The High Co$t of Prescriptions

Max Pixel / MGN

HARRISBURG, Pa. (Erie News Now) – Prices for everything are increasing, but prescription drug prices have skyrocketed in recent years. For millions of Americans, high drug costs are impacting the quality of treatment and the quality of life.

“What do you do about the rest of your bills? You’ve got your mortgage, your car payment. You know, the little things, you need groceries, you wouldn’t have anything left,” said Judy Sabia, one of the more than 130 million Americans who rely on prescription medication every day.

“I get up, I take my pills and I take a lot of pills,” said Sabia.

Nine medications to be exact, day and night, some of which she can’t live without. Between diabetes, high blood pressure, a liver transplant, and complications resulting from a tumor, Sabia has her hands, and pillboxes full.

“It caused a chain reaction. Everything went from something else, it went from that, to another tumor,” said Sabia as she detailed her health struggles after a cancer diagnosis in 2018. On top of her overwhelming health complications, Sabia has to find ways to afford her medication.

“We worked hard for what we have, and now we have to scrounge different things. I’ve already went into my retirement funds just to pay for things, and that’s pretty tough. What’s going to happen when it runs out, and I’m not dead yet,” said Sabia.

The prices for each prescription she relies on are getting out of hand to the point where she had to set up a “Go Fund Me” to afford her life saving medication.

“If it wasn’t for the Go Fund Me, I wouldn’t have anything left. But that’s almost gone, and then I don’t know what I’m going to do after that. I’m just hoping they do something,” said Sabia.

Nationwide, 18 million Americans are struggling to pay for necessary drugs as prices continue to soar.

“Our entire prescription drug supply chain is predicated upon artificially inflated list prices,” said Antonio Ciaccia, President of 3 Axis Advisors and a drug pricing expert who’s experienced the ins and outs of the complex drug supply chain. According to Ciaccia, the drug supply chain is one of the leading reasons for high prices. “Every one of those layers of the drug supply chain would love to charge as much as they could get away with,” he added.

According to the Congressional Budget Office, out-of-pocket spending for prescriptions fell more than 40 percent from 1990 to 2018.

Ciaccia says as more people relied on insurance, prices and the role of Pharmacy Benefit Managers (PBMs) increased.

“But as we as consumers relied more and more upon prescription drug coverage, rather than paying with our wallets, the role that PBMs had became more pronounced,” said Ciaccia.

PBMs were designed to act as a middleman between pharmacies and insurance companies to negotiate costs and discounts. But somewhere along the way, the lines got blurred as costs skyrocketed.

“The problem started to emerge when PBMs weren’t just acting as negotiators, but were cashing in on the negotiations. They were essentially being paid by the drug manufacturers in exchange for covering the drugs. They started opening their own pharmacies, their own mail order pharmacies. PBMs have become both the firefighters and now the arsonists of prescription drug prices,” said Ciaccia.

Nationwide, spending on prescription drugs increased by more than $300 billion from 1980 to 2018. If everyday essentials like milk or gas grew the same rate, they’d cost over $12 and $13 per gallon, respectively.

Ciaccia says through administrative fees, rebates and spread pricing, PBMs have been able to cash in on prescriptions, including those for government programs like Medicaid.

“To the degree with which they are overinflated, we as taxpayers, indirectly are the ones that are footing the bill,” said Ciaccia, who added that with little transparency and oversight, PBMs have been able to essentially buy low and bill high at the expense of taxpayers and patients. “Today, PBMs are Fortune 15 companies. They are larger than the drug manufacturers and pharmacy companies that they were hired to control,” he added. “If a patient is at the end of the bill, they’re being stuck paying a disproportionate share that they should.”

Patients like Sabia, who are running out of options.

“It might cost them $0.10 to make something and they’re charging $20 for it. They have to do something. It’s not fair to anybody,” said Sabia.

A link to Sabia’s GoFundMe page is available here.

Part 1 of The High Co$t of Prescriptions broke down the function of PBMs and how they were originally designed to be the middleman to negotiate better drug costs between drug manufacturers, pharmacies, and insurance companies. Over the years, that role changed.

“PBMs own their own pharmacies, PBMs get paid by drug manufacturers in exchange for covering medications. So, they’re no longer purely working on our behalf and have become conflicted in such that they are pouring gasoline on the fire of high drug prices,” said Antonio Ciaccia, the President of 3 Axis Advisors and a drug pricing expert.

Ciaccia believes the country is at a tipping point when it comes to PBMs and high drug prices as more states begin to catch on.

“It was just four years ago in Ohio, where they discovered PBMs were taking $244 million out of the state Medicaid program. Since then, a number of states have taken action to audit their programs,” said Ciaccia.

“There needs to be significant reform in the system,” said Former Pennsylvania Auditor General Eugene DePasquale, who released a special report in 2018 detailing how PBMs could be responsible for higher prices. “And really got in the weeds and saw, to me, I won’t say ripe with abuse, but I say ripe for reform,” DePasquale added.

The report detailed different ways PBMs could be making big profits from state programs like Medicaid. But exactly how much they profit is unknown because they’re shielded from the public.

“When you’re using public tax dollars to make hundreds of millions of dollars, I believe the public has a right to look at how you’re making those dollars,” said DePasquale.

Some state lawmakers agree with the former Auditor General.

“We’re looking for transparency and accountability,” said Representative Jonathan Fritz (R-Wayne/Susquehanna). “They have control over distribution and pricing and reimbursement and formulary data that gives them an inordinate amount of control over pricing,” said Rep. Fritz who is the sponsor of House Bill 1630. His bill would give the Auditor General the ability to audit PBMs, who are currently protected as subcontractors with the Commonwealth. HB 1630 recently passed the House unanimously.

“Again, it’s good government, it’s transparency, it’s efficiency,” said Fritz.

While there are efforts to increase transparency in Harrisburg, the question of whether PBMs are still necessary remains. That question took us from Harrisburg just a few hours west to Pittsburgh, to see if pharmaceuticals can, in fact, be done differently.

“We don’t deal with PBMs at all, and almost everybody gets lower prices here than they would through their insurance,” said Dr. Kyle McCormick, the founder of Blueberry Pharmacy, a pharmacy that is doing things a bit differently.

“Instead of making up prices that aren’t tied to any real price, we take our costs, so say something costs us $1 to buy, we add on a $10 dispensing fee and charge $11,” said McCormick, who pursued the cost-plus model after seeing the effects declining PBM reimbursement rates had on pharmacies. “Patients expenses have gone up, but also drug costs have gone down. So, it didn’t make sense to me that if drug costs were going down, patients’ prices were going up, and pharmacies weren’t making any money. Why not just cut out the problem, the PBM,” he added.

McCormick says insurance is for high-cost unknown events, not for inexpensive generic medication, which make up roughly 90 percent of prescriptions filled annually.

“If insurance is for high-cost unknown, a generic blood pressure medication that costs pennies is low-cost, predictable, you have to take it for the rest of your life,” said McCormick.

For McCormick, Blueberry Pharmacy’s model is simply a return to the basics.

“But a lot of what we’re doing is just going back to the traditional days of pharmacy, where you shop around and you find the best price and the best service, that’s where you get your drugs from,” said McCormick.

It’s a return to tradition that can have a profound impact on the future of care.

“A lot of patients may not be on the best therapies because it’s assumed that they’re just too expensive and so we could actually be treating a lot of disease states probably a little bit more effectively if prices were actually real,” said McCormick.

In recent years the PBM industry has responded to increased scrutiny by saying that only drug manufacturers have the power to set the list prices for their products. But as different sectors point the finger at one-another, the pharmaceutical industry grows larger and larger, leaving everyday Americans searching for answers, and potentially even settling for a lower quality of care.

We’ve heard how the costs of prescription drugs can impact, even deplete, people’s savings. In an effort to curb costs, President Biden recently signed the Inflation Reduction Act. The bill would in part, address this issue. However, these changes won’t happen immediately.

Senator Bob Casey (D- PA), President Biden and other Democrats are touting the Inflation Reduction Act. The bill was recently signed into law. In part, it aims to lower healthcare costs.

“To cap the out-of-pocket costs for Medicare Part D beneficiaries and 2,000 per year for prescription medications and allowing Medicare to finally at long last to finally be able to negotiate for lower prices,” said Sen. Casey.

But these changes won’t happen immediately. Starting next year, the bill will limit the cost sharing for insulin to 35 dollars per month for seniors. In 2025, there will be a two-thousand-dollar cap for out-of-pocket spending for Medicare recipients. According to the Centers for Medicare and Medicaid Services, by 2023, Medicare will select and announce the first ten drugs for negotiation from a list of the Medicare Part D drugs without competition. However, the negotiated drug prices for these first ten drugs won’t be implemented until 2026.

Representative Mike Kelly (R- PA) said he’s open to looking into lowering drug prices.

“I think all of us should have access to life saving pharmaceuticals,” said Kelly. “There’s just no question about that. Some can afford some cannot afford. At that point we need to take a look at what it is that can we do to subsidize those who cannot afford it? It’s just basically the humaneness that’s in us but again, the economics of it are important. If you want to talk about doing that, please don’t put it in a big spending bill that’s one and a half trillion dollars and tell me that this is what you need to do. It’s a no. Let’s get it down to that one issue and see what we can do.”

Casey said there’s more work to be done on lowering prescription drug costs.

“Implementing all of this is going to be critically important but I think the next legislative step is to make sure that this cap on the cost of insulin covers every American with insurance, not simply in this case, seniors,” said Casey.

Centers for Medicare and Medicaid Services sent us this statement:

CMS is working to implement its provisions of the Inflation Reduction Act. The Inflation Reduction Act establishes a new Drug Price Negotiation program under which the Secretary of the Department of Health and Human Services (HHS) will bilaterally negotiate with manufacturers of certain high spending brand-name drugs and biologicals under Medicare without price competition that are selected for negotiation in order to establish a maximum fair price.

By September 1, 2023, Medicare will select and announce the first 10 drugs for negotiation from a list of the highest spending brand-name Medicare Part D drugs without competition. Negotiated drug prices for these first 10 Medicare Part D drugs will be effective in 2026. Medicare will select and negotiate 15 Part D drugs for 2027, 15 Part B and Part D drugs for 2028, and 20 Part B and Part D drugs for each year thereafter. An excise tax or civil monetary penalties will be imposed on manufacturers that are noncompliant with negotiation requirements for selected drugs.

CMS will provide more information about the methodology and process in the future as we work to implement the law.

Rachel Knapp contributed to this report.


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