Here’s What Real Transparency in Drug Prices Would Look Like

Thomas Goetz
Thomas Goetz, MPH, leads the Research team at GoodRx.
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Everyone agrees that more transparency on drug prices is a good idea. Who’d argue against letting the public know what a drug costs? But nothing is simple when it comes to prescription medication prices, starting with the most basic question: What, exactly, is a drug’s price?

In recent weeks, the Trump Administration has pushed to require drug manufacturers to disclose list prices of prescription medications in their commercials. The list price is one of many types of drug prices, and is set by drug makers before they sell a drug to wholesalers and insurers. (Wholesalers and insurers often receive significant discounts on that list price.)

According to the Administration’s plan, manufacturers would be required to disclose the list price for any drug that costs over $35 per month during commercials. Secretary of Health and Human Services Alex Azar recently argued that patients “deserve to know if the drug company has pushed their prices to abusive levels. And they deserve to know this every time they see a drug advertised to them on TV.”

But drug manufacturers argue that list prices don’t really reflect the true price of a drug. To them, simply disclosing list prices could lead to confusion and dissuade patients from seeking care.

“List prices are not a good indicator of what a patient will pay at the pharmacy counter,” the president of PhRMA, a trade group representing pharmaceutical companies, said recently, “and do not reflect the substantial discounts and rebates negotiated by insurers and pharmacy benefit managers.”

Instead, PhRMA proposes a single website that posts drug prices, and would presumably try to explain—but not disclose—the various rebates and discounts that are applied to a drug’s list price before it reaches the pharmacy counter.

 

 

In this case, Azar and the president of PhRMA, Steven Ubl, are both right. Drug prices should be disclosed. Regardless of what happens later, the drug maker slap a list price on their drug, and consumers have the right to know what that is.

But also, Yes: the list price is a poor proxy for the price a consumer might actually pay (some of that, of course, is the manufacturer’s own doing, in packing so many rebates and discounts into the list price). Prescription medications change hands multiple times before they get to the consumers, and so do the prices. In addition, a high list price could mislead patients into thinking they’re on the hook to pay hundreds of dollars, when health insurance would typically cover most or some of that price.

But also, No. Neither Azar nor PhRMA’s solutions adequately meet the goal of real transparency that would help consumers make better decisions. What would truly help consumers is a resource that offers list price, yes—but also provides reasonable guidance on what people actually end up paying at the pharmacy.

 

This could include some sort of retail price, akin to the full cost of a drug consumers would pay for without insurance. GoodRx shows retail prices (also referred to as “cash prices”) for thousands of drugs such as atorvastatin.

Furthermore, real transparency would mean showing what people with health insurance typically pay, either through a copay or a co-insurance payment. This “insurance price” would be a helpful reference point for people to know what a typical out-of-pocket expense for a drug would be if they used insurance.

But even that would be just a typical, or average, price; it wouldn’t tell a patient what their cost would be. For that, we need true and full transparency—to allow consumers to check their insurance price before they arrive at the pharmacy. This way, consumers would be able to check their prices against other available discounts and make sure they’re not paying more than they have to.

 

 

In fact, for many of the most common prescriptions, using a discount coupon could actually provide better savings than using insurance. A recent analysis by the Massachusetts Health Policy Commission found that GoodRx discount prices are often cheaper than typical insurance prices for 10 widely prescribed medications, with several beating insurance more than 50% of the time.

This sort of service, known as a “real time benefits check”, would allow consumers to easily check their insurance price. But this price wouldn’t be hidden behind multiple clicks on a clunky insurance portal. In the best scenario, consumers would be able to easily compare their insurance price for a drug to other simple and clear reference prices—much like what we do already with other consumer products, like airfare and car insurance—and choose the best price on their own.

Considering the state of healthcare and of drug pricing in particular, this might sound like a fantastic vision. But technically, it wouldn’t require much effort on the part of manufacturers, insurers or pharmacies. Millions of consumers already use drug price comparison services like GoodRx to find the best deals on prescriptions. To add insurance prices into the mix could simply mean allowing consumers to authorize these third-party services to check their coverage on their behalf.

A platform where consumers could see clear and up-to-date prices on their drugs—including list prices, discount prices and insurance prices—would mean real price transparency.

Here’s hoping the jockeying over list prices is just the first step in the right direction.

 

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