Who is lowering drug costs?
Hear from OptumRx SVP, chief pharma contracting & procurement officer
At OptumRx, we work every day to reduce the cost of prescription drugs for consumers and payers. In this video, OptumRx SVP, chief pharma contracting & procurement officer, Kent Rogers, explains some of the steps OptumRx is taking to help secure lower prices. Kent is responsible for all formulary management and procurement contracting at OptumRx.
OptumRx Leadership KRogers
PBMs and payers do not set drug prices. Pharmaceutical companies set the drug prices. So probably the biggest advent and change that we're seeing within the industry today is that there's been a massive move of primary care drugs off patent. In its place has been a wave of new technologies in the specialty space, much higher cost drugs.
Just because it's a scientific advance, doesn't mean it should be costing hundreds of thousands of dollars, if not millions.
For the average individual or even the average employer, how are they going to afford medications that have that kind of a price tag? That's something that we have to take head on.
What we're seeing more today is companies taking the advanced step of coming out with disruptive pricing strategies at launch. That's new in the marketplace, we welcome it.
In fact we've put a number of products that have disruptive pricing strategies on our formulary and we were among the first PBMs to do that.
The best case scenario is the best science that comes out with an innovative disruptive pricing strategy that takes the cost out of the system. That's what we're looking for.
The challenge for them is to bring innovation to the market. The challenge for us is to make sure that that innovation actually has a place within the market.
Not all drugs that come to market are innovative. It's rare that you're going to find a product that really deserves a premium pricing strategy. But that's actually what many pharmaceutical manufacturers have done over the course of time.
Those days are ending. We're actually entering into a marketplace where the value of a medication is not just expected, it's warranted.
And at the end of the day what we really are trying to do is change the course of how we contract and work with manufacturers. We'd like to focus on what the value of the medication is. And frankly that's what our clients are asking for. They want to know what value that they're getting out of all in the money that they're spending on the drugs for their employees and for their members.
“Have you had this medication before?”
I think over the next few years our industry is going to go through fairly dramatic change. How we get medicines to market, the site of care strategy that products put in place, clinical services that PBMs provide.
It's going to be much more about service, much more about what we can provide to the member, what kind of outcomes can we prove with the medications that we have made available.
And our clients and ultimately our members are what's most important. We want to make sure that they have a better quality of life by having access to the best possible science, the best possible price, and the cost to the overall healthcare system, that's always our focus.
Explore more about drug prices
OptumRx is a pharmacy care services business dedicated to achieving better health outcomes for the 65 million members we serve. The services we provide help improve health outcomes for patients while making prescription drugs more affordable for plan sponsors and individuals, and more sustainable for the country.
As we are all well-aware, drug prices continue to climb. The Centers for Medicare and Medicaid Services (CMS) estimates a faster rate of growth in prescription drugs than all other health care expenditures.1
The reason is quite simple: drug manufacturers are responsible for the high cost of prescription drugs. In particular, this is why specialty drug prices are spiraling out of control.
Specialty drugs are those used to treat complex conditions like cancer, HIV, rheumatoid arthritis, immune disorders, and multiple sclerosis. Today, less than two percent of the population takes specialty drugs, yet those drugs will account for approximately 50% of total drug spending by 2022.2
As costly new therapies enter the marketplace, our strategy is to achieve the lowest net cost for each drug category for our clients. However, there can be barriers to obtaining a lower cost when the manufacturer sets a high price for specialty drugs.
For example, competition is one of the most powerful forces in controlling drug prices. However in some cases, we have limited flexibility if a drug has no competing therapeutic equivalent or alternatives.
In addition, drug manufacturers can use aggressive, anti-competitive tactics to delay the entry of cheaper generic alternatives. One common tactic is for drug makers to add new patents and exclusivities to extend the protection period when they face no competition.
A recent academic paper found that 78% of newly patented drugs were not really new, but were merely previously existing drugs with some slightly different characteristics.3 So a new patent might be added that only covers additional uses for the existing ingredients, dosage regimens, or mode of administration (e.g., tablet vs. capsule).3
Yet regardless of exactly why the new patent was granted, the effect is the same as if it were a brand new drug: a new period of regulatory exclusivity. For the 10 year period reviewed, the study found that more than 70% of new drugs had extended their protection period at least once, with almost 50% being extended more than once.3
Repeatedly extending the period when a drug faces little or no competition has at least one obvious result: OptumRx clients are paying for at least 26 non-discounted specialty drugs that cost in excess of $200,000 per year.4
What can be done?
As Kent Rogers describes in the video, OptumRx negotiates better prices with drug manufacturers for our customers and consumers. Here are some of the behind-the-scenes mechanics of how that happens.
Our work starts with a clinically based formulary design process. The OptumRx Pharmacy & Therapeutics (P&T) Committee is comprised of independent physicians and pharmacists. Their role is to evaluate existing and emerging drugs based on scientific evidence, and to appraise those drugs in an unbiased and evidence-based way. The P&T Committee meets regularly, and its deliberations are open and transparent to OptumRx clients and prospective clients.
A drug’s cost only becomes relevant after the P&T Committee has identified drugs that are clinically effective, and should be covered. If there is more than one drug in a class, OptumRx gives preferable placement on its formulary to the lowest-net-cost drug. For about 90% of prescriptions, OptumRx can identify a generic drug alternative, and give that drug preferred placement on its formulary over the more expensive branded drug.
If there is no generic available, there may still be therapeutically equivalent branded alternatives. If so, OptumRx negotiates with those manufacturers to obtain discounts, and places the drug with the lowest overall net cost in a preferred position on the formulary.
OptumRx negotiated network discounts and clinical tools are reducing annual drug costs, on average, by $1,600 per person. Even greater savings are achieved by clients who implement other evidence-based utilization management clinical programs.
98 percent of the value of any discounts negotiated from drug manufacturers is returned to clients, subject to audit and verification by an independent third-party. In the cases where we retain some of the discount, it is because our clients have chosen to pay us that way.
We have taken action to ensure that the discounts we obtain directly lower the out-of-pocket costs for consumers at the pharmacy counter. Already nearly six million consumers are eligible for point-of-sale discounts, with average savings of $130 per eligible prescription
OptumRx has announced the expansion this point-of-sale discount solution to all new employer-sponsored plans beginning in January 2020.
At OptumRx, our mission is helping people live healthier lives and to help make the health system work better for everyone. Pharmacy care services providers like OptumRx are the only stakeholders in the prescription drug supply chain working to reduce costs for their clients and individual members, and the only ones able to effectively negotiate with drug companies.
Ultimately, we measure success by improving health outcomes and experiences for everyone we serve, while reducing the total cost of care.
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STATEMENT REGARDING FINANCIAL INFLUENCE:
This article is directed solely to its intended audience about important developments affectingthe pharmacy benefits
business. It is not intended to promote the use of any drug mentioned in the article and neither the author nor
OptumRx has accepted any form of compensation for the preparation or distribution of this article.