Do Medication Rebates Harm Patients? Yes.

Medication rebates are by now a time-honored part of employer-sponsored health insurance. How do they work? Let’s assume a drug costs $100. A substantial fraction of that, as much as $66 or more in the case of insulin, goes not toward the cost of the production of the drug, nor for pure profit on the part of the manufacturer, but back as a “rebate” to you, the employer (~90% on average, according to CVS and Express Scripts) and to the pharmacy benefit manager (PBM).

Let’s examine the incentives at work in this system. Imagine that KBGH Project Manager Matt Thibault were to invent a magically effective new cardiovascular drug tomorrow that cost only $2 per dose. This drug would soon be in the hands of every high-risk cardiovascular patient in America, right? Maybe not. At a price of $2, no PBM would likely be interested in having the drug on formulary because the potential for the PBM to make money off the drug in the form of rebates (or, for that matter, on spread pricing, a topic for another day) is tiny; any percent of $2 is a small amount of money.

Make that same drug $20 per dose and offer a 50% rebate split between the PBM and the employer, though, and now we’re getting somewhere. PBMs routinely move drugs up the formulary list in exchange for greater rebates. This has led to rebates being renamed, perhaps more accurately, as “kickbacks.” The incentives are aligned, then, to make sure the drug is as expensive as possible in order to maximize kickbacks to the PBM.

It would be one thing if consumers at the retail pharmacy level could see this happening and make a decision on where to buy their medications. But rebates are strictly confidential (although that may change soon). In order to keep rebates secret, PBMs also have to keep net prices—the cost of the drug after applying the rebate–confidential. To avoid having to say what the net price is, insurers typically require anyone with coinsurance to pay for a percentage of the retail pharmacy list price, not the secret net price.

It isn’t hard to predict where this system ends up. Drugs inevitably get more expensive, PBMs make more money than the drug companies they ostensibly help with supply chain issues, and patients (a.k.a., your employees) bear the burden in the form of increased list prices. A recent study in JAMA Health Policy (paywall) bears this out.

Investigators estimated the effective out-of-pocket share of drug costs that would have been paid by a hypothetical patient from 2014 to 2018, taking into account both initial coverage, a “coverage gap” (as in Medicare Part D), and a catastrophic coverage phase. In the study years, the average list price–what the drug costs, rebate included–per unit increased 29%. The average net price–the cost of the drug after applying the rebate–increased only 7%. The huge divergence between list and net prices was completely due to a 98% increase in average rebates.

This astonishingly high list-to-net ratio grew fastest for drugs with branded and generic competitors, from 2.7 in 2014 to 3.4 in 2018. The list-to-net ratio grew, but more slowly, for drugs with branded competitors only (from 1.4 to 1.6) and drugs without any competition (from 1.2 to 1.4). So we have yet another example in the paradoxical medical economy in which competition, rather than decreasing cost to the consumer, increases cost to the consumer (again, a topic for another day).

Americans do not overconsume medical resources. American health care is expensive almost exclusively because of flawed pricing structures. We simply pay more for any given service, medication, or outcome than people in peer countries do. Yet almost every intervention employers implement is designed to reduce consumption, and relatively few interventions are aimed at pricing. Rebates inherently increase the price of medications to the consumer and inevitably lead to less adherence to prescribed medications.

So don’t wait for new PBM transparency laws to take effect. Have a frank conversation about how you want medication prices to work in your employee health plan. A simple first step that doesn’t go all the way to a pure, “pass-through” PBM relationship, is to tell your insurer that you want to include “point-of-sale rebate pass-through” with your plan. This would pass the rebate payment through to the consumer (your employee) at the point of sale, reducing their out-of-pocket obligation by ensuring that their coinsurance applied only to the net price. Your employees will thank you.

As the Medical Director of the Kansas Business Group on Health, I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

Drug prices are getting more transparent, too

We’ve covered the waves of price transparency that are washing over health care the past few weeks in the KBGH Book Club and here in the blog: no more surprise medical bills, new public tools for comparing procedure prices, no more gag clauses on cost or quality, and others. But we haven’t talked about what’s coming in drug pricing transparency. Americans pay far, far more than peer countries for prescription drugs. Drug prices account for almost a fifth of our excess health spending, even more than administrative overhead and salaries. How bad is the problem? Americans make up less than five percent of the world’s population, but we account for 80% of pharmaceutical revenues.

It is easy to cast the pharmaceutical manufacturers alone as the bad guys here; they spend far more on advertising than on research and development, they are far more profitable than any other sector in the economy, they cannibalize profits to gift to shareholders, and they lobby Congress far harder than any other industry. But manufacturers are not the only players. The manufacturers only set list prices, which are publicly disclosed. Manufacturers negotiate rebates with insurers and pharmacy benefit managers (PBMs) in order to move their drugs up the list on the insurers’ and PBMs’ formularies. Rebates and discounts like this have grown to an astonishing extent over the past few years, leading to “net” prices for many brand-name drugs that are lower than list prices. As we’ve pointed out before, insulin has a typical rebate of 66%. Because the process is so opaque, consumers have no way of knowing the actual price paid for the drugs. Payers argue that this “confidentiality” (if you’re charitable; “secrecy” if you’re cynical like me) allows them to more effectively negotiate because transparency would only allow drug manufacturers to get net prices closer to their very high list prices. This is transparently false. If secrecy were such a tool for keeping costs down, the industry would not be fighting transparency rules. Instead, the manufacturers would be demanding more transparency to allow prices for their products to rise naturally. 

Manufacturers and PBMs have reason to be concerned because of the “Transparency in Coverage” final rule that was issued in 2019 as part of the usual flurry of executive orders that precede and accompany any presidential transition. The rule, which takes effect for plan years beginning January 1, 2023, requires that:

1.     insurers disclose the 1) current list price and 2) historical net price for prescription drugs,  

2.     the data be available in “machine-readable” files (that is, not blurry .pdf scans) online to allow for comparisons, and

3.     insurers provide real-time personalized estimates of cost-sharing. 

 Legal challenges may slightly change the final product prior to 2023. But the rule has unusually solid bipartisan support: both Presidents Trump and Biden support it, along with a clear majority of congressional Republicans and Democrats. So it will be difficult to overturn completely. This is all the more reason to make sure our employees are educated shoppers for health services moving forward.

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.

The biosimilars are coming! (and that’s a good thing)

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH:

Most drugs on the market are made the same way you made new compounds in chemistry lab in high school or college: by putting molecules or elements together in a solution and adjusting the temperature, pressure, pH, and other inputs to encourage the elements to combine in a specific way. So if an enterprising high-schooler were to discover a way to produce pure, uncontaminated aspirin in her garage, we could be confident that it would have the same effect as aspirin produced by Bayer.

And generics—unbranded versions of name-brand drugs—really do work to drive down the cost of medications. A 2017 study in the New England Journal of Medicine found that for a drug with a single manufacturer, generic and brand-name prices were roughly the same. But for a drug with three manufacturers, the generic price was only 60% of the brand-name price. So it’s no surprise that 90 percent of drugs used in America are generic.

But newer drugs—and some old ones like insulin—are not synthesized from scratch. Because of their complexity, we have to trick bacteria into making them—as with insulins—or we have to isolate them from living organisms where they naturally occur. We call such large-molecule drugs “biologics,” and instead of calling copies “generics,” we call copies of these drugs “biosimilars.” (As a side note, the first bacteria-produced “recombinant” human insulin ever to be given to a human was injected right here in Wichita by Dr. Richard Guthrie.)

When we make a biosimilar drug to match a biologic drug, the new drug is not necessarily atom-for-atom identical to the brand-name drug. The FDA allows the new drug to be slightly different as long as “no clinically meaningful differences” are noted between the original drug and the biosimilar drug in terms of safety, purity, or potency. This obviously requires more study than what would be required for our garage-produced aspirin. This means a lot of work, much of it in human subjects. Because of this difference, biologics have long operated under a different set of rules than “small-molecule” drugs. Whereas old-fashioned drugs are granted a 20 year patent from the date of application, after which it is relatively straightforward for another company to start producing a generic version, biologics are subject to a kind of natural immunity to generic competition that’s made worse by bad behavior on the part of the reference drugs’ manufacturers, misinformation campaigns, and close-but-not-quite-similar clinical outcomes.

The result has been that, while biosimilar drugs are common in western Europe, their use has been very limited in America. As such, Americans have long assumed that we paid far more for biologic drugs than our peer countries have.

A new study proves this out. Pharmacists and physicians from the University of Pittsburgh looked at the price of the only four biosimilars on the market by December 2018 (white blood cell-producing filgrastim [Neupogen®] and pegfilgrastim [Neulasta®], immunosuppressive drug infliximab [Remicade®], and insulin glargine [Lantus®]) over time. Their findings were striking. From 2007 through 2018 the cost of each of these medications went up by ~5-14% per year. At the time of introduction of a biosimilar (or two years ahead of time in the cases of glargine and infliximab) the cost of the medications immediately plummeted: −7.7% for filgrastim, −7.4% for pegfilgrastim, −13.6% for infliximab, and −23.5% for glargine.

The timing of this information is good. The dam on biosimilars is breaking. Dozens of biosimilar drugs have been approved in the last two years. So as you work with your pharmacy benefit manager to design your drug benefit, make sure that biosimilars are covered for your most expensive biologic agents. This may be harder than you think; abusive contracting practices are some of the obstacles biosimilars face in getting into wide use. However, the benefit to your bottom line will be substantial if you’re able to successfully integrate biosimilars into your pharmacy benefit.

June 6, 2017 link-a-dink

The idea that good diabetes care isn't strictly an obsessive quest for an A1c level of 7% or less is finally hitting the mainstream press. This article also touches on the very real dilemma that doctors and patients face: Do we use old, cheap drugs that are effective at lowering the hemoglobin A1c level, or do we use new, astonishingly expensive drugs that have better evidence of actually reducing death?

Most people will never understand my eating disorder. "I am six feet tall and between 180 and 190 pounds, depending on the month. I am by no means the picture of health or even particularly muscular-looking—not for someone who exercises this much, and definitely not compared to most of the men I see at my gym. Or maybe I am? That's the problem, or one of them: What I see when I look in the mirror doesn't correspond with reality. I see a fat piece of shit, and then I think to myself that it's time to punish my body for letting me down."

Do patients make mistakes during doctor visits because they're put in a position that forces them to rely on intuition and makes them vulnerable to biases? 

Linkfest March 15, 2017

Watch a professional cyclist's carbon wheel melt before your very eyes:

 

Some people think going gluten-free may be risky for diabetes. Hmmm. Gluten-free diets are, for the most part, a waste of time and effort unless you have celiac disease. And whole grain intake is generally associated with a decreased risk of diabetes, which is consistent with the alleged findings of this study. And this paper (not yet published) comes from Harvard, which gives it a certain cachet, but I'm always skeptical of big, splashy pronouncements like this when they're made ahead of publication. Too many of these studies end up having fatal flaws.

Bikes now officially outnumber cars in Copenhagen. "When Copenhagen first began manually counting cars and bikes in 1970, there were 351,133 cars and 100,071 bikes on the roads—a ratio of about 3.5 to 1. That's important, because it means not only are more people riding—about 150 percent more over 46 years—but also, fewer people are driving."

How the world's heaviest man lost it all. "The only thing that gave him comfort in life was food. It was a drug of abuse, freely available, heavily marketed."

Is loneliness the biggest threat to middle-aged men? Well, Vivek Murthy is definitely qualified to say so, and I think we're self-isolating ourselves with suburban homes and gadgets, but "biggest" is a stretch when we still have tobacco and obesity/diabetes to contend with...

Big pharma is very nervous about possible Trump FDA deregulation. This one cuts both ways. On one hand, I'm afraid that ineffective drugs are going to start coming to market if deregulation goes too far. On the other hand, any deregulation that is opposed by big pharma is inherently attractive.

The ADA 2017 Standards of Care in Diabetes are out. "To help providers identify those patients who would benefit from prevention efforts, new text was added emphasizing the importance of screening for prediabetes using an assessment tool or informal assessment of risk factors and performing a diagnostic test when appropriate." It's a start.

You can't use drugs to "prevent" diabetes

Big, big disclosure here: I am a paid consultant for a CDC grant that aims in part to increase use of the Diabetes Prevention Program. So there. Read on.

Good to see you again, Mrs. D. You mind if I call you Mrs. D? Thanks. Reminds me of "Mrs. C" on Happy Days. You know, she was the only one with the cojones to call the Fonz "Arthur." So you can see the resemblance.

I'm glad you asked about the recent study that showed a medicine called "liraglutide" (brand names Victoza or Saxenda) "prevented" diabetes. You're a smart person, so you read some of the fine print in the study, and you know that ~2200 patients, most of them obese, were randomly given a daily shot of placebo or a daily shot of liraglutide, a chemical that mimics a gut hormone to trick the pancreas into producing more insulin. Liraglutide has the side effect of making people feel fuller sooner after eating. Doctors call this "early satiety." The tricky vocabulary's how we make so much money.

All of the patients had elevated blood sugars, but not so elevated that they could be labeled "diabetic." They were "pre-diabetic" in the current nomenclature, just like you. It means the same thing as "impaired fasting glucose" or "impaired glucose tolerance." The study set out to prove that liraglutide could "prevent" the onset of diabetes. Now you're probably wondering: If I'm taking a diabetes drug, what's the point of having "prevented" diabetes?

And you're on to something, Mrs. D. This is an absurd question at face value, but it keeps getting tested, mostly by drug companies. Not surprisingly, in most cases people getting the diabetes drug were less likely than those getting a placebo pill or shot to have their blood sugars rise high enough to be diagnosed with diabetes.

I'm about to get really, really snarky, Mrs. D, but before I do, it's important that I make this point: the prevention of diabetes is actually a HUGE deal, and not only because diabetes remains the number one cause of blindness, kidney dialysis, and foot amputation in the United States. It is astonishingly expensive. Of the $3.2 trillion (!) that Americans spend on health care annually, diabetes directly accounts for $101.4 billion, making it officially the most expensive disease in America. If you can prevent people from advancing from the just-a-little-abnormal-sugars "pre-diabetes" to old-fashioned diabetes, you save about $12,000 per year in expenses. Now, that's insurance company money, but we all pay for it in premiums.

This is where your insurance premiums are going.

This is where your insurance premiums are going.

And as I've pointed out before, a big chunk of that extra spending isn't insurance money at all; it's coming out of your pocket in the form of co-pays and whatnot. And it's not much better for the Medicare crowd, who we all pay for in taxes:

So let's perform a quick thought experiment. You came to see me because you weren't feeling your best, and I checked a blood sugar on a hunch, and it's slightly elevated at 106 mg/dl. That's in that pre-diabetic range I've been talking about.

Bummer.

Now, we've got some options here. But let's say I tell you that the best way to keep yourself from becoming diabetic is to inject yourself with 10 units of insulin every night before bed. That way, your blood sugars will go back to normal, and we can both wash our hands of the whole issue. Great, right? We've prevented a case of diabetes! Your blood sugars are normal, after all.

BUT YOU'RE ON A DIABETES DRUG NOW!

Of course we haven't prevented a case of diabetes! We've just put you on a diabetes drug that has (predictably) lowered your blood glucose levels. The entire assertion that we've prevented anything is as laughable as the assertion that we could "prevent" a diagnosis of hypertension by putting you on blood pressure medications.

To make the situation even more ridiculous with liraglutide, it costs a fortune: over $3,000 a month for the 3 mg dose! If you wanna know where that extra $12k a year is going, I think we're hot on the trail. Think what else we could do with that amount of money. And if you for some reason think the idea of "preventing" diabetes by taking a diabetes drug isn't patently absurd, it works only modestly better than metformin, a drug that can easily be obtained for $3-4 per month.

But the final insult, Mrs. D, is that liraglutide worked barely better in its study than a program called the "Diabetes Prevention Program," or "DPP." In the liraglutide study, roughly 2% of people receiving the drug went on to have blood sugars high enough to be diabetic in three years, versus 6% of people getting placebo, for what we call an 80% "relative risk reduction." (Drug companies love using relative risk because it makes the numbers sound so much more impressive) In the original version of the Diabetes Prevention Program, 4.8% of people getting counseling on diet and lifestyle by a coach went on to be diabetic, versus 11% getting placebo, for a 58% relative risk reduction. The numbers for both groups in the DPP were higher, which I blame on an older participant population.

The cost of the Diabetes Prevention Program? $429 per year. So you might not be surprised to know that in 2016, when CMS was debating whether to allow Medicare to cover the DPP, the Pharmaceutical Research and Manufacturers of America (PhRMA) fought against it, saying that twenty years of evidence was only "preliminary." They do. Not. Care. About your health or the seemingly inevitable transformation of America into a single, enormous insurance company that also happens to field a Navy. And we should all remember that back when insulin was discovered, the University of Toronto held the patent for insulin to keep any single company from exploiting the drug for unreasonable profit. How times have changed.

Okay. Deep, cleansing breaths. I'm calming down. Liraglutide is a good medicine for diabetes. It helps keep sugars down, it helps with weight loss, and it may even help prevent heart attacks. In diabetics, that is. But you're not diabetic, and you don't have to become diabetic, and all drugs come with a cost, financially and otherwise. I think we can agree that diabetes is expensive enough; we shouldn't use drugs to "prevent" it that are even more expensive than the disease itself.

So, Mrs. D. You'd be a great candidate for the DPP. But even if you weren't, do you know what the DPP asks of its participants? 150 minutes a week of physical activity and some dietary modifications to allow you to lose around 7% of your body weight. Let's think about what that might look like. The average bike commute in this country is around 19 minutes one-way. Do that five days a week, and you're at 190 minutes already! And that doesn't even count trips to the grocery store! And if you stop drinking insect bait and cut out the foods that aren't really foods:

If you cut those out from your diet and start eating most of your food from the produce aisle or from the canned fruits and vegetables aisle, don't you think that 7% weight loss sounds pretty modest? I bet you'd blow it out of the water. 

And besides, do you really want to cross that grim threshold from "person" to "patient?" Because the first time you put the needle of that Saxenda pen into your skin, that's what you'll have done. You'll have moved the wrong direction on the Double Arrow Metabolism Wellness Index. You'll have gone from a person with agency, someone who takes medicines to feel better or live longer, to someone who has yielded control to a chemical--a $30,000 a year chemical--to do something you could have done better yourself. You'll have succumbed to a philosophy of better living through chemistry.

Maybe Du Pont doesn't deserve this.

Maybe Du Pont doesn't deserve this.

Or do you want to be the person who SAVES thousands of dollars per year by ditching the fancy gas-powered wheelchair so you can propel yourself through space with your own legs and feet and by eating real foods you made with your own hands and eating them when you want, the way you want, and in the quantities you want? Do you want to live by a philosophy of self-determination, where you know that every healthy, happy day you live from now on was of your own making? 

If that life is what you want, then don't try to prevent diabetes with drugs. It can't be done. 

Freedom from the vortex

Maybe you’re sick. Not throwing up or coughing up blood or having a fever, at least not most of the time, but you’re on a few medications, probably for diabetes or blood pressure issues or cholesterol, and your doctor picks on you to change your diet or be more active whenever you see her. Your medications cost a couple hundred dollars per month, and every second or third time you visit the doctor she adds another one, or replaces an old, cheap medication with a newer, more expensive one.

And maybe you weigh a few pounds (or many pounds) more than you want to. You’ve tried a few diets, mostly Atkins-type stuff, or low-fat, or calorie counting, and you’ve lost weight a few times, but each time the weight eventually came back.

Maybe you’re tired all the time. You feel bad when you get up in the morning, you are fatigued and achy all day, and you don’t sleep well at night. Your doctor thinks you might be depressed, and you’ve tried a couple medications for it, but they don’t seem to help.

And maybe you worry about money. You spend a lot of it on medications, and you go through the drive-through a few times a month even though you promise yourself that you won’t, and you end up working longer hours than you want to because you need to make sure the bills get paid.

Maybe you worry about the environment. You worry that our habits are putting your kids’ futures at risk, and you worry about it, but you aren’t sure what to do. A couple of times you’ve clicked the button to buy carbon offsets when you flew somewhere, but mostly you just try to ignore the problem.

And maybe it hasn’t occurred to you that these are all different manifestations of the same problem. You read that right. There is a very good chance that your diabetes is just another manifestation of the same set of problems as your weight and your fatigue and your money issues and even climate change.

We’re gonna talk about how. This blog is about your health, but not in the way that you’re used to talking about it with your doctor. It's not about the “blood pressure, blood sugar, cholesterol,” kind of health that makes you feel like a gadget someone is tinkering with. It’s more about the “What do I look forward to when I get out of bed in the morning?” kind of health. Or the “What can I do today to make sure I’m happier tomorrow than I was yesterday?” kind of health. Health as freedom: freedom from false choices, freedom from medications (not all of them, but some of them), freedom from the, *ahem*, Bravo Sierra that passes for medical advice from celebrities and celebrity doctors. I’m talking to you, Dr. Oz.

You’re not going to see click-baity posts on this blog about some new supplement or cellulite-destroying cream. You’re going to see posts on how you can take control of your life back. I’m not talking about a life jacket to protect you from the evil, swirling vortex of drug companies, subsidized faux-food, and carbon-spewing cars and factories. I’m talking about the freedom of learning how to swim your way out of that vortex altogether, put your feet on dry land, and walk away. All those people wrapped in spandex and padding away on a commercial gym’s treadmill under creepy fluorescent lights: do you think they’re free? They sure don’t look like it to me. You, with dry feet, having sprung once and for all from the vortex and now walking one foot in front of the other toward a happier, healthier life: that’s what freedom looks like.

I intend to be your guide along this path to medical freedom. I want to teach you a new way to think about your health; a way that allows you to make decisions that are your own and that will get you out of the vortex. You know the last time you had a bad cold, and you felt guilty for taking all the healthy days you had before that for granted, and you wondered when you would finally feel normal again? Remember how you said to yourself that you’d never take a healthy day for granted again? Once you claw your way out of the vortex, you won’t. And it will be because you MADE that next healthy day. You will have made it yourself, with your own hands and feet and decisions. If you believe me, I’ll see you at the next post.