Cost control on healthcare is often a matter of saying “No”, or at least “No, not at that price.”
Michael Bertaut of Blue Cross/Blue Shield of Louisiana has an excellent example of the escalating arms race to say no and then avoid the no between insurers and drug marketeers:
Imagine I send you to your local drug store and instruct you to buy a few over-the-counter ingredients – $37 worth (at retail) of esomeprazole (think Nexium®) and about $11 worth of naproxen (think Aleve®). These $48 worth of ingredients are what you will find in a 30-day supply of a new drug from Horizon Pharma called Vimovo®.
After this drug company works its magic, a new price is set. What’s a fair price for this combination…..
Try $1,492 for a 30-day supply.* That’s what Horizon charges for Vimovo.
I want you to purchase $53 worth of famotidine (think Pepsid AC®) and $34 worth of plain old Ibuprofen (Motrin®). This will get you a 30-day supply of another new drug called Duexis. So, what’s a fair price?
Horizon’s answer? Again, $1,492 for a 30-day supply. The same magically unbelievable amount.
You might think, “Who on earth would pay for such a drug, and what doctor would prescribe it?” Last year, Louisiana doctors prescribed – and patients filled – these drugs more than 5,000 times, and the number is climbing each year.
That is a list cost of $7.5 million dollars for what would cost retail shoppers $400,000 for generic versions. If they went to Costco or Sams Club, the total consumer cost would be less. Once you factor in discounts, the insurers probably paid between $3 million and $4 million dollars net. It is a rip-off.
The initial response of the insurer was educate the doctors in the network about the cost and low cost alternatives. That education effort resulted in the 5,000 scrips filled. They then put these drugs on a high co-pay tier. If they insurer paid for a prescription, the member was paying $100. The goal was to make the drug more expensive than buying the components at the drugstore. The initial counter-move to this cost control measure by the drug maker was to send people who were prescribed these drugs a rebate coupon equal to or greater than the co-pay amount.
The next move by the insurer is to place these drugs off the formulary. That means the insurer won’t pay for them at all. This will lead to people screaming about their insurance company being an evil bastard. The probable long term result is that the drugs will be put on a restricted formulary with significant pre-authorization or step treatment requirements to minimize quantity prescribed for an acceptable level of yelling about being an evil bastard while the drug marketeers give a larger discount off the absurdly high list price.
That will only happen as long as the payer can credibly say no. The insurer has to be able to walk away if they can’t get the net cost of the drug after co-pay to under $150 or $200 a scrip.
That is the only way cost control can work. The payer has to be able to credibly say no and walk to a near substitute. The British use NICE to determine their maximum willingness to pay. The Norwegians use cost effectiveness thresholds to determine which therapies and drugs they cover. Ontario uses its bulk purchasing power to set a single common price with modifiers.
The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs’ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.
These are all systems that have a strong and credible “No” built in.