Paul Markovich – President and CEO, Blue Shield of California.
Imagine you want to go on vacation, but you can’t book a flight, rent a car or reserve a hotel room without a travel agent. You’ll have no insight into what you’re paying for each component of your trip—you just get one price with the itinerary. If the travel agent’s brother wants a huge markup for the airport transfer, it will be baked-in without your knowledge. If you want to stay in a different hotel, good luck. And you have no control over prices going up.
Now swap out “vacation” for “prescription drugs.” Like travel agencies, pharmaceutical companies have an extensive supply chain with multiple players inserting themselves in between patients and their medications. Those who need and use medication have no visibility into what they pay or why.
Most American adults take at least one prescription drug annually, and more than one-third take at least three medications per year. The American healthcare system spent more than $600 billion on prescription drugs in 2021 alone. That’s good for some healthcare industry players, but not always for patients.
The U.S. pharmacy supply chain is severely flawed. It’s nearly impossible to determine what prescription drugs actually cost, and skyrocketing prices are unsustainable. The lack of accountability and transparency worsens healthcare inequities and outcomes in a system that already suffers from inequities in care.
We can and must do a whole lot better for Americans.
The Challenges Of Negotiating Policy
One would think that with this debilitating impact on consumers, employers and the government, politicians would enact policies to improve the situation. They’re trying, but the beast they’re fighting is an octopus. Some players are pushing back because they make more money when patients are prescribed a higher volume of expensive drugs. And they have little incentive to change.
State and federal governments are trying to beat back the beast with better policies. For example, the state of California is partnering with nonprofit generic manufacturer Civica to produce $30 insulin, saving consumers hundreds of dollars per vial. (Disclosure: My company has worked with Civica on other projects.)
But we need policy interventions that enable more government negotiation power for drugs beyond insulin. This has begun, with the Centers for Medicare and Medicaid (CMS) starting to negotiate drugs covered by Medicare for the first time.
The government can help with pricing transparency, too. Currently, the bottom-line cost depends on reference pricing, discounts, rebates, deductibles and other variables that are caught in a web of information. It’s too complex for even those in the industry to understand. Congress is trying to address this, introducing multiple bills to eliminate PBM’s spread pricing and improve transparency.
Reimagining The Pharmacy Supply Chain Through Unconventional Partnerships
While policy changes are important and government actions should progress, we can’t sit on the sidelines waiting for politicians to solve the problem. Patients need access to the right drugs at an affordable cost now. Employers need a better, easier, more efficient and economical pharmacy experience today. Brokers and consultants need the ability to translate a complex system into understandable and efficient solutions. Providers and pharmacists need to be able to offer the best medication without concern for whether a patient can afford it.
Other players need to step forward and find new ways to work together to disrupt a broken pharmacy system.
In my view, the pharmaceutical pricing model cannot be incrementally improved. It needs to be completely reimagined, from the bottom up. I’ve noticed different healthcare industry players, including my company, are already doing just this, implementing initiatives to ensure more people have safe, equitable access to sustainably affordable prescription drugs.
Health plans, for example, are creating value-based payment arrangements with drug manufacturers to drive better value for the medications. Plans are also forming tech partnerships to bring greater transparency into the pharmaceutical supply chain, which can help providers bring equally effective but lower-cost, more-affordable alternatives to patients.
Bringing different sectors with varying interests together is essential to effect change in healthcare, especially within the pharmacy supply chain. But it also takes a great deal of work, an unwavering commitment to the cause and alignment on specific goals, including what determines “success.”
At the start of any partnership, it’s critical to have important conversations about where interests and thinking may diverge to mitigate challenges down the line. Candid conversations can be uncomfortable, but they are necessary for each group to have a shared understanding of the problems at hand. A collaborative mindset can’t happen without open and honest communication about the state of affairs, or without getting on the same page about expectations for exactly how you’ll move forward, together.
Part of those initial conversations, then, must include aligning on the specific goals and business objectives of the partnership, including what timelines and deliverables might look like from each side. Partners must operate from a place of transparency and accountability, which means discussing those expectations early, and making sure both sides are aligned on values and mission.
Time To Act
We cannot wait for other people to solve the drug pricing crisis. It will take many players coming together with innovative thinking to create the change the industry needs to see. It is possible for patients to get affordable drugs and for those along the supply chain to add value and make a reasonable profit. But we first need to acknowledge the urgency of our current healthcare cost situation and be willing to do the right thing, with the right partners, to make prescription drugs accessible and affordable for everyone.
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