Prescription drug prices: Progress or PR?

morgan griffithEveryone knows something is wrong with prescription drug prices. I hear frequently from constituents struggling to pay exorbitant prices for drugs. What is to be done in this situation and who is to blame are hot topics in public discourse.

It’s worth keeping this background in mind when pondering what to make of insurance giant UnitedHealthcare’s announcement on March 6 that it “will expand pharmacy discounts to millions of Americans.”

This seems like good news, but it must be viewed with a critical eye. It may appear to be progress, but I think a closer look shows this announcement is about public relations.

Two paragraphs into the press release, UnitedHealthcare says that these discounts will apply only to people in “fully insured group” health benefit plans, and on prescriptions where the manufacturer already provides the rebate. If the drug in question has a rebate, its cost “will be discounted to reflect a rebate value.”

To better understand why UnitedHealthcare’s announcement is less than meets the eye, we have to step back and take a look at the whole drug supply chain. This is the process that gets drugs from the production stage to the consumer, and it is remarkably complex. When the House Energy and Commerce Committee’s Subcommittee on Health recently held a hearing on the drug supply chain, we had ten witnesses present to testify about various stages of the chain, from manufacturers to pharmacy benefit managers (PBMs) to insurers to pharmacists.

In the center of the supply chain are the PBMs, which manage prescription drug benefits for insurers and government health programs. For prescription drug prices, PBMs are like a magician’s big black box: drugs and their prices enter one end of the box and something different emerges from the other end. But the inner workings of the PBM box are generally hidden from you. PBMs negotiate rebates and discounts for prescription drugs, but how they do it is a mystery.

Testimony indicated in some cases that PBMs encourage manufacturers to raise their prices so that it looks as if the PBM is negotiating a larger discount or rebate. Manufacturers then raise their prices to preserve their profits. So when the people receiving discounts under UnitedHealthcare see “a rebate value” for prescriptions, the bill may still be more than what the drug should actually have cost in the first place.

Further testimony left me with the impression that some insurance companies, seeing what PBMs and manufacturers were doing, required the PBMs to share a part of the “rebate.” These practices seem profitable for manufacturers, PBMs, and insurance companies, while costing the average American.

Further, in recent years, many insurers have acquired PBMs. The same week UnitedHealthcare announced its discounts, the insurer Cigna said it would buy Express Scripts, the country’s largest PBM.

For its part, UnitedHealthcare owns the PBM OptumRx, so what percentage of UnitedHealthcare’s rebate will consumers enjoy? Their press statements don’t say! Additionally, will they receive any of the portion of the rebate the PBM OptumRx keeps? Again, the press statements of UnitedHealthcare are not clear.

The overall tangled mess of drug pricing means accountability is elusive. Consumers are left paying prices with no idea how those prices are set.

In some cases, it is cheaper to go to a drugstore and pay out of pocket than to pay the copay through your insurance.

Declarations about actions to reduce prices that are already too high may just be good PR. It isn’t really progress if you offer a penny discount or rebate after overcharging the consumer a dollar.

During the hearing about the supply chain, I told the panel, “If you all don’t solve this, we are going to come in and come up with an answer, and it may not be an answer that you end up liking.”

The high cost of prescription drug prices is a bipartisan concern. President Trump and colleagues on both sides of the aisle are working to address it.

Ultimately, discounts like those announced by UnitedHealthcare are nice, but are they just window-dressing? Without more transparency, we won’t be able to fully understand what is driving cost increases for prescription drugs, and how to best improve the situation.

Prescription drug costs are a great burden on families across the country and in the Ninth District. In our work to address this ailment, first I prescribe more transparency.

If you have questions, concerns, or comments, feel free to contact my office.  You can call my Abingdon office at 276-525-1405 or my Christiansburg office at 540-381-5671. To reach my office via email, please visit my website at www.morgangriffith.house.gov. Also on my website is the latest material from my office, including information on votes recently taken on the floor of the House of Representatives.

Column by Morgan Griffith

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