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?