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Lowering the cost of prescription drugs

Kaplan, Louise PhD, ARNP, FNP-BC, FAANP, FAAN

doi: 10.1097/01.NPR.0000586028.61540.6a
Department: Advocacy in Practice
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Louise Kaplan is an associate professor at Washington State University Vancouver, Vancouver, Wash., and family NP at Tumwater Family Practice Clinic, Tumwater, Wash.

The author has disclosed no financial relationships related to this article.

The US spends more on healthcare per capita than any other country in the world.1 Similarly, prescription drug spending per capita in the US exceeds that of other high-income countries worldwide.1 US prescription drug costs account for 10% of overall healthcare spending and reached a staggering $448.2 billion in 2016.2 This article explores the high cost of prescription drugs, potential remedies, and the role NPs have in advocating for patient access to prescription drugs.

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High cost

In 2017, spending by private employers, Medicare, and Medicaid accounted for 82% of the $333 billion of retail prescription drug spending in the US. Out-of-pocket spending accounted for another 14%, or $47 billion, of retail drug spending.3 At least 10% of spending in large employer plans, Medicare Part D, and Medicaid is spent on the top five drug products with the highest total spending.3 Using 2016 data, Harvoni (used to cure hepatitis C) was Medicare and Medicaid's drug with the highest total spending, while Humira (a drug for rheumatoid arthritis) was the top drug product for large employer plans.3

Four factors typically account a country's spending on prescription drugs: the population, volume of drugs consumed, drug utilization per person, and the type and mix of drugs (such as generic versus brand name). The high price of drugs in the US, however, is the primary reason US drug costs exceed those of other countries.1 Among people currently taking prescription drugs, only 74% indicate paying for them is easy. Additionally, the more drugs a person takes, the harder it becomes to afford them.4

Drug prices are influenced by a variety of factors. Pharmaceutical companies establish the cost, referred to as the “list price.” The price the consumer pays is influenced by health plan benefits. For example, some private plans require an individual to pay the first $250 out of pocket. The plan may pay 100% of a generic drug cost but only 50% of a brand name drug. An uninsured or underinsured person will likely pay out of pocket.5

The cost of drugs for a health plan is affected by using pharmacy benefit managers (PBMs) who develop the plan's formulary and negotiate with drug companies for a better price. Drug companies offer PBMs a rebate on the price of a drug as an incentive to choose higher-priced brand name drugs for the formulary. The PBM receives a rebate each time a person fills a prescription for the drug. Some or all of the rebate is returned to the health plan and helps reduce the cost of premiums; however, the consumer pays the same out-of-pocket cost, which is based on the list price.5

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Proposed solutions

Many states have passed legislation aimed at lowering or controlling prescription drug costs. States have tackled drug costs by regulating cost sharing and deductibles, pharmaceutical pricing and payment, Medicaid coverage and costs, and PBMs and transparency issues.6 California, for example, has a law that requires price transparency for any drug with a wholesale cost $40 or more. If the price increases 16% in the prior 12 months or 32% in the prior 24 months, drug companies must submit a 90-day advance notice of the price increase to public and private purchasers, which includes the reasons for the increase and justification of the new price.7

Oregon requires drug manufacturers to report the prices of prescription drugs and costs related to the development and marketing of the drugs. This applies to drugs that cost $100 or more per 1-month supply or drugs for which a course of treatment is less than 1 month, and the price increased a net 10% in the prior calendar year.7

In May 2019, the federal government proposed a “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” More than 25 strategies are grouped into four categories: improve competition, better negotiation, incentives to lower list costs, and reducing out-of-pocket costs.7

Federal legislators have proposed bills to rein in the cost of prescription drugs. In July 2019, Senator Chuck Grassley (R-Iowa) and Senator Ron Wyden (D-Oregon) introduced the Prescription Drug Pricing Reduction Act (PDPRA) of 2019. This legislation targets Medicare and Medicaid, aiming to lower costs to the plans and beneficiaries, promote transparency, simplify the Medicare Part D program, and create incentives for lower prices.8

Building on Grassley and Wyden's bill, and proposals by President Donald Trump, Representative Frank Pallone (D-New Jersey), chair of the House energy and Commerce Committee, introduced September 19, 2019, the “Lower Drug Costs Now Act.” The bill is major legislation by House Democrats; its key components include: requiring the Secretary of the Department of Health and Human Services to negotiate the prices of at least 25 drugs annually, and as many as possible, of the 250 most expensive drugs on the market; penalties for drug makers who do not negotiate or do not comply with the result of the negotiation; limits on drugs covered under Part B (used in offices and dialysis centers) and Part D prescription plans; and a $2,000 cap on the annual out-of-pocket prescription drug costs for Medicare beneficiaries.9

The Lower Drug Costs Now Act would benefit all Americans—not just Medicare and Medicaid recipients. Nonetheless, opposition to the bill was immediate, with criticism from Republicans and Pharmaceutical Research and Manufacturers of America, the pharmaceutical industry's trade group that contend the bill interferes with free trade. Specific aspects of the bill these groups opposed included the requirement to negotiate drug prices, linking drug prices to lower prices overseas, and limits to how fast drug companies can raise their prices.9 President Trump has supported the idea of creating an international price index in the past and allowing the government to negotiate prices. While he prefers Grassley and Wyden's PDPRA legislation, his initial response to Pallone's bill was to promote a bipartisan approach to solving the problem of prescription drug costs.10

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What NPs can do

Most NPs advocate daily to keep prescription drug costs as low as possible for patients. This entails prescribing generic drugs whenever possible, assuring drugs require the lowest copay possible, and prescribing medications most likely to be used by patients in appropriate quantities to avoid waste. At the state and federal level, NPs are encouraged to carefully analyze bills to determine which ones are most likely to ameliorate the prescription drug cost problem. NPs can advocate by providing legislators with expert feedback on the potential impact of the bills and testifying before committees. Many states have pharmaceutical and therapeutics committees that use evidence-based information to develop formularies for states. NPs who serve on these committees promote responsible prescribing and lower costs.11

Access to medications and the ability for patients to take them as prescribed are both essential. Many Americans cut pills, skip doses, or never fill a prescription due to cost.4 The consequence can be devastating. NP advocacy is one way to promote lower drug costs and better patient outcomes.

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REFERENCES

1. Sarnak DO, Squires D, Kuzmak G, Bishop S. Paying for prescription drugs around the world: why is the U.S. an outlier? Issue Brief. 2017. http://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_issue_brief_2017_oct_sarnak_paying_for_rx_ib_v2.pdf.
2. National Conference of State Legislatures. Cost and Pricing. NCSL Prescription Drug Policy Resource Center. 2019. http://www.ncsl.org/research/health/ncsl-prescription-drug-policy-resources-center.aspx.
3. Cubanski J, Rae M, Young K, Damico A. How does prescription drug spending and use compare across large employer plans, Medicare part D and Medicaid? 2019. http://www.kff.org/medicare/issue-brief/how-does-prescription-drug-spending-and-use-compare-across-large-employer-plans-medicare-part-d-and-medicaid/.
4. Kaiser Family Foundation. Public opinion on prescription drugs and their prices. 2019. http://www.kff.org/slideshow/public-opinion-on-prescription-drugs-and-their-prices.
5. Kaiser Family Foundation. Prescription drug rebates, explained. 2019. http://www.kff.org/medicare/video/prescription-drug-rebates-explained/.
6. National Conference of State Legislatures. 2018 enacted state laws affecting pharmaceutical costs, pricing and payment. 2019. http://www.ncsl.org/portals/1/documents/health/2018EnactedLawsPharmaceuticalCosts.pdf.
7. Cauchi R. Recent approaches and innovations in state prescription drug laws. 2019. National Conference of State Legislatures. http://www.ncsl.org/research/health/rx-costs.aspx.
8. Grassley C. Grassley, Wyden introduce major prescription drug pricing reform to lower costs for Americans. 2019. http://www.grassley.senate.gov/news/news-releases/grassley-wyden-introduce-major-prescription-drug-pricing-reform-lower-costs.
9. Huetteman E. Hill hodgepodge: Pelosi draws from Democrats, Republicans and Trump for drug plan. 2019. Kaiser Health News. https://khn.org/news/hill-hodgepodge-pelosi-draws-from-democrats-gop-and-trump-for-drug-plan/.
11. Kaplan L. Nurse practitioners advocating through boards and commissions. Nurse Pract. 2018;43(11):25–26.
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