Solving the Drug Affordability Crisis Will Require More Than Minor Gestures

May 10, 2017

 

The prescription drug crisis will only be solved by substantive reforms that reduce drug costs, reform the health care system, and hold companies accountable. Yesterday Express Scripts, the largest pharmacy benefit manager (PBM) announced it was unveiling a plan to lower out-of-pocket costs for brand-name drugs for people without insurance or with high deductibles. But while this program may help at the margins, it will take more than tinkering to ensure affordable access to drugs, and this initiative is nothing more than a minor gesture.  

 

The plan is called InsideRx and is a subsidiary of Express Scripts. Consumers will sign up for the service, get a membership card, and present that card to pharmacies such as CVS or Walgreens. This card will allow them to get discounts that average around one-third off the list price for about 40 drugs, including certain kinds of insulin and medications that treat asthma, depression, and diabetes. Express Scripts CEO Tim Wentworth said his company is launching this program because “we’ve seen these patients need help” and that consumers will pay the drug prices that large insurance companies pay.

 

Consumers should be skeptical that this program is a meaningful change. It has a number of loopholes big enough to drive a freight train through.

 

First, Express Scripts has said it will take a “small fee” from pharmacies for each transaction. Many PBMs are notorious for collecting all kinds of fees without any transparency, and these fees help drive up the costs of prescription drugs while earning the PBMs massive profits. This also implies that the program is really a way for Express Scripts to increase its business. Recently Anthem, their largest customer, announced that it will not renew its contact with Express Scripts in 2020 when it expires. It is likely that the PBM is trying to make up for that lost agreement.

 

Second, InsideRx can only be used by people under 65, and people covered by Medicare and Medicaid will not be able to use it. The program will not help either of those two groups. The program also only covers about forty drugs. If consumers need a drug that is not one of those forty, this plan will not help them either.

 

Third, drug prices are often so high that this discount will have little impact. Even with prices reduced by a third (and only for a few drugs) the vast majority of uninsured or underinsured Americans will be unable to pay for the prescriptions. It is not a real solution for this problem.

 

Finally, the plan does nothing to fix the underlying structural issues or combat market failure. In the past we have noted that PBMs are a major contributor to rising drug costs, in large part because they get shares of the rebates they negotiate with drug companies. Such shares are based on a percentage of the list price, giving them a perverse incentive. They make more money when drug prices increase, despite the fact that they are supposed to promote savings for consumers and companies. The problems with this system are obvious.

 

Express Scripts is attempting to substitute a small gesture for meaningful reform and affordable drug prices. Consumers should not be fooled. They need real transparency and accountability, not a PR move.

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