Community Pharmacy: American Patients First and Drug Pricing

Mar 28, 2019 | Independent Pharmacy Insights, Pharmacy Growth, Pharmacy Insights

Community Pharmacy: American Patients First and Drug Pricing – A Plain Language Snapshot of the U.S. President’s Cost Savings Proposal

The U.S. Administration has received a large share of the spotlight about global and national security policy proposals. Yet, a focus on health care cost containment — through the reduction of Medicare and Medicaid sponsor prescription drug prices for patients, while gaining some press attention, has remained largely in the mainstream background.

The reduction is detailed in the Administration’s American Patients First (APF) proposal, which targets “high and rising list prices, increasing consumer out-of-pocket costs, and a new era of high-cost drugs lacking competition.”

Included in the proposal are areas of concern from the administration including:
· High drug list prices;
· Gag clauses preventing pharmacists from informing consumers of lower cost, out-of-insurance options;
· Overpayments by senior consumers and government programs,
· Increasing out-of-pocket consumer costs; and
· Foreign governments “free-riding” off American innovation investments.

Strategies to achieve drug price reform are proposed in the APF that includes improved competition, better negotiation, incentives for lower list prices, and lowering out-of-pocket costs. Each strategy includes two phases of action. First phase actions are those that the President is directing the U.S. Department of Health and Human Services (HHS) to take immediately. Second phase actions are those that are under HHS consideration and require industry and public feedback.

Ultimately, these initiatives target lowering drug prices, boosting the negotiation power of payers, and the removal of provider margins. How might they do it? In a nutshell, by cutting consumer out-of-pocket expenses, increasing manageable access to more drugs, and stabilizing total treatment costs.

Out-of-Pocket Expenses – Higher Prices = Higher Therapy Abandon Rates

Currently, many foreign countries pay less than the U.S. at large, while some Medicare Part D sponsors and Medicaid managed care organizations (MCOs) leverage rebates based on higher list prices to lower costs — without passing on savings to consumers. The proposal would see the HHS increasing payments from foreign countries and Medicaid MCOs to lower drug prices. Though, skeptics suggest that there are no methods to prevent drug manufacturers from maintaining current U.S. drug prices and taking in additional revenue from price increases abroad.

The APF also suggests removing “gag clauses” or measures that prevent pharmacists from advising consumers of lower cost options outside of their insurance plans. Proponents suggest that if the U.S. were to see reduced drug prices or lower out-of-pocket options, it also may see higher drug adherence rates and improved clinical outcomes. By example, an APF-focused study revealed that consumers who are asked to pay “$50 or more at the pharmacy counter are four times more likely to abandon the prescription than a consumer charged $10.”

Increased Access to Drugs

In addition to lower out-of-pocket costs, special pricing and financing are two areas the APF addresses to improve consumer access to drugs — particularly sophisticated, high cost therapies that have high up-front costs plus long-range benefits, as well as narrow initial indications that could expand later.

The proposal suggests indication-based pricing for situations where a drug may have limited indications when it first comes to market but, over time, may gain more indications for larger patient populations. If the therapy is ultimately offered at a higher volume, it also may be offered at a lower price point in the future.

Long-term financing is another area the APF examines. It suggests that therapies provided in a single dose — that have long-term benefits — may also increase access to new therapies and higher utilization, and could open the door for new financial arrangement models to make higher costs more manageable for consumers.

Costs for Total Treatment

The APF blueprint largely targets drug pricing. However, it also looks at the total cost of treatment through site neutrality in payments.

What does this mean?

In plain language, it means that increased costs in a certain treatment setting, such as a hospital, would be removed. If this portion of the APF were to be enacted, opportunities for treatment settings outside of the hospital could increase.

In addition, financial incentives based on treatment settings would decrease (i.e. physicians who may have overutilized more costly therapies under the Medicare Part B buy & bill model). Ultimately, the interpretation of this part of the proposal indicates leveling the playing field away from higher-cost therapy exclusivity driven by provider incentives.

Final Thoughts

The APF is controversial with steadfast supporters and skeptics. Some skeptics believe that drug price regulation is a virtually impossible fete. More conservative proponents don’t anticipate traction until at least 2020.
Yet despite the push and pull, how might the APF affect your pharmacy?

At best, drug pricing and access may become more manageable for even your most financially vulnerable patients. Higher utilization, increased adherence and compliance through greater affordability, and improved clinical outcomes could become more prevalent. Dispensing volumes could likewise increase. This could be a plus for your pharmacy.

At worst, drug manufacturers may cut back on innovation spending. Innovation comes at no small cost, and manufacturers need to keep the lights on, too. And, of course, there is the potential to remain at the status quo with current drug prices, rebate and incentive models designed to keep the pipeline fluid.

The APF is complex and constantly evolving. But AlliantRx is here to help understand changing policy.

To navigate all of these proposed changes, community pharmacies should partner up with companies like AlliantRx. We’re dedicated to helping you understand changing legislature, maintain the health of your patients, keep your stakeholders satisfied, and improve your pharmacy’s bottom line.

If you’re not a member yet, join us. If you are a member, make sure you’re leveraging your benefits and maximizing your pharmacy’s success.