April 24, 2018

Drug Prices Should Piss People Off, Maybe Not For The Obvious Reason


Drugs are expensive. Like death and taxes, drug list price increases seem inevitable. There is lots of room for justifiable ire.

I think maybe that anger gets aimed at the wrong target. We all feel we understand prices. We go to the store, see an amount for a product on the shelf and choose to buy or not. If the price goes up, we pay more. Sometimes we fill out a form and get a rebate that limits that price increase. But rebates typically are a pain in the ass, and most folks don't factor them in.

But the list price of drugs on the shelf is misleading. In part because few see it. For most, we make a copay and don't know what the actual price our insurance policy paid for the meds.

HUGE rebates are happening, and nobody sees it. How huge? More than $150 billion. Yeah with a "B." So the drug prices keep going up but so do the rebates to the invisible parts of the drug payment system.

In some cases the rebates more than equal the price increases. What that means is that the drug company nets less income even while they raise the price. Where does the money go? Rebates.

Remember back when nobody bought a car without a rebate? It is like that - on steroids. Plans do not buy drugs without rebates.

Those rebates may get back to the insurance plan and in theory, reduce premiums. But that is not true in all cases, and there is no way to know.

So be pissed that $150 billion in drug rebates seems to sift through the cracks of insurance coverage and we the insured patients may or may not get the benefit of that sifting.

What can be done?

Maybe the first thing to do is to start to understand that rebates exist and be pissed that $150 billion is getting shuffled around with nothing approaching transparency. Our anger at drug prices should be focused on this rebate scheme.

What is a good policy solution? Applying rebates at the point of sale for all plan members, whether or not they have met their deductible.

For the uninsured require the average rebate that drug pays insurers to be applied to the uninsured too.

Want to learn more?
This post at Drug Channels.



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