The Rising Costs of Prescription Drugs: How Pharmacy APIs Can Improve Transparency

By PokitDok Team,

woman sleeping on desk after taking pills

The United States spends the most per person on healthcare by a wide margin, but Americans don't necessarily get additional value for their money.

2016 was a milestone in this ongoing conversation, too, as that was the year annual individual healthcare spending broke the $10,000 mark, CNBC's Ester Bloom reports.

But as Melissa Etehad and Kyle Kim at the Los Angeles Times report, people in countries such as Great Britain and Italy spend $5,000 less per year on their healthcare -- and they have a longer life expectancy at birth than Americans.

Prescription drug prices make up about 10 percent of the average American's healthcare spending. In this article, we examine the impact that high drug costs have on patient care, and how pharmacy APIs can help usher in increased price transparency.

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Why Prescription Drugs Are So Expensive In The United States

Julie Mack at M Live attributes the high cost of prescription drugs as one of seven factors that have driven up the cost of healthcare in the United States. Americans, Mack says, not only consume more medication, but also spend more on it.

A 2017 research brief from The Commonwealth Fund is revealing. The brief shows that Americans currently spend more than $1,000 per person in annual drug costs, more than three times what Germans pay and nearly twice what the French pay. This is a relatively new development, though: 20 years ago, annual prescription drug costs among the three countries were nearly the same.

In a Huffington Post article, Dr. Sudip Bose, MD, suggests a simple reason for the exorbitant prices of prescription drugs in the United States: the pharmaceutical manufacturers can get away with it.

The Economist agrees. The lack of government control over prescription drug costs means that pharmaceutical companies can set whatever prices they like. Then, other parties in the system -- insurers, pharmacy benefit managers, and the government -- attempt to negotiate those prices down (which private insurers can do) or promote discounts (for example, through Medicaid).

Just how expensive can prescription drugs in the US be? GoodRx, a website that collates current prices for medications and provides prescription price comparisons, regularly compiles a list of the most expensive prescription drugs on the market. As of January 2017, a drug called Harvoni, which is prescribed to hepatitis C patients, tops the list. Manufactured by Gilead Sciences, a 30-day supply comes in at $87,800 without insurance or discount coupons.

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Patients Bear the Impact of High Prescription Drug Costs

The rising costs of prescription drugs affect all parties within the healthcare system, but the biggest burden falls on patients who have health plans with higher copayments. Higher drug prices shift an increasing percentage of the financial responsibility to patients.

In an interview at The Wall Street Journal, Stephen Ubl, chief executive of the Pharmaceutical Research and Manufacturers of America, points out that patients pay more out of pocket for pharmacy costs (46 percent) than hospital costs (28 percent).

The problem is exacerbated by the lack of transparency with regard to prescription drug prices.  In the same WSJ discussion, John Rother, who leads the Campaign for Sustainable Rx Pricing, argues that transparency is the answer to empowering patients to make better healthcare decisions.

"Now, patients and purchasers don't have any hard data about research-and-development costs, performance or outcomes for a drug," Rother says. "With more information, patients could better decide the right treatment for their family and what price they are willing to pay."

Doctors also contribute to the problem when they prescribe drugs based only on medical need, without considering costs or ensuring that the prescription will be covered under the patient's health plan.

The end result: Patients lose out financially as well as medically. The lack of pharmacy benefit information at the time of care hinders the ability of providers to verify patient eligibility. It also results in sticker shock because patients filling prescriptions don't currently have visibility into their out-of-pocket costs, deductible, and copay ahead of time, nor are they alerted to any additional plan coverage limits, prior authorizations, refill quantity limits, or step therapy requirements before interacting with the pharmacy.  

This financial uncertainty negatively impacts medication adherence and health outcomes.

Research is beginning to validate the causal relationship between drug costs and adherence rates. Speaking to The New York Times, Dr. William Shrank, Chief Medical Officer at the University of Pittsburgh Health Plan, reported a measurable uptick in medication adherence among heart attack survivors when the prescription cost was removed as a variable.

The survivors were divided into two groups in Dr. Shank's recounting. One group had their medication provided for free; the other paid for their medication. In the latter group, just more than 50 percent of heart attack survivors adhered to their prescriptions. Among those who received the medication for free, adherence went up 6 percent, and those patients had 11 percent fewer heart attacks and strokes.

Katie Thomas at the NYT sums up the problem succinctly: "Patients who are the sickest and require the most expensive drugs are the most vulnerable to soaring drug prices."

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Pharmacy APIs Can Create More Transparency

The complexity and opaqueness of the current pharmaceutical distribution system contributes to the current price escalation for prescription drugs. In the meantime, implementing pharmacy APIs is one way to improve transparency within the existing healthcare framework.

Here are three ways pharmacy APIs can make a difference.

1. They Provide Real-Time Information on Formulary and Pharmacy Benefits

Pharmacy APIs can provide doctors with real-time information into a patient's formulary and pharmacy benefits at the point of prescription. This includes crucial information such as:

  • Total cost of the prescription
  • The patient's financial responsibility and how much the insurer will cover
  • Details of the patient's pharmacy benefits coverage

With knowledge of the patient's insurance coverage, doctors are better equipped to discuss medication options and associated costs. This presents an opportunity for physicians and patients to work together to design a treatment plan that is both cost-effective and health-effective.

2. They Give Patients More Control Over Their Treatments and Expenses

Cost is a huge barrier to receiving medical care. Roughly a third of Americans postpone care due to costs according to a recent Gallup poll. Lack of price transparency can lead to confusion and fear over how much medical treatment can cost.

Essentially, patients are currently at the mercy of the healthcare system. When it comes to prescriptions, patients are generally unaware of how drugs are priced and why prices can vary from pharmacy to pharmacy. They have not had the ability nor the tools to compare the costs of prescription drugs.

As Keith Jacobs rightly points out in a Medical Economics article, "You simply can't comparison shop for drugs the way you can for almost every other sort of good by comparing prices on the web."

At the point of prescription, patients have no say in determining their medication options. They also have no information on how much it will cost until they actually fill and pick up their prescription at the pharmacy.

Pharmacy APIs can generate information that would put the patient at the center of the system. In consultation with their physician, patients can better understand their drug options and payment obligations upfront via a formulary and pharmacy plan application. They can learn which drugs they are eligible for, get access to drug information such as quantity limits and authorization, and know the estimated costs.

This leads to more informed decision-making allowing patients to better manage their budgets and health conditions.

3. The Transparency They Create Can Help Control Healthcare Costs

The Robert Wood Johnson Foundation believes that price transparency can be effective in controlling healthcare costs in the long run. Openness regarding healthcare prices would increase the efficiency of the system, the RWJF argues.

According to Public Agenda, Americans are becoming more value-conscious when it comes to healthcare. Seventy-one percent of Americans think price does not indicate the quality of care, and 21 percent have compared prices across healthcare providers before seeking treatment.

The trend of seeking better-value medical care, coupled with increased transparency, can spur the healthcare industry to provide more competitive prices as market forces kick in.

Images by: grinvalds/©123RF Stock Photo, seksan44/©123RF Stock Photo, ximagination/©123RF Stock Photo, Novic/©123RF Stock Photo

The opinions expressed in this blog are of the authors and not of PokitDok's. The posts on this blog are for information only, and are not intended to substitute for a doctor-patient or other healthcare professional-patient relationship nor do they constitute medical or healthcare advice.

  Tags: API, Health Innovation, Pharmacy

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