Feb 2016

Taming Drug Prices by Pulling Back the Curtain Online

The New York Times

Americans have come to rely on their smartphones to help them do seemingly everything, like hailing a taxi and comparing prices of dog food.

But when it comes to buying prescription drugs, consumers still find the process maddeningly antiquated.

Now, a few entrepreneurs say they are aiming to fundamentally change
the way people buy drugs, bringing the industry into the digital age by
disclosing the lowest prices for generic prescriptions to allow comparison shopping.

Most major pharmacies do not list the price of the drugs they sell. And
even if they do, prices for the same drug can vary strikingly and cost far more
than the rate that most insurers pay. Consumers often don’t know how much
they will owe until the pharmacist tallies the purchase at the cash register.

“The prices are all over the map, even within the same ZIP code,” said Lisa
Gill, deputy editor of Consumer Reports Best Buy Drugs, which tracks variation in prices. “It’s a retail transaction that doesn’t actually act like any
retail transaction.”

Frustration over drug pricing bubbled over at a congressional hearing last
week, when Representative Peter Welch, Democrat of Vermont, directed an
exasperated question at an executive of Turing Pharmaceuticals, which set off
public outrage last fall after sharply raising prices on a little­known drug.
“Why isn’t it possible,” he asked, “to just have a price where anybody who
wants to know what that price is can go to a website and see?”

Drug pricing practices have furthermore become a populist issue on the
presidential campaign trail. And many Americans are struggling with
insurance plans that demand ever higher out­of­pocket costs.

The spotlight on drug prices could not come at a better time for at least
two online ventures. One company, GoodRx, collects drug prices at
pharmacies around the country and connects consumers to coupons to help
them pay. Another, Blink Health, takes the process a step further by allowing
customers to pay for their drugs online, then pick up the prescription at nearly
any pharmacy.

“This is the first time the consumer knows what the price of the item is
before they get to the register,” said Geoffrey Chaiken, one of Blink Health’s
founders. “We cracked the code.”

GoodRx and Blink Health often quote prices for generic drugs that are far
lower than the prices that pharmacies typically charge customers paying out of
pocket instead of through insurance. Instead, the sites and their apps are
offering customers prices that are closer to the rate that is typically available —
or even visible — only to insurers.

Ten of the country’s 15 most commonly prescribed drugs, for example,
cost less than $10 on Blink Health, including generic versions of drugs like
Lipitor, which manages cholesterol, and the diabetes drug metformin.

The sites cannot help much with brand­name drugs, which are made by a
single manufacturer and carry prices that can be as high as hundreds of
thousands of dollars. The purchases also often do not count toward a
consumer’s insurance deductible, which could be a problem for seriously ill
patients with high medical costs.

However, nearly 90 percent of the prescriptions dispensed in the United
States are for generic drugs, according to IMS Health, a consulting firm.

Edward A. Kaplan, the national health practice leader at Segal Consulting,
a benefits consulting firm, said the prices he surveyed on Blink Health were
comparable to prices he negotiated on behalf of large employers. “It’s about as
good as you’d see it,” he said.

Several health care experts and consumer advocates said the prescription
drug market desperately needed more transparency, which they hoped would
lead to lower costs. While more Americans are gaining coverage through the
new health insurance law, a number of plans are demanding that consumers
pay for more of their own drug costs, either through higher co­payments or
deductibles, which can add up to thousands of dollars a year.

In addition, many uninsured consumers do not know that the price
pharmacies charge them is far higher than the rate that insurers pay the
pharmacies for the same drug, health care experts said. And even insured
customers are not always getting the best deal. Many people have insurance
plans that require them to pay a flat rate of $10 or higher for generic drugs,
even though the rate the insurers pay the pharmacy is often less.

The listed price for a 30­day supply of the generic version of Lipitor, for
example, is $196 at Kmart, according to GoodRx, and $61 at Kroger. With a
coupon obtained through GoodRx, the drug is about $12. Blink Health is
offering Lipitor for $9.94.

“People should be rioting,” Mr. Chaiken said, “but it’s just that health care
is too complicated.”

He said 10,000 consumers had used the service since the site opened five
weeks ago, even though the company has barely promoted itself. He said he
hoped to have millions of customers by the end of the year, which he said
would further lower prices using economies of scale.

GoodRx, which has been in business since 2011, gets about four million
visitors a month, said Doug Hirsch, a founder. “I still think 99 percent of the
world doesn’t know there’s any way to look up a price,” he said, noting, “I
think there are four billion prescription transactions a year.”

GoodRx and Blink Health get their prices by using the networks of
pharmacy­benefit managers, which manage drug plans for insurers and large
employers. GoodRx works with several benefit managers, while Blink Health
has entered into an agreement with MedImpact. Blink Health also relies on
MedImpact’s network of more than 60,000 pharmacies.

Express Scripts, the nation’s largest drug­benefits manager that also owns
one of the biggest pharmacies, acknowledged that some consumers could save
money by buying low­cost generics through sites like GoodRx or Blink Health.
But Express Scripts said a typical member would save more money by going
through insurance. Express Scripts also said that it monitored patients’
prescriptions to ensure that they were not taking drugs that could lead to
dangerous interactions.

“No single retail pharmacy or doctor has the same line of sight to the
patient’s entire medication history,” Express Scripts said in a statement.

Still, Blink Health said many of its customers saved hundreds of dollars a year, pointing to Wendy Comerford, a business owner in Florida, and others. Ms. Comerford, who has lupus, said she was saving about $500 off her $1,000 monthly drug bill for 11 prescriptions.

“If it weren’t for the drugs that I’m on, I would be sitting in a
Barcalounger on disability,” said Ms. Comerford, 63, who lives in Sanford, Fla. She said she did not renew her insurance policy last year because the premiums were too high. “I’m getting the exact same drugs that I was last year.”

But Louise Norris, a Colorado insurance broker who also writes for the website Healthinsurance.org, said that patients who suffered the most from high drug prices are those who need expensive brand name drugs, which can cost hundreds of thousands of dollars a year.

“When our clients are looking for medications, to be honest, the difference between $5 and $10 — those aren’t the ones that people are having questions about,” she said. “So far, at least, we haven’t seen anything that seems like a magic solution.”

Article written by Katie Thomas, New York Times