Rising Drug Prices: Impact on Patients and Pharmacy

Monday, December 12, 2016

Marsha K. Millonig, MBA, BPharm

Over the past few months, the price of drugs has gotten a lot of attention. It was an issue on Capitol Hill, on the campaign trail, and in the media. With all this discussion, there are still no easy answers. As pharmacists, we’re often on the front line, dealing with patients who may be surprised when the cost of their medication has risen, often drastically, since the last time it was filled, or patients who may abandon a first fill because they can’t afford it.

The most expensive medication is the one the patient doesn’t take.

While items considered “specialty” drugs often get more attention due to their higher costs, patients are also struggling to pay for those medications that are less expensive, but still out of reach. With pharmacy benefit plan designs more frequently including higher deductibles, patients may be responsible for the first several thousand dollars in costs per year. Prescriptions that may be several hundred per month or per fill are not always attainable for patients.

According to an LA Times article published late this summer:

“When you have a generic drug with eight suppliers you would expect the prices to go down,” said Dana Goldman, director of USC’s Leonard D. Schaeffer Center for Health Policy & Economics.

Unlike nearly every other developed nation, the U.S. allows drug manufacturers to set their own prices, a policy that has resulted in overall medicine costs being far higher than elsewhere. Increasingly, insurers are passing the cost along to patients through higher deductibles.

According to the federal Health and Human Services Department, prescription drugs now account for almost 17% of personal healthcare expenditures — up from about 7% in the 1990s.

Brand-name medicines are protected from competition by their patents, and they are still the primary driver of rising drug spending. When the patents expire, other companies can sell the medicines as generics, which in the past has usually caused the price to plummet.

Instead, today the price of an increasing number of generic drugs with multiple manufacturers is rising. For example, eight of the 10 drugs that had the biggest percentage price hikes in 2014 were generic medicines made by multiple manufacturers, according to information published by the federal Medicare program.

As with other elements in healthcare, drug pricing has gotten more complicated.


The manufacturer may have invented the product or paid for the intellectual property that allows it to sell the product. The company will want to recover development costs, as well as the costs associated with producing and marketing the product, maintaining regulatory compliance, etc.

Beyond covering costs, the desire and pressure for increased revenue and profit continues to grow, often driven by stockholders. As seen during recent Congressional testimony, there is a visceral reaction to frequent and significant price increases without a corresponding rationale, such as the cost of raw goods.

Manufacturers will invest in marketing their products. Years ago, that marketing occurred directly to the prescriber. Today, they are building brand awareness not just with prescribers, but also with patients, via direct-to-consumer advertising, websites, and support services. Many manufacturers offer patient assistance programs (coupons, copay cards) to help offset patients’ out-of-pocket expenses. They are also marketing their products to the payer. Obtaining preferred formulary status is a key priority for most manufacturers, as it helps to drive market share. Offering rebates is one way to achieve preferred status. The rebates are paid to the PBM and may or may not be shared with the plan sponsor (i.e., health plan, employer). The patient rarely, if ever, is able to directly benefit from the rebate dollars.

Distributors and Payers

So, now that the manufacturer has made the product and marketed it to prescribers and payers, the drug has to get to the patient. There are companies that serve as wholesalers/distributors that assist in that process. These companies ensure that the product gets from the manufacturer’s production facilities to the pharmacy for dispensing to the patient. Pharmacies often have a preferred distributor that they work with or one that they may be contractually obligated to work with (usually for chains or PSAOs).

Once the product is in the pharmacy, the price it’s actually “sold” for is dependent on a number of factors: the price the manufacturer charges, plus any fees the distributor assesses. The claim submitted to the payer results in the price to be charged to the patient (assuming the patient has/uses insurance coverage). If the price presented to the patient — whether the pharmacy’s customary charge or the price determined by the payer — is more than the patient can afford, the cost to the healthcare system is much greater. The patient who doesn’t take their medication is likely to have other, more expensive interactions with the healthcare system.

Can Pharmacists Help?

As pharmacists, what can we do?

  1. Obviously, dispense a generic whenever possible.
  2. Suggest therapeutic alternatives to the prescriber, especially if he or she has selected a product that isn’t on formulary.
  3. Let your patients know that there may be financial assistance available, either through coupons or discount cards or foundations that provide assistance based on need.

When it comes to patient assistance programs, pharmacists need to keep their eyes open for options patients and prescribers may not consider. While there are restrictions for government programs (Medicare/Medicaid) beneficiaries, it is worth exploring the opportunities they may provide. Also, most brand-name manufacturers offer some sort of program for their products, even if it isn’t a “specialty” medication.

Marsha K. Millonig, MBA, BPharm, is president and CEO of Catalyst Enterprises, LLC, and an Associate Fellow at the University of Minnesota College of Pharmacy’s Center for Leading Healthcare Change.

Want to learn more about related topics? Check out these RxPerts Academy features on drug pricing:

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