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You are here: Home / Anderson On Health Insurance / Whose price?

Whose price?

by David Anderson|  May 7, 20189:39 am| 11 Comments

This post is in: Anderson On Health Insurance

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Whose price should be lowered?

That will be the critical question in the next round of drug pricing food fights.

Is the relevant price what the patient pays? If so, then this is primarily an insurance company problem as they will need to rework their benefit designs and cost sharing structures.

Is the relevant price the combined patient and third party payer price? If so then this is primarily a problem of overall drug pricing levels.

We will need to be very clear in our thinking when we hear the debate over drug prices. One of the projects that I am working on is looking at chemotherapy parity laws. These laws are insurance benefit regulations. Most states requires insurers to charge the same cost-sharing for oral or IV chemo even if they are of the same line of treatment with vastly different total prices. One option may be a few thousand dollars for a full course of treatment while the other option can buy a nice row house in a soon to gentrify neighborhood in Pittsburgh for a single year of treatment.

From that patient point of view, they don’t really care that Drug A costs $2,000 and Drug B costs $55,000 if they are paying a $300 co-pay for either one. They’ll see a few pennies more per month in their premiums if they choose Drug B but that is piffling. Insurers will try to run people through pre-authorization hell to get as many people to Drug A as possible as the first line of treatment.

Now if we decide that the total cost of a drug is what matters, then we should expect differential cost sharing from insurers. Drug A might have no cost sharing while Drug B might have a 50% co-insurance until the out of pocket maximum is reached. But even then, the cost of Drug B is so high and the associated costs of cancer treatment are so high, most people will max out on their insurance anyways.

Prices will come down for drugs that have clinical substitutes and buyers are willing to either say “No” or “No, not at that price” en masse. This means lots of restricted formularies, differential cost sharing, step therapies with try to fail protocols.

So as the debate on drug pricing heats up over the next couple of weeks, please be aware of what price is being talked about — is it the patient facing price or the total dollars transferred from all payers?

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11Comments

  1. 1.

    Sam Dobermann

    May 7, 2018 at 10:23 am

    Did you watch the 60-minute report this yesterday on the drug pricing. It’s more complicated than what your talking about.

    The pharmaceutical benefit managers, PBMs like Express Scripts, have a big part in controlling prices and they are playing games.

    The. whole system is more corrupt than you can imagine. An Illinois town is taking them on.

    You can watch it online. Please do. It exposes so much your head will spin. This stuff is why Medicare etc are so costly.

    Would say more but typing on phone is torture.

  2. 2.

    David Anderson

    May 7, 2018 at 10:29 am

    @Sam Dobermann: I am very well aware of PBMs and they have a role to play in the whole price story but not the patient facing price story.

  3. 3.

    EMedPA

    May 7, 2018 at 10:29 am

    Thank you for this. Too many of us who are clinicians only look at what we think the best drug or therapy is, without thinking about how our patients are affected by the cost.

  4. 4.

    Victor Matheson

    May 7, 2018 at 10:59 am

    Clear thinking on drug prices is pretty tough in the first place. It is even tougher when your country has a history of screaming “death panel” whenever anyone brings up the idea of trying to studying cost-effectiveness of various medical policies or interventions.

  5. 5.

    Victor Matheson

    May 7, 2018 at 11:01 am

    @EMedPA: Shame on you for not considering the costs to the people in your care! Now excuse me, I have to go make my textbook order for next semester without looking at the price of my book options.

  6. 6.

    David Anderson

    May 7, 2018 at 11:10 am

    @Victor Matheson: Come on, isn’t getting screamed at by people who have no clue what they are talking about the core reason we developed expertise

    Especially you as you are a referee as well. I am perpetually stunned at the keen insight and vantage point that can be gained one hundred and three yards off the ball while looking almost perpendicular to the off-side line from someone whose playing career ended at U-10.

  7. 7.

    LaNonna

    May 7, 2018 at 11:13 am

    Amazing that a small country like Italy can afford to provide Il Nonno with his chemotherapy, diabetes, heart, and stroke meds, all for a nominal few euros per month. In New York City eight years ago the same meds minus the chemo cost $350 per month after “insurance”, and the same course of chemo was quoted at $25,000!! We are economic refugees in a way, having refused to be bankrupted by healthcare costs.

  8. 8.

    Sam Dobermann

    May 7, 2018 at 11:13 am

    @David lAnderson:
    David they are playing several roles it sometimes against each part of the firm the the business that it’s very complicated and I really wish you would watch that 60 Minute report because from what your reply to my comment was showed you could benefit from watching that 60 Minute report. Sometimes the PBM can work for reducing prices but sometimes inflating them.

  9. 9.

    EMedPA

    May 7, 2018 at 11:27 am

    @Victor Matheson: I always ask that question in the ED: how do you pay for your meds? And I always prescribe the cheapest med I can. Unfortunately, not all of my colleagues do.

  10. 10.

    Victor Matheson

    May 7, 2018 at 2:43 pm

    @EMedPA: I think you did, but just to be sure, I hope you do realize I had the sarcasm font on for that (fake) bit of criticism. ;-)

  11. 11.

    scottinnj

    May 7, 2018 at 8:11 pm

    It is one thing to price when there are some near alternatives – for example it is possible to compare the cost of say a generic statin regime when you look to price something like Repatha. But if you take a couple of the more expensive cancer drugs that are shown to be more effective how do you price? It’s hard to price say Keytruda or Revlimid vs few alternatives.

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