Rising drug costs in the United States are a pressing concern not only for patients who need to receive those drugs, but also for employers. The Employers’ Prescription for Affordable Drugs is a coalition that aims to tackle this problem by working with policy makers and stakeholders to encourage and facilitate more transparency, competition, and value in the healthcare system.
Rising drug costs in the US is a pressing concern not only for patients who need to receive those drugs, but for providers, who in many cases are employers.
The Employers’ Prescription for Affordable Drugs is a coalition that aims to tackle this problem by working with policymakers and stakeholders to encourage and facilitate more transparency, competition, and value into the healthcare system. The coalition is made up of the Pacific Business Group on Health, the National Alliance of Healthcare Purchaser Coalitions, The Erisa Industry Committee, and the Silicon Valley Employers Forum.
Elizabeth Mitchell, the president and CEO of the Pacific Business Group on Health, emphasized the need for driving down the cost of prescription drugs.
“Drug costs in the US are at an all-time high and actually increased by 41% in the last 10 years from $236 billion to $333 billion,” she said in an interview with The Center for Biosimilars®, a sister site of The American Journal of Managed Care® (AJMC®).
The biggest contributor to this growth is the rising cost of brand name drugs and biologics. In fact, when ranked by total amount spent, the top 2 drug products in that list were biologics, with employers spending more than $7.5 billion on 2 treatments alone, Mitchell said.
In 2016, large employers spent more than $83 billion on retail prescription drugs. Mitchell explains how these expenditures are siphoning away money from wages, growth, and innovation, and present “a real drag not only on employers, but also on the US economy.”
Lauren Vela, the senior director of member value at the Pacific Business Group on Health, agrees. In order to promote use of biosimilars and generic drugs among employers, Vela explains that challenges in the preferred provider organization (PPO) marketplace must be addressed first.
“The first thing they [employers] can do is dig in, identify the opportunity, and then…really understand specifically which obstacles are relevant to some of the larger opportunities,” she said. Issues can include rebates attached to prescribed reference products, resulting in misaligned incentives, and lack of physician incentives to prescribe alternatives to brand name drugs.
In the United States, some physicians are paid based on the cost of drugs they prescribe. Vela argues that in the commercial market, physicians “may very potentially make less money by prescribing a biosimilar,” and are often hesitant to prescribe treatments they may not know enough about.
The organization urges employers to advocate for biosimilar use among network providers. “There have been 17 biosimilars approved in the US that have been shown to have no clinical difference from their brand name counterpart, but only 7 have been launched and adoption has been sluggish,” she said.
However, health economists estimate that the successful integration of biosimilars could reduce prescription drug spending by as much as $150 billion throughout the next 10 years.
One solution to the challenges of rebates, provider incentives, and provider education of biosimilars, is the integration of value-based care.
“Moving away from fee-for-service and to value-based contracts will have the folks who are positioned to make the right kind of decisions for best clinical outcome and best accountability for total cost of care, able to make those decisions,” Mitchell said.
Because there are so many different parties present in the drug supply chain, cost containment won’t take place unless employers and other payers actively work to change it, Vela explained. “Of course, pharmacy benefit managers (PBMs) have opaque rebates that just add to the challenge, so employers and purchasers can and must lead this,” she added.
Added transparency to PBM practices would alleviate some burdens hindering the successful use of biosimilars, and “PBMs might actually be able to step in and be part of a solution where a health plan has failed in having a biosimilar first policy,” said Vela.
Effective legislation and policy enactment are also imperative to capping price increases drug makers apply to products.
“We know that there is recognition on both sides of the aisle that this is an issue, that this can’t be ignored,” Mitchell said. “We know how powerful the pharma lobby is and we know how much effort they put into maintaining these prices.”
Employer coverages of cost have been so helpful to employees and employers, “are increasingly willing to engage in this debate to seek legislative and policy intervention because the market is not working.” Because of this, advocates are optimistic Congress will recognize the absolute necessity of action.
Both experts warn that even in price capping occurs in one sector, “we have real concerns that those costs would be shifted to private purchasers who are challenged to really negate those effects.” Any sort of price cap or control implemented in Medicare or Medicaid, would need to be extended to the commercial market as well, they argue.