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Tuesday Apr 10, 2018

Amazon vs. Walmart: Can Corporate America Lower Drug Prices?

Drug prices are increasing at 10 times the rate of inflation, according to a recent congressional report,(www.hsgac.senate.gov) and corporate America may be the key to curbing costs.

[dollar signs in capsule packets]

The former statement comes as no surprise. Americans spend $450 billion on medications annually, a figure projected to reach as much as $610 billion by 2021.(www.cnbc.com) Every family physician knows patients who have cut their meds in half, skipped doses or simply forgone medications because they could not afford them. We've spent endless hours on prior authorizations or rewriting prescriptions to meet formulary demands and get patients more affordable medications.

Pharmaceutical companies, payers and Congress have been unable -- and, in some cases, unwilling -- to drive costs down, but now there are new players entering the health care field: corporate retailers. Walmart is in talks to buy Humana,(www.foxbusiness.com) poised as competition for the CVS-Aetna merger. Meanwhile, Walmart rival Amazon is pursuing a joint venture with Berkshire Hathaway and JP Morgan Chase. These retailers could drive down drug prices by collapsing the complex layers of the pharmaceutical supply chain.

But who's to blame for high drug prices? And what, if anything, can family physicians do about it?

Cost increases are due to both rising costs of older drugs and newer, expensive medications for conditions such as hepatitis C and cancer. Many people point the finger at pharmaceutical companies, who naturally want to maximize profits. The industry contends that it puts a significant investment into developing new products, and in 2013, eight of the top 20 spenders on industrial research and development(blogs.sciencemag.org) were pharmaceutical companies. However, the industry has been accused of overstating how much it really costs(www.npr.org) to develop certain drugs, and a 2017 analysis(medicine.wustl.edu) found that more than 90 percent of new and/or commonly prescribed medications were developed with funding from the NIH -- that is, taxpayer funding.

One weapon against rising drug prices, theoretically, is generic alternatives to brand-name drugs. But this only works well if there are multiple generic alternatives. Having just one generic on the market decreases the price of the brand-name product only modestly. And unfortunately, the prices of many generic drugs also are increasing.(www.marketwatch.com) It doesn't help that some pharmaceutical companies use a "pay-to-delay" tactic,(hbr.org) offering money to generic manufacturers to stop a competing product from hitting the market.

Aetna recently announced(www.bloomberg.com) it will pass on discounts it negotiates on prescription drugs to its members -- a move similar to what UnitedHealth is already doing. The announcement highlights the tension between the two industries, as pharmaceutical companies blame insurance companies for drug price woes. The Pharmaceutical Research and Manufacturers of America, a drug industry lobbying group, recently launched a campaign(www.biopharmadive.com) blaming insurance companies and pharmacy benefits managers (PBMs) for blocking patients from applying cost-saving copay coupons to their deductibles. Copay coupons reduce insurance company revenues as patients end up spending less out-of-pocket, which is why both UnitedHealth and Express Scripts now count only what patients actually pay toward their deductibles.

Meanwhile, PBMs are viewed as middlemen who get a rebate from pharmaceutical companies, often based on the list price for drugs. The higher the list price, the more money PBMs get. In return for these negotiations, certain drugs are included on PBMs' formularies. Although PBMs argue they reduce costs for patients, a study published in JAMA Internal Medicine(jamanetwork.com) found that this practice for Medicare Part D prescriptions actually raised the cost for patients and Medicare while increasing profits for insurers and Big Pharma.

Finally, some contend that we doctors hold the key to lowering drug prices through our prescribing habits. Although most doctors prescribe generics meds, we often aren't privy to specific drug prices. And even if we were, studies show that wouldn't change our prescribing habits.(www.nytimes.com) Nonetheless, many physician groups are calling for more transparency in drug prices.  

CMS recently announced several changes(money.cnn.com) intended to increase competition and reduce costs for Medicare patients, including allowing insurers to include certain generic options in their respective formularies at any point in the year.

It remains to be seen what, if anything, Congress and industry are willing to do. Retailers see this space as ripe for innovation, but will they truly make a difference? Although there are many winners in the pharmaceutical market, to date there is only one clear loser: our patients.

Natasha Bhuyan, MD, is a board-certified family physician in Phoenix. You can follow her on Twitter @NatashaBhuyan.(twitter.com)

Posted at 03:53PM Apr 10, 2018 by Natasha Bhuyan, M.D.

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