Policies that stymie insurers’ efforts to curb high drug costs

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Insurers could play a key role in lowering prescription drug costs, but various state and federal regulations stand in the way, according to a Health Affairs Blog post.

Insurers “are the only parties in the healthcare system who have both the means and the incentive to counter drug firms’ pricing power,” according to Emory University health economist David Howard. But, Howard writes, a host of policies tie insurers’ hands in the name of facilitating patient access.

In New York, for example, the state attorney general threatened to sue seven insurers for requiring prior authorization for hepatitis C drugs that cost nearly $100,000 per patient. But internal documents from the drugmaker showed that the company might have set prices even higher if it weren’t worried about insurers’ prior authorization requirements, Howard writes.

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He also noted that Medicare Part B pays doctors higher reimbursements when they administer more expensive drugs such as chemotherapy treatments in their offices. That makes little sense, Howard arges, because administrative costs are the same regardless of the drug cost. But Congress--and a pharma company-led lobbying campaign--opposed a Centers for Medicare & Medicaid Services proposal that would pay doctors half or less of the typical 6 percent markup over the drug’s price, plus a small daily reimbursement.

State laws that cap patients’ out-of-pocket spending undermine insurers’ formulary tiering tools because they make the demand for drugs less responsive to price, Howard adds. Drug companies know that they can increase prices beyond the level of the cap without reducing demand among individuals who have insurance coverage.

- read the blog post

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