. Medicines with value-based pricing would be rapidly added to formularies, copays would be kept to a modest level, and administrative barriers like prior authorization would be streamlined or eliminated.
By linking price directly with access, we would get to a system that is more politically and socially sustainable – one that benefits us all. Most importantly, patients would benefit through easier access to the medicines they require and lower out-of-pocket costs. The approach would also incentivize lower, value-based prices, easing the costs to payers; providers and others in the health care system would benefit from reduced administrative burdens; biopharmaceutical companies would be incentivized to align their innovation efforts and their prices to value; and society would benefit from a more efficient health care system and better health outcomes.
Resetting the system will require insurers, pharmacy benefit managers, biopharmaceutical companies, patients, providers and others to work toward a more sustainable system that centers on patients and puts an end to the blame game once and for all.
Scott Howell, M.D., MBA is chief strategy officer, US Pharma, at Novartis Pharmaceuticals.
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