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Health care, Solutions   05.30.2018

Rethinking How Drugs Are Sourced

You’re not alone in wanting to fix a broken system that perpetuates high prices.

Everyone agrees the American drug supply chain is a mess. A lot of dedicated people are working on ways to fix the situation and bring prescription medicine prices under control.

The Trump administration unveiled its plan on May 11. It’s a sweeping set of proposals that strike at many but not all of the drivers of drug price increases.

“Everyone involved in the broken system — the drug makers, insurance companies, distributors, pharmacy benefit managers, and many others — contribute to the problem,” said President Trump announcing the blueprint.

The plan takes aim at the cozy relationship between pharmacy benefit managers (that negotiate lower prices for insurance carriers and self-insured companies) and drug manufacturers. The administration proposes restricting the lucrative rebates that many experts agree keep drug prices high.

The Trump plan also proposes preventing name brand manufacturers from gaming the regulatory system to delay generic makers offering cheaper alternatives. But it does not include a Trump campaign promise to allow the government to negotiate prices for drugs in the huge Medicare Part D program. That is currently against the law as a result of successful lobbying over the years by the pharmaceutical industry.

So far, key drug supply chain players have been cautious about the proposal, which is long on ideas, but thus far limited in action items.

“While some of these proposals could help make medicines more affordable for patients, others would disrupt coverage and limit patients’ access to innovative treatments,” said Stephen Ubl, CEO of PhRMA, the trade association for drug makers, in a statement.

An independent group of 21 health care experts unveiled a plan on May 17. It advocates for reforming the patent system to block applications for new drugs with little improved clinical value, increasing standards for clinical testing, funding regulatory agencies with only public money and stiffening penalties for misleading drug promotions.

“Our pharmaceutical system prioritizes industry profits over public health,” said Adam Gaffney, MD of Harvard Medical School in a statement. “Through a series of commonsense reforms, we can increase the affordability, safety, and effectiveness of medicine for our patients.”

Nonprofit Drug Companies

The high drug price problem is so dire, a group of large nonprofit hospitals recently announced the Generic Rx Company to create their own supply of medications. Intermountain Healthcare, Ascension, SSM Health and Trinity Health have teamed to try first to provide the members of the project with lower-cost meds. If successful, the company could sell drugs to other hospitals.

“What we aim to do is to create something akin to a public utility that is going to put public good first, and we think we’re going to be successful because we don’t have an inordinate profit motive,” said Intermountain CEO Marc Harrison, MD in an interview with the New England Journal of Medicine.

The details of the new company are under wraps but the nonprofit model is happening elsewhere. Medicines360 has been working since 2009 on its mission to make affordable medications and medical devices available to underserved women.

Its first offering is a hormonal IUD. “Our product Liletta is deliberately disruptive,” says Medicines360 CEO Jessica Grossman. “We’re offering a low price in the public sector which no one does.”

The product currently has a 30 percent market share, with a focus on safety-net fertility clinics in the US and health providers in Africa. To get there, the outfit landed on a hybrid arrangement with the commercial company Activis for distribution.

“We wanted to be on shelf at clinics,” says Grossman.

But offering a cheaper, quality product hasn’t been a slam dunk. The competing IUD costs $1,000 and doctors tend to use it.  “A lot of reimbursements are set off the Wholesale Acquisition Price,” Grossman says. “Physicians favor the higher-priced version.”

Unlike commercial drug makers, all of Medicine360’s profits are reinvested back into research and development. The company welcomes donations.

The start-up Drew Quality Group also wants to shake up the system with a nonprofit manufacturing company targeted at drug shortages and discontinued medications.

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“We could become a spoiler,” says CEO Debora Drew. “We wouldn’t need to make every drug on market, but if we could threaten to do so we could upset the apple cart.”

But it’s been difficult convincing institutional philanthropic funders to support the concept. Dew explains they’re not readily organized to give money to a manufacturing company.

A proof-of-concept costs $3.5 million. A fully approved medication would require $37 million. “I believe it will happen, but I don’t know when,” Drew says. “We’re not giving up.”

Cash Only

In 2010, Doug Hirsch went to the doctor and received a prescription. When he presented it at the pharmacy, he was stunned at the $450 price tag. So Hirsch went to another drugstore to see if he could do better, and another. The price kept dropping as pharmacists offered to make deals for a cash sale.

Thus was born GoodRx, a company that connects consumers with the cheapest cash price for prescriptions at local pharmacies. From a third to half the time those prices are cheaper than your insurance co-pay, says Hirsch. That’s particularly true with generics, which tend to be inexpensive.

“We don’t set prices. We just gather ways consumers can save,” he explains.

GoodRx works closely with drug stores and the middlemen known as pharmacy benefit managers to aggregate the savings information. The company offers online coupons that dramatically lower the cost of nearly all medications.

“Forty percent of Americans have high-deductible health plans,” says Hirsch. “Two hundred million prescriptions don’t get filled because of cost each year.”

Solutions Database

America’s Broken Drug Supply Chain: What You Can Do

  1. Check the cash price on your prescription. There’s a good chance that number is lower than your co-pay. You can find out fast and shop for the best local deal by visiting Goodrx.com.
  2. Arm yourself with knowledge. Physician David Belk has dug deep into the costing of American healthcare. It’s all laid out at his website truecostofhealthcare.org.
  3. The Trump administration has unveiled a plan it says will fix the high cost of drugs. Find out more here.
  4. A coalition of doctors unveiled a counter-proposal that they say will address drivers of high drug costs like Big Pharma directly funding its regulators and cost controls to make medicines affordable for all Americans. Find our more here and connect with the health care advocacy group, Physicians for a National Health Program, behind the proposal here.
  5. Large hospital systems are launching their own nonprofit generic drug manufacturing company to do an end run around middlemen and lower prices. Find out more here.
  6. Medicines360 uses a hybrid model to get affordable drugs and medical devices to poor women around the globe. Check it out here.

Tarbell is nonpartisan. We do not endorse you taking these actions. But sharing them with you is part of our commitment to helping you find solutions. Email questions to questions@tarbell.org.