Specialty Drugs Threaten Payer Bankruptcy
December 14, 2015
The common phrase “the beginning of the end” dates at least to a famous speech delivered by Winston Churchill in 1942. It may now be a well worn cliche, but in its essence, it describes a moment of no return. The point beyond which there is nothing you can do to affect change. In business these market forces can be slow or indiscernible and can often be disruptive or sneaky. Everything is fine until one little market tear explodes and the contents of your desk are in a box. Recognizing these moments and having solutions for them are the only ways to avoid the “end beginning.” Technology applications may be the best firewall to the recent rise in drug costs despite its multiplicity of causes.
What we know about prescription drugs right now is that there are a lot of reasons to be very nervous. Drug spending rose 12% in 2014. The highest number in over a decade. The prices of generics are going up as well. Generics have long been the drag on inflation in prescription spending. They have consistently offered affordable alternatives as older patents expire. However a new effort to buy up old patents, extend current ones, and corporate mergers that kill competition have caused soaring generic prices. A recent study released by the AARP and reported on by the Boston Globe found that:
“[generic] drug prices are increasing at ‘extraordinary’ rates, the study said, ‘indicating that the era of consistent generic drug price decreases may be coming to an end.'” What once was a friendly sector of the market has become hostile. ‘The cost of a 250-milligram pill of the antibiotic tetracycline soared 7,567 percent in two years, from 6 cents in 2013 to $4.60 in 2015.'”
In this new market, generics are the dear friend that just got bitten by a zombie. New specialty drugs that are hitting the market can save lives, but to the industry they are a groaning horde of flesh eating zombies at the doorstep. Specialty drugs are ripping holes in the previous industry fabric. In 2014, Hepatitis C drugs like Solvadi, accounted for $11.3 Billion in costs, which was a third of the all new drug spending. Hep C sufferers account for little more than 1% of the population, many of whom are not exhibiting any symptoms, but to cure them costs well into six figures. Also a significant number for another reason 1% of all prescriptions written in the US account for 40% of the total cost burden. A vast majority are for new high priced specialty drugs.
The industry has responded and payers have been putting more expensive drugs in higher tiers. In each successive tier the cost burden on the patient increases. Sometimes it is as high as 50% co-insurance. A patient with a chronic condition who sees co-insurance on their medications enter into the thousands per month might stop filling the prescriptions. Patients with chronic conditions who fail to take their meds are a medical time bomb. Whatever savings the company might see on the front end are going to be overwhelmed by the medical complications and expenses when these patients’ conditions have not been properly managed. This is a difficult balancing act. At what tipping point does a co-insurance percentage create risky choices in patients and greater costs and worse health outcomes long term?
All of this complexity is possible because Rx deals and pricing are the last obstacle in healthcare transparency. Some of the largest and most influential payers are contractually prevented from sharing their drug costs even in an effort to inform their own members and the physicians that serve them. Shouldn’t their be a better way? Cost and Quality information are completely absent from this conversation. It’s truly one of the only consumer buying decisions that do not involve the most basic pieces of data. Your third fantasy football team is more data driven.
The dream scenario would be a tool that disrupted the market at the patient and doctor interface. A platform that would educate doctors and help them write prescriptions which maximize patient outcomes while minimizing their costs. An application that would empower patients with the knowledge and confidence to walk into a doctor’s office and dramatically reduce their out-of-pocket or co-insurance cost burdens. RxREVU is that platform. It is a research driven health technology application that stirs together all of the buzzwords and frothy language around health technology and does the one thing that benefits everyone; it lowers costs. It cannot get drug companies to lower prices, but it successfully recruits and actualizes doctor and patient participation in eliminating waste in your prescription drug spending.