What can be done about soaring drug costs?

Joseph BurnsPrimary care physicians concerned about rising drug costs may want to watch efforts in California and other states to cap copayments, and monitor discussions about allowing the federal government to negotiate prices with drug makers or about setting medication prices based on their value to patients.

How perverse incentives are ruining healthcare

One idea, which is being launched in California, is to cap copayments. California’s limit on copayments took effect in 2015. For patients enrolled through California’s health insurance marketplace, Covered California, insurers must limit what they charge for specialty drugs (those on the highest tier) that are purchased retail or through the mail. Insurers may charge no more than $250 for a 30-day supply of specialty drugs for members in silver, gold and platinum-level plans, and no more than $500 for a 30-day supply of specialty drugs for those in bronze-level plans.
Medications patients receive in hospitals or doctors’ offices would have no such caps. Following these changes, state legislators passed a law that similarly limits copayments for those enrolled outside of the exchange.
U.S. Rep. Xavier Becerra (D-California) says Congress should consider legislation to implement such caps on prescription drugs and to allow the Centers for Medicare & Medicaid Services (CMS) to negotiate with pharmaceutical manufacturers for drugs covered by Medicare and Medicaid.  Becerra, who chairs the House Democratic caucus, has formed a task force to address prescription drug pricing. “Any time you see the price of prescription drugs rising so rapidly, particularly for specialty drugs, you have to do something,” he says.

Next: Delving into the problems

Government negotiations with pharmaceutical companies are banned under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which introduced Medicare Part D prescription drug plans. Eliminating the ban has been discussed often, and it’s now being considered again, Becerra says. “The Veterans Administration pays a lot less for prescriptions because they negotiate the price of those medications,” he notes.

Popular online: Patients unhappy with doctors’ EHR use

Another problem for Medicare is the required 20% copayment for prescription drugs physicians administer. In November, the Government Accountability Office reported that 332,000 Medicare beneficiaries had out-of-pocket costs of $1,900 to $197,000 in 2013 for new medications covered under Medicare Part B. Such high costs are unaffordable for the six million patients covered by Medicare who lack supplemental insurance, researchers Peter B. Bach, MD, and Steven D. Pearson, MD, MSc, reported. In an article published online Nov. 30 in the Journal of the American Medical Association, they explain that Medicare requires Part D plans to cover all drugs in certain classes, allowing pharmaceutical companies to raise prices rapidly without apparent justification.
Congress might act simply because high costs in the United States subsidize drug costs in countries that do negotiate with pharmaceutical companies. Bach and Pearson cite data showing that U.S. drug prices are two to six times higher than prices for the same drugs in other major industrialized countries. Becerra says his task force may pursue this issue as well.

Next: Pondering solution ideas

  One idea that does not require negotiating with pharmaceutical companies is linking drug costs to the medication’s value to patients, Bach and Pearson suggest. But CMS and perhaps U.S. Food and Drug Administration policies would need to change, and even then, drug companies might reject value-based pricing, they warned.
Regardless of any actions the government takes, spending on drugs likely will rise again in 2016. And, if past is prologue, volatility in drug costs will continue.