HIT Perspectives: Improving Drug Price Transparency: The Case for Out-of-Pocket Drug Cost Information at the Point of Prescribing

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HIT Perspectives – June 2018


Improving Drug Price Transparency: The Case for Out-of-Pocket Drug Cost Information at the Point of Prescribing


By Tony Schueth, Editor-in-Chief



Drug Price TransparencyThis is part 1 of a two-part series on price transparency. The second article will focus on the industry’s response to the problem articulated in this piece.

Consumers are being asked to absorb an increasing share of their medication costs. Even with third-party help — such as coupons and patient assistance programs — patients’ out-of-pocket (OOP) costs for medications can be steep, making therapy unaffordable. Now with advances in technology, patients and providers are beginning to ascertain what OOP costs will be for medications and alternatives at the point of prescribing. This understanding may help reduce costs as well as improve the quality and safety of patient care and enhance adherence to therapies.

The current lack of price transparency at the point of prescribing. Lack of clarity regarding a patient’s prescription coverage for individual drugs at the point of prescribing is a significant challenge. Since approximately two-thirds of Americans have private — and 20% public (Medicare and Medicaid) — coverage, it all begins with how much an insurance company will cover. This can be a complex calculation, depending on whether the prescribed drug falls under the pharmacy or medical benefit.

Insurance companies will often contract with third-party companies — called pharmacy benefit management companies (PBMs) — to manage utilization and cost for drugs covered under the pharmacy benefit. If the drug is covered under medical – e.g., cancer medications – they will often administer this themselves.

It would benefit the patient, insurance company and prescriber to understand the cost at the point of care. Many different components are involved in making this determination.

Since the 1990s, health plans and PBMs have been providing formulary and benefit information on drugs covered under the pharmacy benefit to prescribers. Since the turn of the century, they have used the National Council for Prescription Drug Programs’ (NCPDP) Formulary & Benefit (F&B) standard through the nation’s largest electronic prescribing (ePrescribing) intermediary, Surescripts.

This information has shortcomings. Because health plans and PBMs don’t have all of the data to provide F&B at the patient level, this information is often on a higher plan or group level and does not provide OOP costs. Further complicating the matter is the fact that formulary tiers constantly change, especially for higher priced medications. ePrescribing systems may lag behind, so prescribers may not have the latest or most accurate information. Flags noting the need for prior authorization (PA) are too often missing.

On the medical side the process remains primarily manual, relying on phone calls, faxes and portal calculators and submissions. There is no functional equivalent of formulary or even the powerful existing pharmacy “test claim” that allows a prescriber or dispenser to understand the cost, PA or step-therapy requirements at a patient-specific level. This often results in a retrospective workflow with the patient, provider and dispensing location not clearly understanding the true cost of the product until claims are submitted and processed. Depending on the cost, complexity of the regimen and site of dispensing, a provider may order/prescribe the product for a patient and simply hit “send,” relying on one or more retail or specialty pharmacies to obtain accurate pricing information for the patient. If the prescriber is the site of dispense, it will use staff to collect data and review options with patient. Each of these options can take anywhere from days to weeks from the actual diagnosis.

The challenge is that today the information to make a fully informed decision isn’t available at the point of care. This issue is important as patients increasingly need high-cost medications and payers begin to transfer more OOP costs to the patient.

Since they don’t have all the facts at their fingertips — and don’t really trust what they do have — prescribers frequently order medications that are not on formulary, have higher copayments or generally are unaffordable. This leads to prescription abandonment and medication noncompliance. Patients will not follow through with medications they cannot afford.

The industry is aware of these issues and their complexity, and is working to address them by providing more accurate and transparent drug information at the point of care. Although much progress has been made, more remains to be done. Challenges and opportunities will be discussed in the second article in this series. For the remainder of this piece, we will focus on the drivers for change.

Drivers for change. A number of factors are accelerating the need for drug price transparency at the point of prescribing. They include:

  • Reducing medication nonadherence. Nonadherence to medication regimens is a serious problem that is expensive for the American health care system and has implications for the quality and safety of patient care. It’s caused, in part, by patients’ OOP costs. The Kaiser Family Foundation found that one in four people taking prescription drugs report difficulty affording their medication. An estimated 150 million prescriptions go unfilled each year due to prescription costs. This has gotten the attention of payers and policymakers, which are beginning to link reimbursements to medication adherence.
  • Insurance coverage gaps. The insurance industry is changing and, with it, the way medications are covered. Unfortunately, this change may lead to higher OOP prescription costs for consumers. High-deductible health plans are becoming the norm, which may put needed drugs out of reach until the deductible is met or because of minimal medications coverage. A growing number of health plans offer percentage-based copays and use of specialty tiers with coinsurance (percentage vs fixed copayment). This results in increasingly large OOP portions being paid by consumers.
  • Personal responsibility. Consumers are increasingly being asked to bear the costs of medications. The changes in insurance discussed above have increased patients’ OOP costs 10-fold. At the same time, consumers frequently lack a basic understanding of how their insurance works and what it covers, especially when it comes to medications.
  • Need for high-cost specialty medications. Specialty pharmaceuticals are high-cost, complex drugs with special handling and administration requirements. Generic alternatives and lower cost biosimilars usually aren’t yet available. Specialty medications are primarily used to treat rare or chronic conditions and half of American adults have one. On a practical level, the costs of specialty medications can lead to a huge financial burden for consumers.
  • Drug pricing policies. Federal and state governments are concerned that drug manufacturers are launching products with high prices and routinely raising the prices of existing drugs, often by amounts that hit the national news. In response, the administration is convening a group of drug manufacturers to discuss price transparency and reforms as well as lower OOP costs for Medicare beneficiaries.
  • The move toward value-based care. Many public and private insurers are moving toward value-based arrangements that reward lower costs and improve patient outcomes. Providers may be measured and reimbursed according to whether they meet certain quality and cost targets.
  • Availability of technology. Technology increasingly is available to provide some OOP information at the point of care. Two complementary and needed transactions have been created: electronic prior authorization (ePA) and the real-time benefit check (RTBC). ePA helps providers know upfront whether the medication they want to prescribe requires PA, which could reduce speed to therapy. The RTBC provides real-time, patient-specific information to providers regarding a patient’s prescription drug benefit coverage as well as OOP costs.

It is clear that drug transparency at the point of prescribing is becoming a front-and-center issue for prescribers, patients and ePrescribing vendors alike. While progress has been made to provide more information than we’ve had in the past, it is complicated and there are still missing pieces of the puzzle. •

Want to know how the ePrescribing industry is responding? Stay tuned to the next issue of HIT Perspectives, in which the second article in this series discusses challenges and opportunities. In the meantime, if you need to know more, please let me know. Reach out to me at tonys@pocp.com.