The Hidden Costs of Healthcare
The move toward pharmacy benefit administrators is seen as a way to reduce healthcare costs. Because they don’t directly negotiate with pharmaceutical companies, they have no hidden motivation to direct a patient toward atorvastatin rather than simvastatin. They simply relay the formulary decisions and cost savings negotiated by the company that hired them. The system is financially transparent.14
This isn’t to say they do this for free. This year, GoodRx is on track to earn $100 million.
Why should you care? GoodRx helps patients save some money and generates some money along the way. I have even started to send my patients to its website when they express sticker shock at the cost of a drug I prescribed. What’s the harm?
The problem is less with what GoodRx does and more with what it represents. In a field with few heroes, GoodRx seems to be one of the good guys. And yet it still manages to generate a healthy profit just by helping patients purchase drugs, such as hydroxychloroquine. GoodRx claims it has saved Americans $10 billion on prescriptions, but why should these savings come only to web-savvy people who own a printer and an internet connection?5 Imagine also the amount of profit generated by its less altruistic brethren, hidden behind confidential agreements that will never be made public. Even if GoodRx is one of the good guys, will it remain so after being acquired? Is there really no better way for these funds to be distributed?
Markets Without Rules
In 2018, spending on prescription drugs increased by 10%. Spending, not utilization. It’s not that patients are taking more drugs; the drugs that they are already taking just cost more. Another statistic: 7.8% of patients report not picking up a prescription after finding out how much it would cost.15 Forget about new technologies for just a moment; imagine, instead, how much we could improve the health of our patients if they all could afford to take the pills they were prescribed.
Individual state governments have already begun to examine this issue more closely:16
- Arkansas, Connecticut and Kentucky have launched investigations into spread pricing, the difference between what pharmacy benefits managers charge insurance companies and what they actually pay pharmacies;
- Ohio audited OptumRx and CVS and found that both companies kept $224 million through spread pricing;
- West Virginia removed the pharmacy benefit manager in charge of Medicare patients for the state, saving the state $32 billion; and
- Pennsylvania’s top auditor has strongly argued that their state should follow West Virginia’s example.
These states are discovering that allowing market forces alone to set the cost of drugs does not always lead to a fair price. Sen. Elizabeth Warren (D-Mass.) puts it succinctly: “I believe in markets. But I believe in markets with rules. Markets without rules is theft.”17
Surprisingly, the business world largely agrees that the free market should be a little less free. On Aug. 19, the Business Roundtable, a coalition representing more than 200 of the largest companies in the U.S., including Abbott, Bayer, Bristol-Myers Squibb, Mallinckrodt Pharmaceuticals, Pfizer, Walgreens and CVS Health, all signed a statement asserting the primary purpose of the American corporation is no longer to generate a profit. Other goals, such as “supporting the communities in which we work” and “investing in our employees [by] compensating them fairly and providing important benefits,” now carry equal weight.18 Affordable access to basic medications is one of those “important benefits.”
In the U.S., belief in the power of market forces to resolve problems is almost a religion. It is time to admit that our faith has been poorly placed. The price a drug commands in the marketplace is determined largely by how desperate the patient is for salvation, not its true worth. As heretical as it sounds, it may be time to cap the profits generated by our oldest drugs—like hydroxychloroquine—and redirect those monies toward keeping those same drugs affordable for all of our patients. Allowing market forces alone to determine the price of basic medications is immoral.
No one expects a free lunch, but it’s not unreasonable to expect a fair price.
