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Price Transparency Essential to Lower Out-of-Pocket Patient Costs

Requiring price transparency could lead drug manufacturers to reduce out-of-pocket patient costs for insulin.

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Source: Thinkstock

By Sara Heath

- Price transparency and clarity within the chronic care management medication supply chain will be essential for reducing out-of-pocket patient costs, according to a new report from the Congressional Diabetes Caucus.

The report, which focuses on high insulin costs, outlines the murky relationship between different players in the insulin supply chain, noting that limited transparency is a major contributor to high insulin costs.

The relationship between insulin manufacturer, wholesaler, pharmacy benefits manager (PBM), and patient is convoluted. This prohibits meaningful downward pressure that could lead to lower insulin costs, the report explained.

“The structure of the insulin delivery and payment pathways create several incentives for entities along these pathways to artificially raise the price of insulin,” the report said. “Simultaneously, these incentives also insulate many of the pathway participants from market forces that normally provide a downward pressure on typical commodity prices. Combined, these two factors seem to be vital drivers of increasing insulin costs.”

The Congressional Diabetes Caucus is taking on high out-of-pocket patient costs for insulin and other diabetes medications.

READ MORE: FDA: Patient Access to OTC Drugs to Cut Out-of-Pocket Drug Costs

“These market failures have allowed a handful of players along the insulin distribution pipeline from manufacturers to health insurers to capitalize on their strategic positions, driving up the price of insulin and minimizing competition,” the report authors noted.

Patients are feeling the pinch of high insulin costs, the report noted. Insulin costs have doubled since 2012. In the ten years prior to that, costs tripled. Currently, out-of-pocket patient costs for insulin can reach up to $300 per vial, and many patients go through about two vials per month.

High medication costs are tied to low medication adherence, research has shown. When patients have high patient financial responsibility, they are more likely to forego some doses of that medication. Patients are finding that they are not able to afford their medications, which can have harmful and oftentimes expensive impacts on health and wellness.

The Congressional Diabetes Caucus has proposed creating more transparency in the insulin supply chain. This will ideally create more downward pressure that decreases patient costs.

For example, creating value-based contracts (VBCs) between manufacturers and PBMs could create overall lower list prices for drugs. Entities would be required to pass savings onto patients.

READ MORE: Top Strategies for Collecting Patient Financial Responsibility

“VBCs are arrangements between different entities along the supply chain that pay higher rates for better patient health outcomes, instead of for higher sale volume,” the report noted. “The implementation of these contracts could eliminate current volume-based incentives by tying payments to successful patient outcomes.”

The caucus members also proposed more transparency about rebate use. Currently, different entities can use rebates to reduce their payments to other parts of the insulin supply chain. However, entities do not need to disclose that they have used a rebate. This means the entity could reduce their own costs without passing those savings onto patients.

Drug manufacturers, wholesalers, and PBMs should also practice transparency with regard to drug price negotiation.

“As previously discussed, some patients’ out-of-pocket costs are based on insulin’s list price,” the report authors stated. “As a result, patients do not benefit from the discounts and negotiated prices generated by rebates. Lawmakers could introduce legislation that requires health plans and PBMs to base out-of-pocket expenses on negotiated prices.”

From there, the caucus proposed requirements for list price transparency. List price transparency could create overall market pressure to lower the cost of a drug, preventing manufacturers from “setting list prices that do not reflect the operational and business costs of manufacturing insulin,” the caucus members said.

READ MORE: Health Pros Nudge Senate Toward Care Quality, Price Transparency

Additionally, the caucus members called for better transparency about patient financial responsibility. Rarely do patients pay list price for their insulin, but instead a cost-sharing price. Offering transparency about patient financial responsibility will help patients and providers price shop and let patients budget. It could also create downward pressure to reduce patient cost sharing.

The caucus also recommended overarching out-of-pocket price caps for patients with chronic illness.

“Chronic conditions like diabetes are long-lasting diseases that can get worse over time. As a result, patients with chronic conditions must take prescription drugs throughout their lives to manage their conditions,” the report authors said. “Capping out-of-pocket costs for life-sustaining drugs like insulin could help patients better manage their diabetes and avoid adverse outcomes leading to unnecessary hospitalizations.”

Reducing out-of-pocket patient drug costs is essential for chronic disease populations, according to caucus leaders Tom Reed (R-NY) and Diana DeGette (D-CO). Medications like insulin, which are used to maintain overall wellness, should not break the bank because patients rely on them for survival, the pair said in a press release.

“We care about the 7.5 million Americans who rely on insulin to manage their blood sugar levels and prevent debilitating complications every day,” Reed and DeGette stated. “Many cannot live without it, but countless patients struggle to afford it. As their out-of-pocket costs continue to rise, the current system is unfairly putting insulin out of reach, placing millions of lives at risk.”

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