Six ways to combat pharma price gouging

Source: Managed Healthcare Executive

Back in September, Turing Pharmaceuticals set off a firestorm of criticism for pricing Daraprim, an older drug, at $750 per pill.

After the backlash, Turing has slashed the cost of the 62-year-old drug. This controversy has brought price gouging to the forefront for payers, says Alynn M. Purdum, PharmD, director of pharmacy, SummaCare, Inc.

“In past years, if a novel drug came to market it was used for rare conditions,” says Purdum.  “Health plans—payers—expected to pay a great deal of money for the drug, but may have only had one plan member with that particular uncommon condition. However, with the surge of new hepatitis C drugs, health plans were disappointed to see extraordinarily high per- member-per-month costs for this type of medication that has such widespread use.”

Combatting these egregious price increases can be a challenge for payers, but industry watchers offer six top-secret weapons that will help:

#1. Pharmacy benefit managers (PBMs). “PBMs contract with drug makers to be the exclusive therapy on the formulary—such as when Express Scripts made Gilead’s Sovaldi compete with AbbVie to be the exclusive drug for hepatitis,” says Devon Herrick, senior fellow, National Center for Policy Analysis.

“PBMs also like to create preferred pharmacy networks,” Herrick says. “They can negotiate lower prices if they can build pharmacy networks excluding certain pharmacies from the networks that are known to drive higher costs for customers and members.”

Herrick has witnessed large PBMs refusing to do business with so called “captured pharmacies,”—“those dispensing the drugs of only select drug makers and who are basically paid to never substitute a generic even though one is available,” he explains. “Medicare Part D plans are mostly insulated from the cost-sharing discount debit cards drug makers give to patients to encourage the use of brand drugs,” Herrick says. “It’s considered an illegal kickback in Medicare. However, PBMs must deal with that in their employer plans. One method is to encourage the use of mail-order pharmacies for lower cost sharing.”

#2.  Utilization management. The days of encouraging members to switch from one costly blood pressure medication, to another to save money, for example, are over, according to Purdum.

“Specialty pharmaceuticals cover a niche membership market and there are no less costly medication alternatives,” she says. “Therefore, plans must seek out the best ways to manage members. For example, hepatitis C treatment may be given for an eight- to 24-week treatment regimen at approximately $33,000 per month. Certain variations in this disease support when eight weeks of therapy may be appropriate.”

Strict utilization management controls are needed to ensure members who qualify for the eight-week regimen receive it and are not taking for 24 weeks, says Purdum.

#3.  Contract with a specialty pharmacy. “An additional cost savings strategy for payers is to contract with one specialty pharmacy, when appropriate, to take advantage of volume discounts,” Purdum says.

The specialty pharmacy contract would narrow the pharmacy network for these costly medications and prohibit members from obtaining specialty pharmaceuticals from any retail pharmacy in their network, she says.  

#4. Price protection. When negotiating contracts with pharmaceutical manufacturers, Aetna spokesperson Matthew Clyburn, says that the health plan ensures that price controls and protection are embedded in the contract to prevent dramatic cost increases for a particular drug.

OptumRx agrees. “Our contracting efforts with drug manufacturers in which we strongly drive to build in pricing protections to mitigate impact of significant price increases for our clients,” says Heidi Lew, vice president, clinical services, OptumRx.

#5. Monitoring and analytics. Aetna monitors drug pricing and increases on a weekly basis, according to Clyburn.

“Significant and/or frequent cost increases are reviewed by our pharmacy & therapeutics committee,” he says. “If necessary, potential drug alternatives and formulary changes are considered in order to allow affordable access to medication.”

Similar to Aetna, OptumRx also closely surveys both brand and generic drug pricing increases throughout the year so that it can advise clients in a proactive manner, according to Lew.

“Our preparedness in quickly and adeptly revisiting drug products undergoing these substantial increases to revise our formulary offerings and implement utilization management protocols to counter these price increases as clinically appropriate helps protect the interests of our customers and members,” says Lew, adding that in-depth analytics capabilities allow OptumRx to model the potential impact of these pricing changes at a client specific level.

#6. Exclusionary formulary. “This allows us to exclude select products undergoing these substantial price increases when there are clinically sound therapeutic alternatives,” says Lew.