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Escalating Cost of Prescription Drugs Facilitated by Lack of Transparency

Posted: August 30, 2017

The expansive list of actors involved in delivering prescription drugs to patients substantially inhibits patients from making fully informed treatment and purchasing decisions. Each intermediary between a pharmaceutical manufacturer and patients adds additional layers of negotiation, contracts, and attendant complexities that inevitably impede the flow of information downstream to consumers.

This problem is readily apparent at the point of sale where pharmacists struggle to identify the specific type of coverage that a patient possesses. As a result, they are unable to discern the full scope of cost defraying options available to a patient. This inability negatively impacts patients’ out of pocket costs, which in turn makes them more likely to slide into non-adherence for their therapy. A report in the journal of Risk Management and Health Policy estimatesthat non-adherence costs the economy between $100 and $289 billion every year. Measures that improve the flow of information would improve decision-making by pharmacists and consumers, reducing out of pocket costs as a result.

Any such initiative would do well to consider improving system transparency as a starting point. As CSRO has previously written, drug intermediaries known as pharmacy benefit managers (PBMs) use their concentrated market share to consolidate exclusive control over advantageous drug channel information, and utilize this asymmetric information economy to extract rents from consumers and manufacturers alike. Specifically, at the pharmacy level, PBMs insert gag clauses, into their contracts, preventing pharmacists from disclosing important purchasing information to consumers. In some cases this causes patients to pay more than the actual cost of the drug, allowing the PBM to capture the difference as a “clawback.”

To learn more about PBMs please visit our PBM focused advocacy page.