Drug Costs

Express Scripts, the nation’s largest mail-order pharmacy, announced plans to drop coverage of 44 prescription drugs and medical devices it says aren’t worth their high price tags. The company’s 2014 formulary will list recommended alternative drugs alongside the ones it will no longer cover.

The excluded drugs include new treatments like Pfizer’s rheumatoid arthritis pill Xeljanz, Novo Nordisk’s diabetes injectable Victoza, and GlaxoSmithKline’s inhaler Breo Ellipta. The change will also affect some older medications like Bayer’s multiple sclerosis drug Betaseron.

Express Scripts spokesman David Whitrap told the industry publication FiercePharma that the change will apply to between 30 and 40 million pharmacy members, but that the drug exclusions will affect only about 600,000 of them.

"If you look across our industry, there is broad and growing acknowledgment ... that not all drugs need to be covered," Whitrap said. "Drug choices in some classes are larger than ever, with many products costing more with no additional health benefit."

James Robinson, Ph.D., M.P.H., director of the Berkeley Center for Health Technology at the University of California, Berkeley, says this is a common bargaining tactic of pharmacy benefits managers (PBMs).

“There are lots of classes of drugs that do basically the same thing, and there are lots of PBMs like Express Scripts who say to manufacturers, ‘You need to lower the price for us or we’ll drop you from our formulary,’” Robinson told Healthline.

Hospitals are doing the same thing. Last year, one of the nation’s leading cancer centers told drugmaker Sanofi they would not cover their $11,000 a month colon cancer treatment Zaltrap. Sanofi promptly cut the price in half.

Of the $2.7 trillion a year the U.S. spends on healthcare, 10 percent goes to medications. And those costs continue to rise. According to a study by the Health Care Cost Institute, in 2012 the price of brand name drugs rose by 25 percent; generics, by 5.3 percent. 

Learn 10 Ways Medicare Patients Can Help Lower Healthcare Costs »

An Imperfect System

If doctors and patients could always look at price and safety information for a variety of drugs and choose the one that offered the best outcome at the lowest price, the makers of similar medications would have an incentive to be more competitive.

But most patients don’t know the retail price of their medications because insurance covers most of the cost. And many doctors can’t advise patients about medication costs because what the patient pays depends on what his or her insurance company has chosen to cover. 

The U.S. government, hamstrung by agency rules supported by drugmaker lobbying groups, doesn’t promote price transparency, either. Medicare, the government program that provides healthcare for seniors and the disabled, bargains on behalf of 49 million beneficiaries but is explicitly barred from negotiating drug prices. 

Even the newly created United States Patient-Centered Outcomes Research Institute, which evaluates drugs for coverage under federal programs, cannot factor cost into calculations of the quality and value of the treatments it recommends.

Find Out How to Shop for Affordable Healthcare on the Federal Insurance Exchange »

Why Companies Are Stepping In

In the absence of government action, the only buyers large enough to leverage concessions from drugmakers are hospital and pharmacy chains, insurance companies, and middlemen: group purchasing organizations and PBMs, such as Express Scripts.

“As a representative of the consumer, they have more bargaining power against the pharmaceutical company than any one consumer,” Robinson said.

And giving drugmakers an ultimatum—lower prices for our members or we won’t cover your product—makes sense for these companies’ bottom lines. 

“The basic idea is that the consumer and the employer and insurers are all looking for ways of reducing the price [of drugs], and the pharmaceutical industry are all looking for ways to keep prices high because they need it to fund their activities,” Robinson said.

The ACA will require PBMs to disclose how often they substitute generic drugs for brand name ones, as well as the discounts or price concessions they negotiate with drugmakers. The law should make it easier for doctors and policymakers to evaluate how good a deal companies like Express Scripts offer.

“PBMs are for-profit, investor owned companies. They make a profit by being in the middle,” Robinson said. However, he added, “savings in healthcare do accrue ultimately to the consumer.”

What Can You Do About High Drug Costs?

Single-payer healthcare systems (like those of Canada and the U.K.) allow governments to negotiate on behalf of all their citizens. In the U.S., for now, PBMs and large hospitals are perhaps best positioned to demand lower prescription costs.

But patients aren’t completely powerless. There are multiple ways you can have an impact.

Always do your homework before filling prescriptions. Call or go online to find out if the medication you’ve been given is covered under your insurance company’s formulary and what your co-payment will be. If the drug is too expensive, talk to your doctor about prescribing a generic or another drug in the same class instead.

Some drugmakers also offer assistance programs to help underwrite the cost of their medications for low-income patients. A searchable database of these programs can be found here.

And there is strength in numbers. Social media campaigns, patient forums, and online petitions are ways for like-minded people to share opinions and ideas. You can also join a patient group, such as the National Multiple Sclerosis Society, that campaigns on behalf of all its members.

Voices for Change: Explore the Ways You Can Impact Drug Prices »