I just read a thought provoking blog on high priced new drugs. The author, a hospital pharmacist, is faced with the issue of how her institution can afford to treat patients with a new drug that promises profound increases in quality of life, but at astronomical prices.
(Note – I am not personally endorsing or failing to endorse the Campaign for Sustainable Rx Pricing that Dr. Duty mentions in her blog. I don’t know enough about the organization to have an opinion one way or the other.)
For most of my career, it’s been pretty simple to find good estimates of the average price of a prescription. But for the last several years it has not been. You would think that simply Googling “average prescription price” would provide links to several sites that would provide this information. You would be wrong. The closest estimate I could find online was a study commissioned by Prime Therapeutics that found the average net ingredient costs from Prime compared with its competitors.
Using “mean prescription price” doesn’t work either. This is all the more surprising given that many PBMs – Express Scripts, CVS/Caremark, Catamaran, and Prime Therapeutics – publish annual drug trend reports.
I’m frequently asked about the average prescription price, so I did what a good PhD advisor should do and asked my graduate students to find it. Specifically, I asked three graduate students – Anisha Patel, Batul Electricwala, and Della Varghese – to calculate the average prescription price for all prescriptions and for selected therapeutic categories from the latest data available from the Medical Expenditure Panel Survey (MEPS).
Retail pharmacies, despite the fact that they face high competition, low reimbursement rates, and limited-to-no control over their pricing, continue to be profitable. Census data quoted in the Drug Channels blog indicate that gross margins in retail pharmacies have actually increased over the last few years. Data from the NCPA Digest indicates that most independent pharmacies continue to be profitable. But how do they do it? My calculations, using publicly available sources, indicate that pharmacies are probably taking a loss on most prescriptions that they dispense.
One of the purposes of this blog is to educate readers about basic issues in pharmacy business. This post will discuss the differences between discounts, rebates, and kickbacks. Warning – I am not a lawyer and this is not a legal opinion. It’s a non-lawyer’s attempt to understand and explain some basic pharmacy business concepts.
A headline on the Wall Street Journal Health Blog from earlier this year announced that “AstraZeneca Pays $7.9M to Settle Kickback Charges Paid to a PBM” The federal government alleged that AstraZeneca made illegal rebate payments to Medco in exchange for preferred formulary position for Nexium (a very popular drug prescribed for ulcers).
Pharmaceutical companies commonly provide rebates to PBMs and specialty pharmacies to increase use of their products, so why was the rebate in this situation a kickback? Continue reading →
Big changes are occurring in Medicaid reimbursement for prescriptions and, surprisingly, this has received little attention in the pharmacy press. Medicaid agencies in 9 states have switched from reimbursement based on Average Wholesale Price (AWP), which provides pharmacies’ with bigger profits on more expensive drugs, to one based on pharmacies’ actual acquisition costs (AAC), where profits are determined by the dispensing fee. If this trend spreads to private payers, it could have a huge impact on pharmacies’ profits and viability. Continue reading →