5 principles for prescription costs reform; industry middle managers are driving prices

High copays required by insurance providers and health market middlemen are driving up patient costs and causing a crisis in medication non-adherence. Around 20% of Americans say they've skipped filling a prescription because of the out-of-pocket cost. This causes over 100,000 preventable deaths annually and costs the U.S. health care system as much as half a trillion dollars every year.

Reducing out-of-pocket costs would make it easier for millions of Americans to take their medicines as directed. Medications keep manageable conditions — like diabetes, heart disease, and high blood pressure — from turning into expensive and life-threatening health crises.

Unfortunately, health care middlemen known as pharmacy benefit managers are keeping out-of-pocket costs high, making it more difficult for patients to access the life-saving drugs they need. It's time for policymakers to address these managers' price-inflating tactics.

Pharmacy benefit managers are third-party firms hired by insurers to help administer prescription drug coverage. They negotiate directly with drug manufacturers, who offer these middlemen and women discounts and rebates in exchange for preferential placement on insurers' "formularies" — or lists of which medicines the health plan will cover.

It's hard to overstate the role they play in the modern drug supply chain. As a pharmacist, I see it every day. The three largest pharmacy benefit managers control over 80% of all prescription drug access and reimbursement in the United States, giving them disproportionate power and influence. That's largely why managers have been logging double-digit profit growth while out-of-pocket costs for many patients have continuously risen.

They ultimately have control over which medications patients receive, when they can receive them and how long they may use them. In addition, negotiating tactics have negatively affected product supply. I've witnessed firsthand how benefit managers have reduced profitability for manufacturers and local retail pharmacies so much that life-saving medications — including treatments for everything from infections to cancer — are frequently out-of-stock.

Patients, health care providers and patient advocacy organizations are urging regulators and policymakers at both the federal and state levels to take strong action. The current situation — which incentivizes and prioritizes the profitability of third-party companies such as pharmacy benefit managers over the health of the public — is no longer tenable or sustainable.

Reform will have a profound impact on medication access and patient out-of-pocket costs. To ensure that the proposed reforms benefit patients, policymakers should adhere to five foundational principles.

First, the current third-party reimbursement process is too complex and convoluted. Contractually mandated lock-out clauses that prevent disclosure of key contract terms (including product pricing, rebates, claw-backs, and offsets) effectively make transparency impossible. Policymakers should incentivize systems and procedures that are simple, transparent, understandable, and effective — and penalize those that do not meet these standards.

Second, reforms must ensure that patient out-of-pocket costs are based on actual prices, not the essentially fictional "list" prices that are currently used. Too often, patient cost-sharing obligations don't consider rebates and incentives that reduce the "net" price that managers pay. Any equitable and honest system must calculate patient out-of-pocket prices using the bottom-line price, factoring in all discounts and incentives.

Third, policymakers should carefully examine the utilization and access-management tools that insurers and their middlemen and women use to maximize profits. These policies include highly restrictive formularies, step-therapy requirements, complex prior-authorization procedures and a refusal to reconsider claim denials. Such practices hurt all patients, especially minorities and those in socioeconomically disadvantaged groups. Utilization and access-management policies must face more intense oversight from regulators.

Fourth, pharmacy benefit managers must be subject to the same scrutiny and regulation as other businesses, especially since the welfare of the public is at stake. Policymakers should consider dismantling the oligopoly that exists, where three for-profit, vertically integrated, multi-platform corporations manage over 80% of the prescription drug market.

Lastly, policymakers should remember that the public will be best served by a transparent, equitable and patient-focused system that operates in line with competition and other free-market principles. In the past, government interventions in product pricing have ended up increasing consumer costs. Pursuing free-market solutions while maintaining appropriate government oversight is likely to be a more successful model.

These five principles have one important commonality: They focus on the long-term best interests of patients. In the end, that should be the goal of any reform effort.

Salvatore Giorgianni, PharmD, based in Melbourne, is co-founder and vice president of Healthy Men, an organization that works to enhance the wellness and health of boys and men.

This guest column is the opinion of the author and does not necessarily represent the views of the Times-Union. We welcome a diversity of opinions.

This article originally appeared on Florida Times-Union: Pharmacy industry middlemen are pushing out-of-pocket costs sky high