Pharma Is Working to Fix Out-of-Pocket Drug Costs, But We Can’t Do It Alone

When it comes to prescription drug prices, the number that matters most is the amount you pay at the pharmacy counter. There is new evidence that shows even a small increase in what patients are required to pay out of pocket by their health plan for medicines can have catastrophic health effects. 

A working paper from the National Bureau of Economic Research analyzed data from millions of first-year Medicare patients. It found that it only takes a $10 increase in patient cost-sharing for medicines to lead to a 23 percent drop in adherence and a 33 percent increase in the monthly mortality rate.

Those findings add urgency to the ongoing conversation about affordability of prescription medicines. We need to ensure health insurance plans and benefits design don’t harm the very people those plans and benefits are designed to protect when we need them most.

At Sanofi, we believe all stakeholders have a responsibility to take concrete actions to improve access and affordability for patients and we are committed to doing our part. That is why in 2017, we adopted the most progressive pricing principles in the industry. This includes our annual Pricing Principles report, which details how substantively, transparently and aggressively we continue to approach this problem.

Last year, for the third year in a row, more than half of the revenue (over $14 billion) from sales of our prescription medicines in the United States went to health plans and pharmacy benefit managers in the form of discounts and rebates. 

Rebates and discounts are negotiated with plans to secure formulary access for our medicines, which should, in turn, help lower costs for patients at the pharmacy counter. However, based on our experience, we know the system does not always work as it should for patients. When companies such as Sanofi pay higher and higher rebates to health plans, but patient out-of-pocket costs also continue to rise, the system is working for the plans — not for the patients.

The average price that insurance companies pay for most of our medicines has fallen for five straight years. For some medicines, such as insulins, the decline has been substantial. For example, the average net price that insurance companies pay for our most prescribed insulin, Lantus, is 44.9 percent lower than it was in 2012.

Meanwhile, average out-of-pocket costs for patients with commercial insurance and Medicare increased approximately 82 percent over that same period. Put another way, as the price to health plans has nearly been cut in half, those same plans use the false claim of “skyrocketing prices” as justification for shifting more and more costs to patients.

So what should be done? Our Pricing Principles report lays out four patient-oriented proposals that can help us solve the out-of-pocket problem:

• Require rebates and discounts paid by pharmaceutical companies to health plans to be passed through to the patients receiving those medicines at the pharmacy counter. Under current law, health plans can calculate patient cost-sharing based on a “retail price,” which is generally similar to the list price, rather than the actual price the plan pays for the medication (i.e., the “net price”). Requiring plans to calculate patient cost-sharing based on the net price could substantially lower costs by ensuring patients directly benefit from the discounts and rebates paid to plans.
• Prohibit health plan practices that limit a patient’s ability to access financial assistance. As net prices to plans have declined and out-of-pocket costs to patients have increased, companies such as Sanofi have stepped forward to expand programs that help patients afford their medicines. In recent years, health plans have responded by implementing policies designed to block or limit patient access to these programs, such as copay accumulators and maximizer programs.
• Reform Medicare Part D to lower costs for seniors by lowering how much they pay out of pocket for their medicines. The Medicare Part D program has been a great success, providing prescription drug coverage to millions of seniors. Fifteen years in, the program needs to be modernized to lower out-of-pocket costs for seniors and provide more consistency and predictability month-to-month.
• Remove incentives for high list prices by delinking the payments to middlemen in the pharmaceutical supply chain – such as PBMs – from list prices and move to a flat fee based on fair market value.

But this is not simply a matter for policymakers. Sanofi is ready to cut list prices of more of our medicines so long as health plans agree to meet us halfway and guarantee affordable access for patients to these lower-cost medicines. Based on our direct experience, manufacturers unilaterally dropping list prices has minimal impact on affordability or access for people with insurance.

The NBER paper is only the most recent analysis to find that the stakes here are literally life and death. No one part of the health care system can address the out-of-pocket spending crisis alone. The time has come to tackle why patients are shouldering this growing burden and engage in a transparent, productive discussion to implement real solutions to stop this problem now.

Adam Gluck is the head of Sanofi U.S. and Sanofi Genzyme Corporate Affairs.

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