While Washington debates whether the “rebate rule” proposed by the administration would cause federal spending to rise, too many are forgetting the people it would help.
Like the woman in Iowa who takes Humalog insulin. Her Medicare Part D plan requires her to pay $193 per prescription — which she sometimes has to carry as a balance on her credit card. But under the administration’s rebate rule, her cost would drop by two-thirds — to $64.
The rebate rule would convert rebates on brand-name prescription drugs — paid by pharmaceutical companies to health insurance plans — into upfront discounts — shared directly with patients at the pharmacy. The rule affects seniors and low-income Americans in privately run Medicare and Medicaid plans, but the administration wants Congress to extend the same protection to all Americans with private insurance.
This is the quickest way to lower consumers’ out-of-pocket costs for medicines — by billions each year. It’s also a once-in-a-generation opportunity to reset our system to work better, for all patients.
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The ideal system would have four key features: 1) Lower patient costs; 2) Better patient adherence; 3) Transparent prices; and 4) Value-based payments. The rebate rule would help achieve all four.
Make prescriptions cheaper for more people
►Lower patient costs: Despite what you’ve heard, drug prices are actually going down at many companies. Last year, Johnson & Johnson, Sanofi, Novartis and Lilly all experienced declines in our “net prices” — the final amounts we receive after paying rebates and discounts to health insurance plans, pharmacy benefit managers (PBMs) and other supply chain entities.
Unfortunately, these lower net prices are reaching fewer patients. Instead, health insurance plans and PBMs frequently use rebates to reduce premiums for all consumers or to fund other priorities. But that’s not working anymore because nearly half of Americans with private insurance are in high-deductible health plans. Most patients in these plans must pay at or near the list price for their medicines, until they reach their high deductible — usually several thousand dollars.This means the sick are subsidizing lower premiums for the healthy.
No other part of the U.S. system works this way. Patients get the benefit of negotiated discounts for doctor visits, lab tests, hospitalizations — but rarely for drugs. The rebate rule would end this unfairness — especially for the 60% of Americans with a chronic disease, who take medicines regularly.
The Congressional Budget Office predicts the rebate rule would allow pharmaceutical companies to offer discounts 15% smaller than their current rebates. If so, this could cause patient premiums and federal spending to rise. But we believe the opposite will occur.
At Lilly, we are committed to compete on our current net prices — not to raise them. We’ve already told health insurance plans and PBMs that, under the rebate rule, we will maintain our current discount levels. This debunks the CBO’s prediction. If the rebate rule expands to private insurance, the list price of our Humalog insulin will come down and patients’ out-of-pocket costs with it.
Rebate rule will be better for patients
►Better patient adherence: Lower out-of-pocket costs at the pharmacy would help more patients fill their prescriptions. When patients pay less than $75 per prescription, 7 out of 10 take their medicines, according to IQVIA data. But when out-of-pocket costs reach $125, half of patients abandon their prescriptions — which should never happen for financial reasons. Better adherence improves patients’ health and saves money on other, more expensive types of care.
►Transparent prices: Already, free list price information is available on all medicines via GoodRx.com. Now pharmaceutical companies are using their TV ads to direct people to web sites or 800 numbers to learn about list prices, average out-of-pocket costs and financial assistance. The rebate rule would make purchases at the pharmacy even more transparent by sharing all discounts with patients.
►Value-based payments: The rebate rule could remove the motivation for health insurance plans to negotiate larger rebates and instead accelerate contracts called value-based arrangements. These arrangements test how patients’ health changes on a medicine, versus alternatives. If patients do worse on a medicine, its price goes down. The administration can help value-based arrangements grow rapidly with clear new safe harbors defining them and protecting their use.
Our current system isn’t sustainable. We want to see change.The rebate rule opens the opportunity to make our system work for individual patients. For their sake, let’s come together and make it happen.
David A. Ricks is chairman and CEO of Eli Lilly and Company, a pharmaceutical company based in Indianapolis.
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This article originally appeared on USA TODAY: Rebate rule would help make prescriptions more affordable for more patients: Eli Lilly CEO