Insight provided by Bryan Klazinga, VP of Pharmacy Benefits
As we enter the second half of 2019, medication costs remain a primary concern among employer groups, consumers and associations alike. Drivers of rising prices include new medications entering the market and continued waste, while possible detractors include a call for more transparency.
The increased scrutiny may result in a fundamental shift in how PBMs conduct business. To stay ahead, companies and benefits professionals can take note of the following five trends we’re watching in Q3.
Historically, disease like cystic fibrosis, muscular dystrophy and hemophilia had treatments available to minimize the symptoms or slow the disease, but recent developments offer a much more positive outlook. Gene therapy medications currently in development offer potential cures for these diseases by modifying or replacing missing or malfunctioning genes so that they function properly. An influx of these gene therapy medications is expected in the coming years: one estimate predicts the global cell and gene therapy market will exhibit a compound annual growth rate of 21.9% between 2018 and 2026.
One example: The drug Zolgensma was recently approved for treatment of spinal muscular atrophy in children up to age two. At launch, the cost of this novel medication was $2.1 million, spurring a debate about drug value versus drug price.
A second example: A CEO of a specialty drug manufacturer recently spoke about the drug his organization currently has in human trials for Duchene’s muscular dystrophy. Four children around the age of ten underwent a well-tolerated one-hour procedure that is showing very positive results. Although the price tag will be significant, the prospect of a cure for this terrible disease is remarkable.
The life-changing impact of these new drugs is clear – but how will health plans manage the accompanying costs? As more gene therapy drugs come to market, it will become critical that plans follow cost management best practices including first-line alternatives and proper independent medical review.
A number of states have requested permission from CMS to negotiate prices with manufacturers with the aim of holding manufacturers accountable medication effectiveness. One example is Washington State, which received approval to negotiate the price of the Hepatitis C drug class for its Medicaid population. CMS is considering the need for value-based pricing for many drug classes, especially new gene therapy treatments. If proven successful, the move could have future implications for the commercial market.
Hidden profits, risings costs and the complexity of PBM contracts contribute to a general culture of mistrust in the PBM industry. With growing scrutiny on the high cost of medications, groups are demanding greater transparency from pharmacy benefit managers.
The first calls for change may focus on transparency. Recent examples:
True pricing transparency will require transparency across all parties, and PBMs that already offer a true transparent pricing arrangement will benefit most. Generally speaking, more transparency could mean more competitive pricing for employer groups in the future.
Earlier this year, the Trump administration called for the end of rebate protections against anti-kickback laws for Medicare claims. The goal was to lower the list price of the medication that would benefit members at the point of sale. However, the CBO estimates that federal spending would increase $170 billion if the rule were implemented as proposed. The elimination of rebates for Medicare claims does not guarantee the lowering of the list price of medications. It is also unclear what the elimination of rebates would do to premiums as PBMs claim they already pass back most of the rebates. The debate continues as to the root cause of high medication costs.
It’s no secret that all parties profit from the generic drug market. It’s a good thing that all are incentivized to increase utilization of generics over more expensive brand name drugs. However, this has created an incredibly obscure generic pricing structure that’s ripe for abuse. Authorities from more than 40 states filed a complaint accusing 20 pharmaceutical companies of colluding to raise generic drug prices. According to the complaint, the companies exchanged emails regarding the timing of the next price increase. An unredacted copy suggests this complaint could have significant impact on overall on drug prices. The very fact that this practice has come to light will force more scrutiny and calls for transparency.
The pharmacy and PBM market is continuously moving towards greater transparency. The attention on drug prices could result in more government regulation if transparency isn’t first accomplished by plan sponsors and PBMs. This will require industry to commit to eliminating waste and actively managing spend on clients’ behalf through plan design and utilization management.
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