Government, Health Care, and Law

Health care coming to crossroads, pharmacy expert says

Change is inevitable as companies have no pressure to keep drug costs low.

December 21, 2018
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Amid rising health care costs nationwide, one area pharmacy expert said he believes disruptive changes to the system are on the horizon.

With an aging baby boomer population comes increased Social Security and Medicare expenses.

Many experts have published concerns over the past couple decades about expected health care cost increases. A 2018 report by the Centers for Medicare and Medicaid Services expects national health expenditures to grow by an average of 5.5 percent annually from 2017-26.

Coupled with the U.S. system of private health care, in which workers and employers will bear that burden through premiums and other expenses, the level of stress is unsustainable and makes change inevitable, said Greg Wellman, registered pharmacist and professor of pharmacy administration at Ferris State University, and previously a drug buyer for the OhioHealth health system.

A major piece of that strain comes from a system that allows high prescription drug costs, he said.

The most expensive are brand-name and specialty medications, according to Atheer Kaddis, vice president of pharmacy services for the health insurance agency Blue Cross Blue Shield of Michigan, who shared numbers at a recent Grand Valley State University health forum.

Some gene therapy medications can cost insurance companies nearly $1 million per patient annually, and some expect the prices could reach $2 million, he said.

Kaddis said 28 percent of BCBS’s health care budget is spent on prescription drugs. He said 90 percent of those drugs are generic and 10 percent are brand name. Of the total spent on drugs, more than 80 percent goes to the brand-name group.

And those costs are continuing to rise, Wellman said, at a rate much higher than inflation.

“If those inflation rates were happening in the general economy, we would be heading for a financial crisis,” Wellman said.

When Wellman’s pharmacy students ask what keeps drug companies from excessively raising prices without notice — such as the famous case in which former Turing Pharmaceuticals CEO Martin Shkreli raised the antiparasitic drug Daraprim from $13.50 to $750 per pill — he said he has to respond: “A drug company can raise the price of a drug, and there really isn't a lot that anybody can do about it.”

That’s because the drug companies have no pressure to lower prices, he said. People need their medications.

Combatting the expensive timebomb will take a system that keeps drug costs in check, Wellman said, which can only come from significant policy or system changes. Otherwise, a lot of people eventually will face reduced benefits, or workers will have to pay a lot more to meet the increased need, he said.

“We're coming close to a crossroads, and we're going to have to take one of two possible pathways,” Wellman said.

One pathway: some type of universal system. The other: more price-sensitive drug costs.

Theories to lower costs

Wellman said the ability to control prescription costs in other developed countries comes from some type of publicly funded health care system, which often is paired with supplements through private companies or through workplace plans.

Politically, the U.S. likely is far from that, he said.

So, if choosing to maintain the U.S. system of health care, lowering overall costs will take a setup that allows the greater market to affect drug prices, he said.

There are a couple ways this could happen, including treating medications like any other product in a market economy, giving patients more open-ended prescriptions that allow them to choose — based on what they can afford — from a group of similar medications.

When buying cell phones, for example, customers make the selection, pay for them and use them.

With prescription drugs, physicians make the selection, insurance companies pay for them and patients use the products. The insurance companies then charge employers — using funds that could be spent in other ways, Wellman added — and the patients have no real stake in bargaining lower prices.

Wellman argues that if these processes are converged a bit, patients would have a higher stake in lowering that price.

“We need to develop a way so that the point in time that decision is being made, there is an awareness of both the cost and the financial means of the person,” he said. He added there needs to be a system that enables speedy information exchange between providers and pharmacists because drug costs aren’t always known at the time of prescription.

Another way Wellman suggests lowering prices is by allowing the federal government to negotiate Medicare drug prices by assessing multiple factors and basically refusing to pay drug companies more than what the medications are worth. So, if a company wants to sell the drug in a certain country, it would have to lower the price.

“My guess is if we started to do that, private insurance providers would probably start to come on board, and then that would start a cascade of competitive pricing,” he said.

There could be unintended consequences of lowering prices to consider, as well. Some experts have concerns lowered prices would keep drug companies from significantly investing in research and development. A 2016 report of case studies by nonpartisan nonprofit Citizens Against Government Waste said price controls would lead to “a shortage of life-enhancing or life-saving treatments, especially for chronic diseases that are difficult to conquer, such as Alzheimer’s and cancer.”

‘Baby steps’ toward affordability

While Kaddis wouldn’t say insurance companies will offer the final solution to the overall issue, he does believe they play a role in affordability.

Wellman said there are some efforts toward price sensitivity now, such as through high-deductible health plans. If a medication is too expensive for the patient’s budget, a negotiation could then ensue with the doctor or pharmacist for something more affordable.

Wellman said health insurance companies are implementing high deductible plans because it lowers utilization, ultimately lowering their expenses, Wellman said.

However, a “sticker-shock” reaction to initial high prices leads to some people forgoing needed treatment, and some simply can’t afford the high deductibles.

“Insurance companies have to work responsibly in the deployment of high-deductible plans to create that cost sensitivity for patients but not create a situation where they're going to avoid important treatments that people need to maintain their wellness,” he said. An existing tactic some companies use, for example, is providing guarantees to treat conditions like high blood pressure, which keeps that condition from creating something worse.

Wellman said he understands why people may have angst about this type of solution because being sick is different than buying a TV.

“But the fact is we work in a market economy. We can't create a singularity within our economy and think that an alternate reality of pricing is going to function on its own,” he said.

Kaddis said insurance companies should make sure savings from programs such as federal rebates are passed directly to the consumer, as well as ensure less-expensive generic medications are available to patients.

Kaddis agreed with Wellman that transparency is necessary to improve the system.

He said BCBS is “doing what we can” to educate patients on how to be better consumers in general, making available information such as costs for preferred versus nonpreferred drugs and the most affordable pharmacies.

Eric Roath, clinical care coordinator for SpartanNash, agrees transparency is important, not just for insurance companies.

There’s one Michigan House bill proposing required transparency from drug companies through an annual report to the state outlining associated costs for drugs and treatments priced at $10,000 or more.

Transparency is important, Roath said, because it allows everyone to better understand the system.

“But those are baby steps,” Roath said. “If we want to have a dramatic impact, we're really going to have to have the discussion as a nation.”

Making system changes

There are multiple medication choices patients could make for conditions like high blood pressure and high cholesterol, but when it comes to treatments like gene-based therapy, there’s only one option, and it’s expensive.

Though some cannot afford high-priced treatments, the financial loss is not significant enough to pressure drug companies, Wellman said.

“That's where we have to look at how do we restructure the payment pool to help those people that have no option, have no choice, so they can be treated for that rare disease,” Kaddis said.

All parties agree change will take new policy and collaboration.

Efforts by the American Cancer Society Cancer Action Network and the Leukemia and Lymphoma Society to lower oral chemotherapy costs in Michigan has not reached a Senate vote for the past two years, contrary to the requests of many providers and patients, according to Dr. Philip Stella, medical director for the oncology program at St. Joseph Mercy Hospital and founder of the Michigan Society of Hematology and Oncology.

Wellman said he believes leaders spend too much time fighting about how people access health insurance, rather than trying to create a system that adequately provides care patients need.

He said the country has a wide range of experience with varying types of health care systems —now it’s a matter of using that knowledge to “build a better way to pay for health care.”

Whether the country decides to venture down one path or the other, Wellman said he expects a bumpy journey.

“Both of those things are extremely disruptive to the current system,” he said, and whatever decision is made will not come from insurance companies or health systems.

“It’s the people pulling the lever on election day. They're the ones that will make that determination.”

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