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3 ways America is trying to get its drug-price problem under control

Lydia Ramsey   

3 ways America is trying to get its drug-price problem under control

The US has a problem: the cost of pharmaceuticals is rising too fast.

It grabs attention in extreme cases, like when the the price of a 62-year-old drug was hiked from $13.50 to $750 per pill overnight, or a new cure for hepatitis C debuted with a list price of about $1,000 a pill.

But, the problem is more widespread than just a few headline grabbing cases. The Department of Health and Human Services says Americans spent $457 billion on prescription drugs in 2015, up nearly $100 billion since 2009.

And it is only going to keep rising. HHS expects prescription drugs to cost the US an estimated $535 billion by 2018. That revenue for retail prescription drugs is independent of how many prescriptions were filled, rising much faster as this chart shows.

How do you fix this? There's a range of solutions emerging, from closing regulatory loopholes to discourage companies from buying old drugs just to jack up their prices, to insisting that pharmacy customers first try lower-cost alternatives. Not to be left out, the tech industry has ginned up a solution too - in the form of an app that helps patients find the lowest possible price.

screen shot 2016 03 09 at 10.34.27 am

HHS

Closing loopholes

Last week, the FDA updated its generic drug approval process to try to keep massive price increases on old drugs in check.

The updated document details a way to speed up the review process for certain generic drug applications. Specifically, it will apply to potential alternatives for drugs that no longer fall under patent protection and - here's the key - are made by only one company. The process could speed up the approval for up to 125 new drugs.

The goal is to close that loophole that Martin Shkreli exposed with his 5,000% price hike on Daraprim - when a drug has no competition and only one manufacturer. It remains to be seen if the move can prevent the next dramatic price increase, as there was no generic version of Daraprim in the works that could have had an accelerated approval after the hike happened.

Using the power of negotiation

Government agencies aren't the only ones capable of bringing about change.

Health insurers, pharmacy benefit managers and pharmacies themselves all play a role in what you actually pay when you show up to the pharmacy counter.

Pharmacy benefits managers are the ones that set drug prices, working with drugmakers and insurers to negotiate down the list price to a point where everyone is happy. In February, CVS, one of the largest PBMs, said it managed to keep the lid on rising drug prices, with an increase of only 5% in 2015.

It's done this with a combination of negotiation, rebates, and making sure what people are paying for is worth the price. For example, CVS said last month it wouldn't sell some patients a $1,000 per bottle toenail fungus treatment until after less expensive options failed.

Express Scripts, the largest PBM in the US, claims similar results to CVS using the same tactics.

But PBMs aren't always perfect: To get the price they want, they often leave certain drugs off of their "formularies," or lists of drugs they cover. For example, Express Scripts covers one version of a hepatitis C cure, but not another because of its high cost, which limits patients' ability to choose.

Putting power into the hands of the consumer

Blink Health screenshot

Blink Health

The cost of a 90-tablet prescription of Ambien on Blink Health.

Then there's the tech solution of bringing price transparency to patients.

That's the idea behind Blink Health, a startup that just launched last month. With the help of PBM MedImpact, the company scours the Internet to find out what people are actually paying for their prescriptions. Then, it sets a price, which the user pays through the app and brings the pre-paid prescription into the pharmacy.

The idea behind finding the lowest pharmacy price isn't new: in fact, many companies like GoodRx, OneRx, etc. are interested in helping consumers find where they can get the lowest price on their medication. Others still work with employers to find the lowest cost for their employees.

Where Blink Health may have the advantage is that the price isn't dependent on the pharmacy. Blink users can still go to their regular pharmacy (so long as it accepts Blink Health, which more than 60,000 do) for their prescriptions. The service also doesn't factor in health insurance, giving users with insurance the chance to compare how much they're paying to Blink users.

Blink CEO Geoffrey Chaiken told Business Insider that the idea for the service came from the lack of transparency around pharmacy prices. That uncertainty of what you're paying when going to the counter was jarring in the age of Uber and Seamless, where payments for services can be paid online.

"We are 100% focused on just patients' out-of-pocket expenses," he said. "We won't finish until out of pocket expenses go to zero."

While a lofty goal, that mentality could be the driving force behind a more simplified understanding of how drug prices are set, and what people actually pay.

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