The ACA and the Myth of Increasing Drug Costs

On the issue of drug pricing, Azar pointed to a large amount of misinformation permeating among the public and media. He said that drug pricing has been relatively stable over the past 5 to 10 years, but insurance benefit design changes have shifted more of the burden in employer-sponsored health care to employees.
Azar said that under the ACA, many people chose low premium plans that meant high bills if they ever needed services such as prescription drugs.
“So, the patient is walking in to the pharmacy and they’re seeing the sticker price,” Azar said. “On top of this, you have the issues that happened with various generic and generic-like manufacturers on pricing that really stood out there.”
He said that high list prices at launch in hepatitis C, oncology, and rare diseases all had a significant impact on spending.
“One of myths is that health care spending is out of control because of high drug costs. It isn’t drug costs that are doing it,” he said. “Over the last 50 years, drug spending has remained constant at 10 to 14%. For the last 50 years it is unchanged and every forecast has it unchanged going into the future at 10 to 14% of spending.”
Azar said that 56% of premium increases were a result of hospital and professional costs compared with 13% from drug costs.
“As we look at insurance benefit packages, they’re still—from the 1960s—prejudiced against prescription drug spending,” he said. “Drugs are one of the most important tools the physicians in our hospitals use who deal with health care conditions.”
Azar said that average out-of-pocket costs for hospital services is 5% compared with 20% for prescription drugs, which removes incentives to use these drugs. List prices have increased as well, rising 12% in 2015 and 9.2% in 2016, according to QuintilesIMS. Azar added that rebates have risen sharply with a concentration of power among pharmacy benefit managers (PBMs) and insurance companies.
“They’re masters of negotiating rebates and they’ve brought down the net pricing of rebates. Effectively, they do their job really well,” he said.
Azar said that cutting list prices does not change the equation at the point of sale for patients. He said brand competition is the magic key to lower drug prices, as seen when competitors to high cost hepatitis C antiviral drugs entered the market.
“Within 1 year, a competitor hepatitis C vaccine entered the marketplace and rebates went up to 65% and net pricing of the hepatitis C vaccine is lower in the United States than the pricing in Europe with socialized medicine,” he said. “Competition actually works because there is concurrent innovation.”
Azar cautioned against pushes for legislation to address drug costs. He said that natural forces of self-correction are already at work.
“You’ve had loss of exclusivity on major drugs and you’ve had fairly bare pipelines. All of that is changing right now,” he said. “PBMs are really good at their jobs. You now have launches of most products under price predictability agreements.”
Azar added that legislating drug costs could be extremely detrimental as we enter a “golden age” in pharma.
“With the decoding of the human genome, we now have such an understanding of the molecular nature of disease that we are producing targeted therapies. We are seeing unbelievable, revolutionary drugs roll off right now,” he said. “I hope this is not when we stifle innovation and stifle patient access to that innovation in the interest of looking at a rear-view mirror problem here.”
Azar concluded the session praising the work of specialty pharmacies, who he said deliver white glove services to patients and act as their shepherd through the storm of battling a potentially life-threatening disease.
“This connectivity isn’t just about a great customer experience or to make the patient feel good. It has an impact,” he said. “It’s been demonstrated that you deliver better adherence when a product is delivered through a specialty pharmacy.”

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