List Vs Net Price: Are High Price Tags Really That High?

As drug list prices continue to rise, pharmacy benefit managers (PBMs) are adopting
strategies to keep drug spending to a minimum, but some consumers could still face high fees at the prescription counter.

In its report released in 2016, titled “Medicines Use and Spending in the US: A Review of 2015 and Outlook to 2020,” QuintilesIMS reported that total drug spending on an invoice price basis—excluding adjustments for rebates or price concessions—grew to $425 billion in 2015. This figure was 12.2% higher than the growth seen the year before. 

In 2016, according to Express Script’s 2016 Drug Trend Report, the average list prices for brand name drugs rose 10.7%. 

Glen Stettin, MD, senior vice president of clinical, research and new solutions at Express Scripts, said one of the most egregious examples of this is in oral oncology medications. As part of the report, Stettin said Express Scripts examined the 88 oral oncology medications on the market from 2011 to 2016 and found that during the five-year period, the unit price doubled from $20 a tablet or capsule to $40 a tablet or capsule. 

“Some of that was manufacturer’s raising their price year-over-year and some of it was new drugs, new oral drugs, that were coming in significantly higher than anything that had been on the market previously,” Stettin said.

While list prices have continued to rise, aggressive strategies employed by health plans and pharmacy benefit managers (PBMs) have kept drug spending figures to much lower increases. For instance, in 2016, Express Scripts reported a change in commercial payer drug spending of 3.8%. The figure is similar to the increases being reported by other PBMs. CVS Caremark reported a drug spending increase of 3.2%, Prime Therapeutics reported a change of 2.5% and MedImpact reported a change of 4.4%.

Cigna Pharmacy Management does not put out a public report on its drug spending trends, however, Michelle Vancura, senior vice president of sales and clinical account management for Cigna Pharmacy Management, said its overall pharmacy trend was also in the low single digits.

Drug spending figures are driven by a combination of both utilization and price. According to Dr Stettin, at Express Scripts, about two-thirds of the 3.8% change in drug spending was driven by cost, while one-third of it was driven by utilization, or people using more drugs.

Pharmacy benefit managers have tried to keep drug spending to a minimum for their customers despite rising list prices through a number of strategies. 

Dr Stettin said while Express Scripts doesn’t control what their clients do in terms of benefit design, they are able to offer advice encouraging them to align their benefit designs so that when people choose less expensive drugs, whether it is generics, a preferred brand, or traditional medications, they pay less.

PBMs have also introduced programs for payers that help get money back for certain cancer drugs if they are not effective and have helped customers get lower costs for the same cancer and inflammatory medication based on what it is being used for and the value a given medication has for a certain health condition. 

Using Pharmacy Integration To Reduce Price

Dr Stettin said part of the reason the company has been able to keep the increase in unit costs to 2.5% year-over-year is because of how it leverages its pharmacists, who are able to counsel patients and offer advice about other medication alternatives that offer lower costs without sacrificing effectiveness.

“Armed with that information people can make choices to switch that save them money out of pocket, helps to make their benefits more affordable, and gets them the results they need to get healthy and to stay healthy,” he said. 

As an integrated PBM, Ms Vancura said Cigna increases accountability for both their physician providers and  pharmaceutical manufacturers through contracting arrangements. 

Cigna is committed to having 50% of its reimbursements in alternative payment models and through its Cigna Collaborative Care value-based model, physicians are held to certain quality, or value based metrics, including several specific pharmacy performance metrics.

“(By) being able to affect the right drug being prescribed at the time it’s being prescribed, we’re able, with those contracts and the relationships and the information we share, to be able to have an impact before somebody gets to the pharmacy,” she said. 

They also use value-based contracting with pharmaceutical manufacturers that tie their financial terms to how well the drug improves the health of the patients.

According to Ms Vancura, the integration of pharmacy, medical and behavioral working together as part of the PBM structure, also fosters a greater level of consumer engagement.

“A big part of keeping costs in check and making sure that the right choices are made, is having that engagement with the consumer or the customer so that they understand the full choices, what drug options to get, where they have those choices to get them and what they can do to improve their health beyond just the medication use,” she said.

Such integration, Ms Vancura said, gives Cigna a 360-degree view of a patient’s health and allows them to affect customer behavior and encourage healthier choices.

When Cigna compared the claims data of more than two million customers who had Cigna medical and pharmacy benefits to those with just medical benefits through Cigna, they found that those plan sponsors with integrated pharmacy and medical benefits saved an average of $77 per member per year. The savings were primarily associated with providing patients in the integrated group with greater care coaching and engagement opportunities as well as helping customers manage specialty drug conditions.

List Price is a Reality for Some

Overall, PBMs have been able to use these strategies to limit drug spending trends even as list prices rise, but Dr Stettin said a new phenomenon in recent years has been that patients themselves are increasingly being exposed to actual list prices due to changing benefit designs.

While 5 or 6 years ago there were few plans that had deductibles for prescription drugs, as part of the Affordable Care Act, a new mandate now requires health plans to combine the deductibles for prescription drugs and medical benefits. As a result, those patients with high deductible plans could be exposed to drug list prices.

“You had this situation where people had copays or coinsurance and they paid $10 for a drug or $30 for a drug in December and then in January it was $1500 or $4000, and since it was their first claim of the year it was all out of pocket,” Dr Stettin said. 

This has lead to a hot-button issue in the pharmaceutical industry: who is benefiting from the discounts or rebates if consumers are paying the list price as part of their deductible benefit?

Dr Stettin said Express Scripts itself returns 89% to 90% of the rebate dollar back to their customers, who are either the sponsors of a plan or a health plan themselves, but health plans or sponsors then have the choice whether to reinvest those savings into the operation of the plan or return a portion to the consumer.

Express Scripts now gives its health plan customers the option to incorporate a rebate value into the pricing for a patient during the deductible phase so that the patient could benefit from the discount. 

“Of my 3500 clients, I have roughly 20 that have us do so,” Dr Stettin said. “Most of the plans are using that money, the discounts, to further subsidize the cost of their benefits.”

Due to the new pricing climate, Dr Stettin said it is possible that some consumers are being exposed to large charges at the pharmacy counter; however, on average, most consumers still benefit from being a part of the PBM.

“The average out-of-pocket costs for people in our benefit plans, including deductible, including coinsurance, including co-pays on a per prescription basis, went up about a dime,” he said. 

Drug list prices will likely keep rising in the years ahead, especially as more specialty medications and biologics make their way through the pipeline. 

Ms Vancura said the advent of these drugs is a positive step forward in patient care; however, they also require more careful management to contain costs.

“The expense management aspect of that has to be carefully watched to ensure that it’s the right person who needs that drug and that their physical make-up will work and that drug will respond in the manner that it’s intended,” she said.