Blog Post: Specialty Pharmacy Pricing: Will the Buck Ever Stop? by Carolyn Pare

Blog Post: Specialty Pharmacy Pricing: Will the Buck Ever Stop? by Carolyn Pare

“Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them.”
– Laurence J. Peter

With hundreds of new drugs in the pipeline that will exceed $100,000 per patient, per year, costs for specialty medications are projected to quadruple by 2020. Given the lack of checks and balances to hold drug makers and sellers accountable for rational pricing practices, specialty pharmacy has been called the New Gold Rush.

“It may come down to ‘naming and shaming.’ We’ll report extremely high prices drug companies are charging and ask them to justify their actions publicly.”

Stephen Schondelmeyer, Pharm.D., Ph.D.

The NY Times recently published a letter from Academy of Managed Care Pharmacy (AMCP) CEO Edith A. Rosato, RPh, objecting to the newspaper’s May 5 editorial supporting government price negotiations of pharmaceuticals. (Click here to view her letter and the original editorial.)

In a quest for price-setting transparency, the Obama administration has asked Congress to allow Medicare officials to negotiate prices with drug manufacturers. Additionally, several states are considering bills that would require drug companies to justify their prices to public agencies, according to the NY Times editorial.

While I agree that Medicare should be able to negotiate, and that drug companies should be held accountable for questionable pricing practices, these efforts alone will not magically rein in the skyrocketing costs of certain therapies for the long term. As Ms. Rosato astutely points out, “Regulated prices can simply cause cost-shifting to other consumers.” This is because the health care industry is so blatant in their justification for shifting costs from one payer to another, rather than containing costs in ethical and responsible ways.

Public, private and individual purchasers all need to optimize their negotiating power to address the cost-plus pricing used throughout the health care industry. Just like in other health care segments, pharmaceutical manufacturers and sellers simply pass costs on in new ways if they don’t achieve their profitability goals. We’ve come to accept that costs will continue to escalate and payers need to capitulate to the whims of a market in disarray.

Through The Action Group, we bring all purchasers together, regardless of sector, to create a cohesive approach, instead of fueling the cost-shifting fire. We must all work together to drive down egregious cost-plus pricing practices.

Members of The Action Group’s Specialty Pharmacy Care Delivery Learning Network are here to say, “We’re mad as hell and we’re not going to take it any more.” For the past six months — and for at least the next six — we’re studying the issue of specialty drug costs and working with employers, policymakers and health care industry groups to set forth a strategy to push for price transparency, while adopting coverage and benefit policies that encourage appropriate pricing and appropriate use of high-cost prescription drugs.

In addition to looking for opportunities to join forces and collaborate for change with other employers, here are five key drug management goals for payers as identified by The Minnesota Health Action Group Learning Network:

  • Understand your current specialty pharmacy drug spend, including all drugs administered as part of your medical benefit.
  • Ask vendors to project specific future costs given your company history and drugs in the pipeline.
  • Make sure your benefit plans don’t drive patients to higher-cost sights of care, such as outpatient hospital settings, which can cost twice as much as care given in a clinic.
  • Require health plans to contract with providers to eliminate any incentive for them to administer more expensive drugs in more expensive settings.
  • Require pharmacy benefit managers (PBMs) and health plans to administer prior authorization and step therapy programs based on clinical, objective evidence.

All the people who write the checks for health care services — employers, public purchasers, and individuals — should be informed about this issue and work together to hold drug manufacturers and sellers accountable for ethical, rational and sustainable pricing practices.

Carolyn Pare is the President and CEO of the Minnesota Health Action Group.