Stanley Feld M.D.,FACP, MACE
Prescription drug consumption can demonstrate the power of the consumer. This can demonstrate the power of a consumer driven healthcare system. Since 2006 the use of generic drugs to reduce the cost of healthcare for patients and the healthcare insurance industry has escalated.
Consumers have demanded that physicians use generic drugs when possible. Insurance drug plans promote the demand for generic drugs by having higher patient deductibles for branded drugs as well as not covering some branded drugs. Some insurance drug plans have eliminated the patient deductible for patients using generic drugs.
Physicians are being forced by their patients to become more aware of the cost of medications. Patients (consumers) are demanding generic substitution. In the past pharmaceutical companies seduced physicians into trying their new drugs. They sold the new drug as better than the first generation drug. In some cases it was. In most cases the difference was marginal.
Pharmaceutical companies also started to manufacture many me too drugs as well as combinations of two older drugs in order to extend expiration of the drug patent. This prevented generic drug manufacturers from manufacturing blockbuster drugs at lower generic prices.
The marketing implications were that the new medications were “better” than the old medication. The Food and Drug Administration (FDA) approved many of the combination drugs.
As physicians became aware of the cost difference between branded and generic drugs they became irritated. They have switched patients to generics.
Brand name drug patents usually last 14 years from the initial studies for FDA approval. Generic medication manufacturing undergoes the same rigorous FDA quality control study as do brand name drugs.
Both the healthcare insurance industry and Medicare/Medicaid programs have drug benefit programs. Medicare and Medicaid drug benefits are outsourced to the healthcare insurance industry by the federal government. The healthcare industry buys drugs from a Pharmaceutical Benefit Organization (PBO). Many times a healthcare insurance company owns the PBO. The payment system is very complicated. There is no way of telling what the real wholesale price of a drug is. There are many conflicts of interests involved.
There are multiple wholesale prices for a drug. Every time the drug goes through another middleman overhead and profit are also built into the drug price. In fact, the healthcare industry earns 4.7 billion dollars from the federal government per year from Medicare Part D.
There is nothing transparent about the profits made by the secondary stakeholders.
Wal-Mart almost broke the healthcare insurance industry’s cash cow by selling many generic drugs for $4 per month. Wal-Mart has recently instituted a 3 month supply cost of the drug for $10. Interestingly enough the large pharmacies, the healthcare insurance industry and the PBOs have figured out how to rip off the consumers despite Wal-Mart’s initiative.
If patients use their drug benefit insurance policy for a generic prescription, they will be charged $4 or more. The total charge toward their Medicare donut might be $30. The price the pharmacy plan (Medicare Part D) supposedly paid for a one month prescription. If seniors pay Wal-Mart cash and do not use their drug benefit plan, the total cost of the transaction to seniors is $4 as opposed to the $30 charged to their donut.
Most seniors have not figured this out. They use Medicare Part D to pay for their medications. Seniors should buy their generic medications for cash. They should not charge it to their Medicare Part D drug benefit. Since the healthcare care insurance industry probably gets the generic from the pharmacy for $4, the healthcare insurance company’s out of pocket expense for the medication is zero. Seniors have paid for the drug with their deductible. If seniors hit their donut, they will have to pay retail to the pharmacy for additional medications.
President Obama’s healthcare reform act modified the donut insignificantly. Yet he is selling the $250 increase toward the donut as a great advance.
Why is it so complicated? We are dealing with lobbies from at least three industries. None of these lobbyists represents patients or physicians.
Does President Obama’s healthcare reform act do anything to solve the cost of medications seniors need to maintain health? No.
President Obama’s healthcare reform act has done very little and very ineffectively to fix the drug benefit problem. He has not protected seniors or others from the abuses of the healthcare insurance industry.