Prescription Drug Prices Can Be Leveraged

Despite promises by leaders of both political parties, drug prices have been the nemesis of employer health plans, of taxpayer-supported plans in the public sector and of family budgets.

Hard-won savings in other medical areas have been chewed up by steep price increases jammed at consumers and their health plans by drug companies. Employers and employees stuck with the bills feel helpless, partly because many of the drugs work well on various afflictions and people rely on them to just live or to live with an acceptable quality of life.

One cancer drug for a Serigraph employee billed out at $7,400 per month when it was prescribed. The drug worked wonders, but who can afford that?

To help the company, the employee, an older person, made the decision to leave the company plan and go onto Medicare instead. He shifted the burden to the taxpayers.

After rigorous research, he also found he could buy the same drug, Abiraterone, for about $3,100 from a Walgreens specialty pharmacy. His co-insurance dropped sharply, and U.S. taxpayers saved $4,300 per month.

This not chump change. The employee was still stuck with $5,700 per year in co-payments and the taxpayers ate with the balance — more than $34,000. This is just one example that is repeated day in, day-out across America.

Our company’s drug costs ran about 10% of our total health care expense ten years ago. Now they are running at 16%.

We did find one tourniquet on the drug price hemorrhage. An innovative pharmacy benefit manger (PBM) offered us complete transparency on the rebates they receive from the drug companies. And it passes along 100% of the “kick-backs” — my description of the incentives to favor their drugs – to our health plan.

We also give the rebates to consumers. If the “coupon” from the drug company for the consumer to offset the drug cost is $100, we set our co-pay at $100. If it’s $5,000, we set the co-pay at $5,000. Our employee wins with no co-pay, and the company wins by offsetting a drug price that can be $40,000 or more with the co-pay rebate.

With the return of the rebates, our pharmacy billings dropped from about $1.2 million per year to around $800,000. An incredible reduction!

We are still searching for additional innovative ways to lower the horrendous charges for specialty drugs. These drugs really work for afflictions like rheumatoid arthritis, but are killer-priced. We have only nine people on those drugs, but they account for a $400,000 spend, half of our drug costs.

We have no other answers beyond the capture of the rebates.

So far, Congress and Trump Administration have been of little help on drug costs. Some bills in Congress would eliminate the rebates, aka kick-backs. Some would install price controls. None have passed.

At Serigraph, like most companies, we incent generic drug substitutes for branded drugs. And we use pre-authorization of expensive drugs to make sure they are the most cost-effective answer.

The purpose of making public these grass roots solutions for taming the health cost beast is to make the case that costs must be managed from the top-down and bottom-up simultaneously. Smart decisions by managers and by individual employees in tandem are what works.

That’s what our leaders need to learn and incorporate before they adopt another arrogant master plan for health care for the country. They need to be humble, talk to and listen to the people on the front lines, not the lobbyists and middlemen who created the health cost crisis in the first place.

Finally, Congress people are going to have to use their pragmatic smarts to implement workable solutions and turn their backs on big donations from the pharma industry that lobbies ferociously for ever-higher prices.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.