Here's why your prescriptions cost so much
Here's why your prescriptions cost so much
Aug 15, 2022
Content
Prescription drugs can be life saving for millions of Americans but they can also be cost prohibitive to the same millions who desperately need them.
Why do prescriptions cost so much?!
Prescription drugs can be life saving for millions of Americans but they can also be cost prohibitive to the same millions who desperately need them.
Understanding why drugs cost so much is the latest plight for healthcare price transparency and patient advocacy.
What most consumers don't understand is that pharmacy benefit mangers (PBMs) are the gatekeepers of 1) prescriptions drug prices, 2) which pharmacies are covered by insurance and 3) which drugs are afforded rebates. This power dynamic positions PBMs as not just mere middle men but the controllers of prescription drug prices up and down the chain.
The practices in which PBMs set prices and assign insurability is so vague that the Federal Trade Commission (FTC) is now investigating whether PBMs' practices are anti-competitive, as drug practices have skyrocketed in recent years.
As a prime example, a new Alzheimer's treatment has a list price of $56,000 a year and some folks are paying $1,000 per month for insulin. (this is ridiculous!)
Digging into the reasons why, here are highlights our research surfaced:
An estimated 18 million Americans couldn't afford to buy one prescription drug, according to a 2021 poll.
For a variety of reasons, drug-specific rebate information is not shared between the PBM, payer, patient, or provider. This means that the true net cost of a particular drug is rarely known.
And while there is has been a push for cost transparency in healthcare bills through policy and regulations, an analysis of 5,239 hospital websites found low industry-wide adherence. Urban, rural hospitals and those with higher per patient-day revenue were more likely to comply.
To combat the rising drug prices, a new bill was recently passed to allow Medicare to negotiate drug prices with pharmaceutical companies. However, critics are quick to warn this will make drugs less profitable and drive down research for new drugs. The Congressional Budget Office (CBO) estimates 15 of 1,300 drugs wouldn't be brought to market over next 30 years due to lost revenues.
When we look at digital health in the pharmacy sector, we can point to several companies focusing on improving access to drugs through pharmacy delivery and medication management (see Amazon's PillPack, Capsule and Pandia Health). But few companies have mastered price transparency (see GoodRx) and even fewer have tackled radical price reduction (see Mark Cuban Cost Plus Drugs, PBC ).
What's clear is that beyond access, consumers needs price transparency and drug price reductions. Until regulatory bodies can curb drug price inflation, the faster health tech companies solve for these needs, the better for everyone.
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In the News
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Industry Voices--Cracking the code on drug cost savings through transparency
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Physicians have prescribed medications, while being blind to their costs. Extensive electronic health record (EHR) adoption within the past few decades has done little to improve drug cost transparency. Despite cost transparency regulations, prescribers may not see a drug price in their EHRs when prescribing. The lack of lower-cost alternatives makes savings calculations and return-on-investment analysis very difficult. Most cost transparency services provide transaction counts but lack clearly documented savings and ROI resulting from more cost-effective prescribing.
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