I recently attended the Texas Association of Health Plan’s (TAHP) annual conference and was reminded of Gerard F. Anderson’s seminal Health Affairs article “It’s the Prices, Stupid”. Anderson and colleagues, notably the late great Uwe Reinhardt, published this article almost 20 years ago to shed a light on the dramatic difference in health care expenditures in the U.S. as compared to other Organization for Economic Cooperation and Development (OECD) countries.
While at the TAHP conference there was a lot of focus on the high cost of prescription drugs and who is to blame. We can point to the various roles each party plays in the supply chain, but, at the end of the day, we must come to grips with the fact that the price for drugs in America is higher than in other countries. In fact, the Trump Administration is considering importing certain drugs to help drive down costs. While I don’t have a formal opinion on the idea, I can understand the rationale.
Even if certain drugs do end up being imported, the ones currently in the FDA pipeline are mostly expensive specialty medications that will easily hit a seven-figure price tag. As such, importation alone is probably not enough to dramatically reduce the cost of these treatments. Some of these drugs will have the potential to cure chronic illnesses that most researchers never imagined curing 10 years ago. If you do a standard cost-benefit analysis, one can begin to see why these medications cost so much. But, if you’re a health plan, are you really going to willingly hand over seven figures in up-front costs for a patient you might not even have on your plan in two to three years? That question was posed at the TAHP conference and let me tell you, folks were not shy about saying no.
Nonetheless, we all feel the costs associated with prescription drugs. Even if you don’t use any prescription drugs yourself, you’re almost certainly paying for someone who is – because of tax policy. Although Congress is trying to find a legislative fix, I can guarantee whatever they come up with is not going to be a panacea. Prices are still ultimately set by drug manufacturers and PhRMA is doing everything in their power to maintain the status quo. If Congress’s plan doesn’t address how prices are set to begin with (and they only have so much authority to do so), we will still be facing the same issue in the years to come.
So yes, it’s still the prices, stupid.
If you want a refresher on the forgotten quality conversation in the fight against high drug costs, click here.