The Affordable Care Act (“ACA”) has promised to provide a lot of services to a lot of new folks, all without breaking the bank (isn’t it already broken?) Prescription Drugs is one on many benefits that have been delivered, but the question remains, at what cost? At WBC (www.wbcbaltimore) we have been watching with great concern.
Prescription drug coverage has been included as one of the essential health benefits required by the ACA. This means millions of new potential pharma customers. That should be a good thing for pharma shareholders. Their new customer “buy-in” was obtained in exchange for providing significant brand-name drug discounts for our Medicare Part D beneficiaries and the elimination of the donut hole by 2020. Something to help seniors bear the cost of the donut hole in their Medicare program’s Rx design (the donut hole is the coverage gap that exists where seniors must pay for their own drug costs out-of-pocket). Remember, the donut hole design was a construct of the Bush administration in an attempt to create a CBO-scored cost of adding a new entitlement program somewhat palatable! Without the coverage gap, Medicare Part D was just too doggone expensive!
Today, the Obama Administration has been able to scoff at CBO cost forecasts. “We’ll just let Pharma foot the bill”, said one freshly-minted PhD in public health policy. But we live in a healthcare world that expresses incredible elasticity, like the proverbial water balloon. Squeeze one end and something bulges or pops someplace else!
So what are we seeing as the fruit of this new coverage labor? True,more people have access to drugs that someone else can pay for, but that generally leads to excess over-utilization and increased costs. To help offset rising costs, some plans have opted for much more restricted formularies. A formulary is a list of preferred drugs that are managed by a pharmacy benefit manager (“PBM”) on behalf of an insurance company or other third-party plan sponsors (self-funded employers, unions, municipalities). This list will define which drugs are available and at what cost-sharing requirement. Some drugs are excluded all together, which means that plan participants either pay for the full cost of the prescription or they opt for a different medication. This off course is great news for the manufacturers of the preferred products, but not so much for the others.
We were pleasantly amused when stories from erstwhile reporters started popping up this year about the “surprising” spike in drug costs. Drug costs have been going through the roof in 2014. Do you really believe it’s coincidence? Pharma giveith and pharma taketh away! Most of the drug cost escalation has occurred in generic drugs (we’ll talk about the impact of Hep “C” Solvaldi at another time.) Some generics are seeing 1,000% increases or more. Irbesartan, a medication for high blood pressure, for example, went for $300 for a recent 90-day supply of the 150 mg tablet, while their 300 mg tablet was offered for $30. Crazy times makes for crazy pricing!