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If you have allergies to bee stings, foods or other environmental allergens, an EpiPen filled with epinephrine could save your life. In fact, it’s the only thing that can.
In 2007, the cost of an EpiPen was under $100. In 2016, it cost more than $600.
The price of insulin, the drug that keeps diabetics alive, more than tripled between 2002 and 2013.
Many people who suffer from rheumatoid arthritis depend on a drug called Humira to get them out of bed in the morning. The average annual cost of Humira climbed from $19,000 in 2012 to $60,000 in 2019.
That’s more than many people make in a year.
What’s going on? To say that these increases are unreasonable really understates things. But what’s the explanation for these skyrocketing costs?
We tend to blame Big Pharma and their hunger for profits at the cost of people. And while this is absolutely true, in order to answer the “why” of drug prices, we need to look a little deeper.
We need to look at the system that’s in place for setting prices. We need to take a look at the three players in this system, and at the one who’s really “driving the bus”, and driving our prices ever higher…
Who REALLY sets drug prices
There are three players in the convoluted system that determines what you pay for your prescriptions:
The drug manufacturers. Of course, they’re the ones who set the list price for their drug. The problem begins with the fact that there are really no regulations when it comes to how, or how much, they charge.
Instead, they set a price based on what they think the market will bear. That’s why, for treatments that are unique, convenient or known to work well, drug companies know they can charge a hefty price.
On the other hand, if a new drug has a lot of competitors already available, the price will be more modest.
The insurance companies. Your insurance company reimburses your pharmacy for their cost of dispensing the drug to you. And, they cover all or part of your costs as well, hopefully making the drug affordable.
So who’s the third player?
PBMs: the middleman with all the power
Has this ever happened to you?
You go to the pharmacy to pick up a prescription you or your doctor have phoned in. The pharmacist tells you it will be about ten minutes.
You ask them for the price you’ll be paying. And they say, “I won’t know that until I run it through your insurance.”
Happens to me all the time, and I never understood it at all. Isn’t there a set price for the drug I’m taking? Why can’t they just tell me the price?
There’s a middleman at work who’s pulling the strings, that’s why.
Pharmacy benefit managers (PBMs) are third-party administrators that are pulling the strings.
Let’s say a drug costs $1000. The PBM negotiates with both the manufacturer and the insurer to get the drug listed and set prices. For this work, the manufacturer pays the PBM a fee. Let’s say $400.
But this “rebate” ultimately results in higher prices. The PBM takes that $400, gives it back to the insurance plan administrator, and then raises its negotiation fee by $400.
Remember that skyrocketing EpiPen cost? It’s a sure bet this had something to do with it.
But the power of the PBM doesn’t stop with pricing. They get to decide which “tier” a drug is on (indicating not its effectiveness, but how expensive it will be, or whether your insurance will cover it at all).
They can even pressure manufacturers into providing bigger rebates by “demoting” their drug to a lower tier, or removing it from the list of covered drugs altogether, thus encouraging patients to look at other more affordable choices.
How to Save Money on Prescriptions
Now that you understand just a little more of the “behind-the-scenes” activity that goes into your rising and often inconsistent prescription drug prices, what do you do about it?
One great resource is the website of Pharmacists United for Truth and Transparency, particularly this page: PBM Practices. The section, “A Few Things PBMs Don’t Want You to Know” is quite informative.
Otherwise, information is key here. It will take a little work, but ask questions…
- Ask your pharmacist what they know about the way your insurance company decides on what you pay.
- Know your insurance. If you’re unclear about deductibles, co-pays, or any charge for medication, take the time to call your provider.
- When possible, go generic. Generic medications are always less expensive, so unless your doctor has told you to use a brand name, request a generic.
Harvard Health Blog recommends:
- Ask your doctor and your pharmacist about bigger dose pills that can be cut with a pill splitter so your medicine goes further. Some drugs, however, like extended-release or slow-release pills can’t be split.
- Get a larger supply. For long-term medications ask about a 90 day supply. That could keep you from having to pay a co-pay as often.
- Apply for assistance programs offered by state and local governments, Medicare, nonprofit groups, and even drug makers. The programs typically have income requirements. Your pharmacist or doctor should be able to make recommendations.
- Consider online pharmacies like WeRx or GoodRx. Generally, they can offer lower pricing because there is no middle man and they buy direct from drug makes.
- Why does medicine cost so much? — Time
- PBM FAQs — Pharmacists United for Truth and Transparency
- What older adults should know about prescription drug prices — Kendal at Home Blog
- 6 Ways to Save Money on Prescription Drugs — Time