Spending on prescription drugs in the U.S. increased 12 percent in 2014, higher than in any year since 2002. Over the past year, there has been mounting evidence of public a backlash over rising prescription drug costs. And no wonder. Specialty drugs for such conditions as hepatitis C, muscular sclerosis, and autoimmune diseases are costly. And prices for some formerly low-cost generic drugs are trending upwards.
This is particularly alarming for employers. Since companies cite prescription drugs as the second leading driver of their health care costs,1 any factor contributing to higher priced drugs is bound to affect an organization’s bottom line.
Specialty Prescription Drug Costs Soaring
On the specialty side for instance, Solvaldi, the new specialty drug for hepatitis C, costs $84,000 for a course of treatment or $1,000 a pill. Some cancer drugs cost about $150,000 per patient for a one-year supply. A new specialty medication from Vertex Pharmaceuticals to treat a mutation of cystic fibrosis costs $259,000.2
Generic drug costs growing
Currently, generic drugs cost 80–85 percent less than their brand-name counterparts. But even generic drug prices are rising. One report states that out of a research sample of 4,421 drug groups, 222 of those groups more than doubled in price. On the extreme side, 17 drug groups saw prices increase by more than 1,000 percent. The cost of one product, tetracycline, prescribed for bacterial infections, increased 67-fold.3
Earlier this year, a Forbes’ article examined the reasons why generic drug prices are rising. Industry consolidation has resulted in fewer manufacturers producing certain drugs. Less supply has caused some prices to rise. Stricter quality control measures have forced drug makers to invest more in their QC systems. Those costs typically are passed on to the consumer.
The WSJ reports that the Laura and John Arnold Foundation plans to give a $5.2 million grant to the Institute for Clinical and Economic review, a non-profit that examines the value of new medicines. With the infusion of new funds, the Institute can double its staff to produce more reports suggesting benchmark prices for up to 20 drugs over two years. In a much more focused response, a group of prominent physicians have gone public with complaints that Vertex is overcharging for its cystic fibrosis drugs.
How Kaiser Permanente Keeps Rx Prices Down
Kaiser Permanente (formerly Group Health) has put into effect a number of policies and services to help drive prescription drug costs down for our members and employer groups.
1. Cost-effective medications
Our Pharmacy and Therapeutics Committee reviews and selects medications in all therapeutic categories in our formulary based on safety, effectiveness, and costs.
2. Bulk buying
With eight service regions around the country, we’re able to buy drugs in bulk at more advantageous pricing.
3. Generic over brand
Kaiser Permanente has long promoted the use of generic drugs rather than more expensive brand-name equivalents.
4. Tiered copays
Many of our plans offer your employees a sliding scale of copays, with the more expensive preferred brand-name drugs having the highest copays and generic medications having the lowest. Such a pricing structure generally encourages employees to choose the less costly but equally effective generic option.
5. Specialty pharmacy
One of the biggest steps we’ve taken is forming our own Specialty Pharmacy, staffed by a team of board-certified specialty pharmacists and trained clinicians. Together, they dispense and, equally important, manage specialty drugs. They review all patient medications for possible interactions, discuss protocol and possible side effects with patients, and contact the prescribing physician if revised treatment is warranted.
The online Specialty Pharmacy Times notes that as drug costs go up, adherence goes down. To guard against this, our specialty pharmacy team schedules regular follow-up calls with patients to check on adherence and tolerance. What’s more, rather than dispense a three-month supply of a specialty medication, we give patients a trial period amount to monitor the drug’s efficacy and watch for any interactions.
6. Mail order savings
Ordering prescription refills by mail saves your employees money and helps bring down the total cost of prescription drugs ascribed to your plan. By way of example, at Kaiser Permanente, workers can order up to 90 days’ worth of refills on many drugs at typically two-thirds the cost.
- 2013 Employer Study, Deloitte Center for Health Solutions.
- Silverman, Wall Street Journal.
- Miller, Forbes.