Managing Healthcare Costs: pharmacy

Today’s Managing Health Care Costs Indicator is $1.5 billion

I’ve been on the road early this week – where I see a lot more of USA Today. The top of the fold Tuesday trumpeted “Health Care Law Changing Behavior.” The article itself mostly recounts pharmacy savings from the ACA, and briefly mentions full coverage for preventive care in some of the last paragraphs.

The article states that Medicare beneficiaries saved $1.5 billion this year (through August) because of the 50% discount on brand name drugs that are purchased within the “donut hole,” where cost of outpatient drugs are entirely the patient’s responsibility. The donut hole is between $2700 and $6154. CMS states that the average saving was $569 per person.

Where did these savings come from? The ACA included mandatory price cuts for seniors who are in the “donut hole,” and thus the funding for this comes from the brand name pharmaceutical industry. This isn’t all a giveaway, though, by any means. Lower priced brand name drugs for those on multiple prescriptions is a great deal if there are no generic equivalent. However, generics tend to be 90% less expensive than brand names – so a 50% discount on a brand name remains a bad deal for seniors.

I suspect the $569 is the average savings for those who had any savings – because a bit over half of Medicare beneficiaries does not hit the $2700 in eligible outpatient pharmacy expenses.

The pharmaceutical industry made a deal early to support what became the Affordable Care Act. PHaRMA agreed to some price concessions, but gained many more elderly with meaningful drug coverage. Out of pocket costs went down by more than 20% for seniors, leading to a bit over a 5% increase in overall drug utilization. Marginal costs to produce drugs are very low- so these extra customers are very important to industry profitability.

Has there been behavior change? Perhaps. But the USA Today reporter didn’t probe very hard. Catch this quote.

“Seniors are becoming more engaged in their care, [CMS director Jonathan] Blum said, citing the hundreds of forums Medicare has conducted about the changes.”

I’m guessing the benefit design of full coverage for preventive care might change behavior more than the hundreds of forums!

Today’s Managing Health Care Costs Indicator is $167.40

I’m a devoted reader of the Medical Letter – a nonpartisan, nonprofit biweekly newsletter on drugs that is not supported by pharmaceutical advertising.

This week’s issue highlights a new medicine, Duexis, which is a combination of a high dose of ibuprofen (800 mg, Advil or Motrin) and a high dose of famotidine (26.6mg, Pepsid). These medicines make sense together – ibuprofen causes a substantial amount of GI upset and some ulcers, and famotidine can prevent these complications.

All the elements of this medicine are available over the counter – and they’re all available from multiple different generic manufacturers. The cost of a month of this therapy – using generic OTCs, would be well under $30, and would allow more dosing flexibility. (Many patients experience relief from ibuprofen 600mg, and famotidine is generally not prescribed as more than 40mg a day).

The cost of the combined pill? $167.40 per month.

There are compelling reasons to put medicines together – and a single “superpill” to address cardiovascular risk (combining aspirin, angiotensin converting enzyme inhibitor, and statin cholesterol medication) would be an enormous boon.

There are good reasons not to prescribe Duexis, though:

1) It’s far too expensive

2) The fixed doses are convenient but not clinically optimal

The manufacturer has priced this medication with reference to the cost of brand name antiinflammatories and antiulcer medications – but it makes better sense to value this medication with reference to generic/OTC medications.

I’m hopeful that health plans and pharmacy benefit managers will choose not to increase the cost of health care by providing coverage for this medicine.