Real Solutions Needed to Curb Drug Costs

Roxanne Nelson BSN, RN

October 13, 2016

In an attempt to quell the outrage of the dramatic price hike of the EpiPen, Mylan, the manufacturer, proposed several solutions to help consumers deal with the inflated cost. One in particular was a plan to financially assist patients with copayments.

Although in theory it sounds somewhat reasonable, a new commentary published online October 11 in the Annals of Internal Medicine argues that such "solutions" will undoubtedly lead to even higher drug prices in the future.

"[C]opay assistance programs create broader problems in health care markets and encourage further price inflation," write coauthors Peter A. Ubel, MD, from Duke University, Durham, North Carolina, and Peter B. Bach, MD, from Memorial Sloan Kettering Cancer Center, New York City.

Although the 600% price hike of the EpiPen received a great deal of media attention, a second commentary also published online October 11 in the Annals notes that this is just the latest high-profile event in the ongoing drug pricing controversy. The problem goes back decades, but this time around, it has sustained public outrage and heightened calls for pricing reform.

Proposals to reduce payment to pharmaceutical companies for their products have been consistently met with rebuttal by the industry, as well as fears that they would stifle innovation and delay the development of new drugs.

However, in the second article, Rachel E. Sachs, JD, MPH, from Washington University School of Law, St Louis, Missouri, and Austin B. Frakt, PhD, from the Veterans Affairs Boston Healthcare System, Massachusetts, offer an alternative: an innovation–innovation tradeoff.

The aim of this type of approach, they write, is not necessarily to change the rate of innovation but, rather, to change its composition, which would "reduce some types of innovation we have now and encourage other types that would yield greater social value."

Copay Assistance Raises Costs

Dr Ubel and Dr Bach write that although financial assistance with copayments may be the only way that some patients can afford a medication, it is essentially part of the price problem, and not a solution to it.

For starters, copay assistance programs "reduce public outcry over outrageous drug prices," and take the pressure off manufacturers to reduce the actual drug costs.

A second problem is that copay assistance programs can actually undermine benefit designs that allow for low-cost insurance plans.

The authors also point out that consumers can often choose among plans that offer a range of premiums and out-of-pocket expenses.

One reason lower-premium plans can be offered is that high out-of-pocket expenses both shift costs to patients and inhibit healthcare use, which in turn lowers total healthcare costs.

Copay assistance programs also can reduce insurers' negotiating power, as they sometimes leverage competition between drugs by formulary tiering. In this manner, insurers assign low out-of-pocket costs to certain drugs when the manufacturer strikes a deal, and high out-of-pocket costs when manufacturers offer no price concessions.

However, copay assistance programs could have a detrimental effect, as they give pharmaceutical companies a way to sidestep the consequences of drug price negotiations "because they can keep out-of-pocket costs low even when insurers are aiming to keep them high," write the authors.

Finally, these programs can interfere with a patient's ability to be more consumer savvy.

Copay assistance can act like an "artificial price support," which lessens the incentive for patients to factor cost into treatment decisions and, in turn, weakens the pressure on pharmaceutical companies to lower their prices.

Aaron S. Kesselheim, MD, JD, MPH, associate professor of medicine at Harvard Medical School and director, Program on Regulation, Therapeutics, and Law at Brigham and Women's Hospital, Boston, Massachusetts, agrees copay assistance is a strategy offered by pharmaceutical manufacturers that "allows them to extract higher prices overall from the healthcare system."

"I think it makes the point that it makes patients less price sensitive, allowing companies to charge higher prices to private payers," he told Medscape Medical News. "Some individual patients may indeed find such programs useful when they have to take an expensive medication and there are no other alternatives, but there are studies showing that many coupons are offered for drugs in classes in which there are generic alternatives available, and that there can be limitations on program enrollment, such that some people who could benefit from them don't qualify."

Another expert also agrees with the authors.

"Copay assistance programs are companies' first response to public concern about rising drug costs, but they do not offer a long-term solution for patients," Joseph Ross, MD, MHS, an associate professor of medicine from the Institute for Social and Policy Studies at Yale School of Medicine, New Haven, Connecticut, told Medscape Medical News.

"Copay assistance can only be used when a patient has insurance coverage and when their insurance plan offers coverage for the drug, but when prices rise, more and more medications are likely to be excluded from formularies," Dr Ross said.

He noted that although copay assistance can offset higher out-of-pocket costs at the time of purchase, the insurance company also pays more for the patient to receive that drug, which over time will result in higher premium costs for all patients.

"Finally, co-pay assistance is often time limited, so while patients might be able to use it for their first prescription, or even their third, eventually they will be required to pay the higher out-of-pocket costs for these drugs," Dr Ross explained.

One point the authors do not mention is how copay assistance could affect physician prescribing.

"Even though doctors aren't paying for the drugs they prescribe, doctors may be reluctant to prescribe a drug to a patient if the patient will face a steep out-of-pocket cost," David Howard, PhD, an associate professor in the Department of Health Policy and Management at Emory University, Atlanta, Georgia, told Medscape Medical News.

"Copay assistance programs make doctors more comfortable prescribing high cost drugs," he added. "Companies can charge higher prices if doctors are less price-sensitive."

Innovation&ndsah;Innovation

In the second article, Sachs and Dr Frakt explore the innovation–innovation tradeoff, which is different from the more commonly proposed "innovation–access tradeoff," in which putting the brakes on drug pricing might broaden access, but also stifle innovation.

As an example, the current system of drug reimbursement provides additional incentives to pharmaceutical companies for pursuing maintenance therapies to treat common chronic conditions such as high cholesterol.

However, although they earn higher profits from drugs that patients may need to take for the remainder of their lives, rather than cures or preventive products, patients generally would prefer to be cured or to prevent their illness in the first place.

So if drug prices were commensurate with cost-effectiveness, they would be priced higher for cures and prevention, and in turn, profit would be greater for developing these products.

There are ways to make it more attractive for companies to pursue drugs that will cure, rather than another statin or diuretic, explained Ms Sachs.

"We can encourage companies to pursue cures or preventive interventions by paying them based on the cost-effectiveness of their products," she told Medscape Medical News. "Groups like [the Institute for Clinical and Economic Review] have been developing sophisticated methodologies for calculating the value-based price of different kinds of therapies, and if policymakers put those methodologies and the resulting information to use, we could encourage companies to invest differently."

A related approach, Sachs and Dr Frakt write, would be to adopt a system of reference pricing similar to that used by many European countries. In this model, one drug price is established for each drug class, and if patients want a more expensive agent in that class, they pay the difference out-of-pocket.

Another example would be for policymakers to equalize payments across Medicare, Medicaid, and private insurers. Pharmaceutical companies might then be more motivated to invest in products that affect the most patients, regardless of their incomes.

Thus, they note, instead of being "blinded by innovation–access tradeoffs," policymakers should redirect their energy toward innovation–innovation tradeoffs.

This can be accomplished in several ways. "Passing laws imposing requirements of various kinds, whether on pharmaceutical companies themselves, on the pharmaceutical regulators, or on public payers would certainly accomplish these goals," said Ms Sachs. "Congress has been able to pass price control laws in the wake of particular scandals, such as the Martin Shkreli situation last year."

"But state governments and the Centers for Medicare & Medicaid Services may also have a role to play here separate and apart from Congress," she added.

Sachs, Dr Frakt, and Dr Ubel have disclosed no relevant financial relationships. Dr. Bach reports personal fees from the Association of Community Cancer Centers, America's Health Insurance Plans, AIM Specialty Health, the American College of Chest Physicians, the American Society of Clinical Oncology, Barclays, Defined Health, Express Scripts, Genentech, Goldman Sachs, McKinsey and Company, MPM Capital, National Comprehensive Cancer Network, Biotechnology Industry Organization, the American Journal of Managed Care, the Boston Consulting Group, Foundation Medicine, Anthem Inc, Novartis, and Excellus Health Plan, and grants from the National Institutes of Health, the Kaiser Foundation Health Plan, and the Laura and John Arnold Foundation outside the submitted work. Dr Ross receives support through Yale University from Johnson & Johnson to develop methods of clinical trial data sharing, from the Centers of Medicare & Medicaid Services to develop and maintain performance measures that are used for public reporting, from Medtronic Inc and the US Food and Drug Administration to develop methods for postmarket surveillance of medical devices, from the Blue Cross Blue Shield Association to better understand medical technology evaluation, and from the Laura and John Arnold Foundation to support the Collaboration on Research Integrity and Transparency at Yale. Dr Kesselheim has disclosed no relevant financial relationships. Dr Howard reports a speaking honorarium from Pfizer in the past year.

Ann Intern Med. Published online October 11, 2016. Ubel and Bach extract, Sachs and Frakt extract

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