Insurers can't use 'mystery' drug prices to justify premium hikes

Health insurers have long complained about being blindsided when it comes to prescription drug prices--and claiming they've been left in the dark has provided insurers with justification for increasing premiums. But is it a sound argument?

Perhaps not, wrote Forbes contributor and American Enterprise Institute Fellow Scott Gottlieb. Drug prices are not a "mystery," he said. A list of drugs hoping to be approved by the Food and Drug Administration is available on the Internet, where analysts weigh in and state the odds of each drug getting approved. Eventually, the numbers make their way into the financial press.

Hepatitis C drug Solvadi is a perfect example of this process, noted Gottlieb. In November 2013, prior to Solvadi's launch, investment research firm ISI Group released a survey of the estimated cost and market size for the drug. At the time, investors rightly predicted Solvadi to have a price tag of $85,000 for a 12-week treatment course.

Seven months before the ISI survey, though, JP Morgan had published a survey of 50 insurers. Most were aware of the large number of patients expected to forgo current hepatitis C drugs and instead take Solvadi.

Last year, America's Health Insurance Plans called out the drug industry for the soaring costs of new drugs, saying such expensive pricing is unsustainable and takes unfair advantage of health insurers, FierceHealthPayer previously reported.

However, Gottlieb pointed out, Solvadi did not disrupt insurers' earnings. After all, health insurance stocks are hitting all-time highs, with payers adding customers by the hundreds of thousands thanks to the Affordable Care Act. 

Now, because premiums are regulated on a national level as opposed to a state level, the rate cycle has been much more politicized, noted Gottlieb. To reconcile this, payers have stated in the past that they need more outcomes data--clinical, economic and humanistic--from drug manufacturers for more informed decision-making. And they have leaned on easy targets--the high cost of prescription drugs and, before that, rising healthcare costs and reduced reimbursement rates.

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- here's the Forbes commentary