The government is working on behalf of patients who have cancer or other chronic illnesses that require drug therapies by taking a closer look at how pricing is determined. How did someone decide how much a specific drug will cost the patient as well as the insurance company, Medicare, and Medicaid? And why does the price not remain consistent over time?
The goal of the government is to curb what equates to billions of dollars in annual rebates that drugmakers give to middlemen in Medicare and instead to pass the rebates on to the consumer. Currently, the middlemen are third parties that manage benefits for Medicare, as well as Medicaid managed care, where states contract with insurers to deliver benefits. Drug manufacturers set list prices but often offer rebates that reduce the amount companies and the federal government actually do pay. These rebates shape the decisions that are made about what drugs are available within some plans as well as their prices. Critics claim this leads to higher prices, without any of these savings being passed on to the patients. If these discounts were redirected to the patients, then obviously drug costs for the patient should drop significantly. There is a catch though. Surprised? The Pharmaceutical Care Management Association, which represents pharmacy benefits managers, said the rule change could increase costs for Medicare beneficiaries in the form of higher premiums and out-of-pocket expenses. But isn’t the intent to reduce the overall monthly out-of-pocket expenses people pay and the cost they have to pay when they seek out care and treatment somewhere?
An estimated $89 billion in rebates was paid to health insurers in 2016, according to a study published by Altarum, a national research firm. This included Medicaid recipients, private health insurance, and Medicare Part D, which is a benefit that is intended to help senior citizens pay for self-administered drugs. And with more and more cancer drugs becoming oral oncolytics, we will probably continue to see this number grow even larger.
Why do drug companies charge so much for a new drug? There is a method to this madness. At any given time, a pharmaceutical company may be working on 15 to 18 research endeavors, each one looking possible to become a new drug therapy for patients with specific types of cancer. Five years into these research efforts taking place in the laboratory, 3 or 4 are deemed not to be as promising as hoped and are discontinued. The research on all the others continues, and a few more years pass, and a couple more are found not to work either. Time from the original idea getting underway in the laboratory to a drug being successfully created that does in fact work for specific types of cancer averages 16 to 18 years. Now tally up all the money spent on the 17 studies that didn’t work, and you have a very large number. Combine that with the 18 years of research spent on the winning drug, and you will see an extraordinarily large amount of overhead that still needs to get paid somehow. So that overhead, if you will, needs to get added into the expenses of the one drug that made it all the way through. There is only a fixed period of time, however, that big dollars are charged for these new and amazing therapies. This is because in the coming years the government will approve the creation of generics and biosimilars, which insurance companies and Medicare will purchase at a much lower price, and the brand-name drug will fall from favor.
There will be a public comment period in the coming months, and this new process could take effect as early as January 2020.
Stay on top of this potential policy change and speak up on behalf of your oncology patients. We need to be their voice. This is a reason why AONN+ has a committee that focuses on regulations, policies, and other government-focused endeavors. We need to cure the nation of financial toxicity associated with cancer care.