High drug prices: Who’s really to blame?

FEB 08, 2019 / Susan Morse, Senior Editor

Providers, payers, pharmacists, pharmacy benefit managers, drug manufacturers and consumers all have a stake in the recent proposal by the Department of Health and Human Services to lower the cost of prescription drugs by taking away kickback protections on rebates.

Reaction to the proposal has varied. America’s Health Insurance Plans and pharmacy benefit managers say it’s the drug manufacturers that set the prices, and it’s hard not to point the blame at pharmaceutical companies when prices for orphan drugs to treat rare diseases have sometimes increased by thousands of dollars, for no obviously perceivable reason.

But the reality is not that simple, and there are opposing viewpoints about who, and what, is truly to blame for the already high and still rising prices.

A ‘shadowy player’ between patients and pharmacists

In an opinion piece “Don’t Blame Drug Prices on Big Pharma” published February 3 in The Wall Street Journal, Drug Channels Institute CEO Adam Fein takes issue with the accepted mantra that prescription drug costs are skyrocketing. In fact, sale prices for brand-name drugs increased only 1.5 percent last year, Fein said.

America’s Health Insurance Plans responded to Fein’s opinion piece on its website. “Big Pharma wants to shift the blame to health insurance providers, who fight for consumers every day, using their bargaining power to negotiate lower prices. But casting blame for high drug prices on insurance providers, pharmacy benefit managers (PBM), or others is the definition of fake news,” AHIP said. “Let’s be clear–the savings insurance providers negotiate are returned directly to consumers through lower premiums and out-of-pocket costs.” 

An independent pharmacist, at least one provider interviewed and HHS Secretary Alex Azar, put the blame on pharmacy benefit managers as the middlemen who negotiate drug prices and rebates.

“There is a shadowy third player in the transaction ­between patients and their pharmacists: middlemen who have taken a big kickback from the drug manufacturer, which may or may not be reflected in patients’ out-of-pocket costs,” Azar said Thursday in a statement published in the New York Post.

More PBMs are at the top of the Fortune 500 list than drug manufacturers because most make more revenue, according to Drug Channels.

Express Scripts is ranked in the Fortune 500 because it has the tools and resources that are in demand and highly valued, responded Brian Henry, vice president of Corporate Communications.

Drugs are a heavy burden on hospitals

Prescription drugs are the number one utilized health insurance benefit by plan members, outpacing their doctor visits.

The price of drugs is seen as the reason why healthcare costs can’t be brought in-line.

Hospitals bear a heavy financial burden when the cost to buy drugs increases. Not only in the purchase price, but in patients ending up in the hospital when they cannot afford their medications.

Providers dealing with higher costs must make cuts elsewhere, according to a study released by the American Hospital Association and others. Twenty-five percent of those responding to the study said they had cut staff and 17 percent said they had cut services.

Health plans have become increasingly intertwined with their PBMs to better compete, realize cost savings and to produce efficiencies.

The largest, UnitedHealthcare, is connected to OptumRx through parent company UnitedHealth Group; Cigna closed on its $67 billion purchase of Express Scripts in December; CVS Health and Aetna also merged late last year in a $69 billion deal; and Anthem is ready for an early launch of of its in-house pharmacy benefit manager, IngenioRx.

Cigna’s stock dropped 2.9 percent on February 1 after HHS proposed the new rule aimed at lowering prescription drug prices, according to Barron’s.


Chris J. Stewart

Chris currently serves as President and CEO of Surgio Health. Chris has close to 20 years of healthcare management experience, with an infinity to improve healthcare delivery through the development and implementation of innovative solutions that result in improved efficiencies, reduction of unnecessary financial & clinical variation, and help achieve better patient outcomes. Previously, Chris was assistant vice president and business unit leader for HPG/HCA. He has presented at numerous healthcare forums on topics that include disruptive innovation, physician engagement, shifting reimbursement models, cost per clinical episode and the future of supply chain delivery.

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