United States healthcare policy is currently in the spotlight as the Trump administration seeks to weaken Obamacare with actions such as the Tax Cuts and Jobs Act, which removes the individual mandate that required individuals to carry health insurance. Another focus of the current administration’s plan is to lower drug prices with strategies like preventing brand-name drug manufacturers from blocking the entry of cheaper generics and creating incentives for cheaper drugs. While the results of this strategy have yet to play out, they do beg the question, how expensive are medications in the United States?
For that answer, we turn to the leading prescription comparison resource, GoodRx. The company’s wealth of prescription drug prices from over 75,000 pharmacies in the United Sates helps consumers save money on their prescription medications. As of May 2018, GoodRx announced the top 11 most expensive drugs in the United States based on the Wholesale Acquisition Cost (WAC), or list price, of a one-month supply of each medication.
- Actimmune (treats osteopetrosis): $52,321*
- Daraprim (treats AIDS and transplant patients/toxoplasmosis): $45,000
- Cinryze (treats hereditary angioedema): $44,140
- Chenodal (treats gallstones): $42,570
- Myalept (treats leptin deficiency): $42,137
- H.P. Acthar (treats Lupus, rheumatoid arthritis, MS, infantile spasms & more): $38,892
- Juxtapid (treats gene mutations): $36,992
- Firazyr (treats hereditary angioedema): $32,468
- Harvoni (treats Hepatitis C): $31,500
- Cuprimine (treats Wilison’s Disease): $31,426
- Sovaldi (treats Hepatitis C): $28,000
*Horizon asserts an average net price of $24,000 per month.
Note that while the WAC is the drug price assigned by the pharmaceutical company, the actual cost to patients varies based on health insurance coverage as well as pharmaceutical patient support and assistance programs. That said, as deductibles rise, patients end up paying more for their medications while higher medication costs simultaneously drive up health insurance rates.
To learn more about the nuances behind the cost of drugs and how consumers can mitigate their medication spend, Medgadget spoke with GoodRx co-founder and co-CEO Doug Hirsch.
Medgadget: Let’s start by trying to demystify drug prices a little bit. What goes into the price of a drug from manufacturer to consumer? [this question was inspired by this blog post as a starting point]
Doug Hirsch: First, the drug manufacturer sets a list price — otherwise known as the wholesale acquisition cost (WAC). This is the official price of the drug, but it might not at all reflect what consumers will pay for it. The manufacturer sells the drug to a wholesaler at an average of a 2-5% discount to the WAC. Then, the wholesaler sets the average wholesale price (AWP), which is the list price plus a markup — generally around 20%. Next, the pharmacy pays the wholesale price, minus a small discount, providing the wholesaler with a small profit. From here, the pharmacy sets the usual and customary price (U&C), which is the full retail price for the drug — like the MSRP on a car. This U&C price can vary widely from pharmacy to pharmacy. And lastly, the consumer then has a number of options for how to pay, which will affect what it costs them out of pocket. There’s the cash price, a discount price via a coupon, like from GoodRx, or a co-pay, a co-insurance pay, or a manufacturer’s coupon–all of which can be different amounts.
Medgadget: Referring back to GoodRx’s Top 11 Most Expensive Drugs List (May 2018), why are these medications so expensive?
Hirsch: Pharmaceutical manufacturers spend billions of dollars in research and development for prescriptions before they ever see any income, and I don’t think anyone doubts that their efforts have saved countless lives. Manufacturers typically say that these prices justify their large investments, and often these high prices are less than the cost of alternative treatments – surgery, long-term care, etc., and that very few patients actually pay these high prices. However, many patients can still be stuck with bills that are far too high.
Medgadget: Are there other factors outside of the supply chain, such as regulations or policy, which have an impact on drug prices?
Hirsch: It’s actually the opposite: the US government doesn’t regulate drug prices. Medicare, Medicaid, Tricare, and other government programs are the largest buyers of prescription drugs in the world. But the Department of Health and Human Services is prohibited by law from negotiating what it pays with manufacturers. Nearly 90% of Americans think that the government should have the ability to negotiate.
Medgadget: Looking at it in the other direction, what kinds of things do drug prices, low or high, impact?
Hirsch: One area where drug pricing is having a particular impact is on insurance premiums. High drug prices are partly to blame for rising insurance rates. These astronomical drug prices, like those on our most expensive drugs list, are being subsidized through insurance premiums, so an increase on the price of a drug can also increase the amount you have to pay for insurance, not to mention the out-of-pocket costs and co-pays for those who are being prescribed the drugs. High drug prices also cause medication non-adherence (i.e. patients don’t take their drugs), which sadly leads to about $300 billion in medical costs every year.
Medgadget: What options do consumers have to try and lower their out-of-pocket spend on drugs?
Hirsch: Consumers can save on meds so many different ways. We always suggest first checking your insurance co-pay against cash prices via GoodRx, to see if the cash price is lower than the co-pay, this is the case more often than you’d expect. Other ways to save involve shopping the way you might save on groceries: asking your doctor about similar drugs that might be cheaper, buying a 90-day supply instead of a 30-day supply, or splitting higher dosage pills. If your insurance doesn’t cover the medicine you need, ask your doctor about submitting an appeal. It doesn’t always work, but when it does, it can save a patient significant money.
Medgadget: Tell us a little about GoodRx and the role your business plays in the medication market.
Hirsch: GoodRx gathers prices and discounts to help make prescriptions more affordable for Americans, whether they have insurance or not. Our role is to serve as a savings and information resource for patients, so they can shop smarter and pay the lowest possible price for the meds they need to stay healthy. As of April this year, consumers have saved more than $5.6 billion on prescriptions, by using GoodRx.
Medgadget: Looking at a couple examples on your website, I was able to find a pretty big difference in drug prices in pharmacies near where I live. What causes such a disparity in the cost of the same drug between local pharmacies?
Hirsch: Since drug prices aren’t regulated, pharmacies ultimately decide on the prices that they charge customers for their prescriptions. Pharmacies also work with Pharmacy Benefit Managers, or PBMs, to negotiate prices for customers with and without insurance. Since different pharmacies work with different PBMs, their prices vary from one another as they determine which discounts they’re able to offer.
Medgadget: I also noticed the coupons available at GoodRx. How is the company able to offer additional discounts to patients, even those without insurance?
Hirsch: The cash price, without insurance, of a prescription is often far higher than the actual cost of the drug. Fortunately, there are many ways consumers can save, and GoodRx provides easy access to pharmacy coupons which can save up to 80%. GoodRx also collects manufacturer discounts, patient assistance programs, and more to help patients save.
Medgadget: We’re hearing a lot about how the current administration plans to lower the cost of expensive drugs. Based on what we know today, do you think consumers should expect a change, up or down, in the price of prescription drugs over the next couple years?
Hirsch: With prices are high as they are today, any change is good. But as for what impact the plan will actually have on patients’ wallets, we’ll have to wait and see.
Medgadget: Thank you for your time! Any last thoughts, comments, or recommendations for consumers trying to balance the cost of prescription drugs?
Hirsch: To balance the cost of prescription drugs, consumers should treat the purchase of their prescription drugs like any other major purchase and do their homework. Start by talking to your doctor about the cost of your treatments, and then use resources like GoodRx to understand how much a drug will cost, what savings opportunities are available and what alternatives might exist.