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What does a new Mark Cuban business venture have in common with a Senate committee look into the rising price of insulin?
Two more boosts of momentum on the need for drug price transparency, according to one observer.
On the one hand, there’s Cuban’s newly-launched Mark Cuban Cost Plus Drug Company. The company says it will make cheaper versions of pricey generic drugs. Pledging “radical transparency,” the company said it will disclose its costs to manufacture, distribute and market its drugs to pharmacies and add a 15% margin for it wholesale price.
The company is planning to make 100 drugs by the end of the year and its first drug is albendazole, used to treat hookworm. The company is setting a $20 manufacturer’s retail suggested price, compared to a current list price of approximately $225.
On the other hand, there’s a Senate Finance Committee investigation released Thursday into the rising costs of insulin.
It’s a drug that’s been long-used for diabetes but doubled and sometimes tripled in price over the past 10 years, according to the report from Sen. Chuck Grassley, a Republican from Iowa chairing the committee, and Sen. Ron Wyden, a Democrat from Oregon who is the ranking member.
The report alleged insulin makers increased prices, which increased the dollar value of rebates, discounts and fees the makers could give to pharmacy-benefit managers and health plans that contracted the managers to administer their prescription benefits.
“The investigation underscores how the opaque business practices of pharmaceutical manufacturers and [pharmacy-benefit managers] have huge implications for patients, payers, and the Federal government, with respect to insulin and therapies for other diseases,” the report said.
For Patricia Kelmar, health-care campaigns director at U.S. PIRG, a consumer advocacy organization, Cuban’s venture and the committee report both hit at the same theme of clarity — and the lack of it — on prescription costs. “Drug pricing is generally a huge challenge for consumers and policy makers, and much of the reason is the lack of transparency.”
Without that clarity, Kelmar said consumers and lawmakers can’t see the complicated costs getting passed on as a drug goes from a manufacturer and ends in a person’s pillbox. “The tail of this complication is long and it has dramatic health impacts on individuals and the health care system as a whole,” Kelmar said.
Americans in 2018 paid $1,397 on average for prescription drugs and medical costs, according to the Kaiser Family Foundation and the Peterson Center on Healthcare. By contrast, people in Canada and the United Kingdom paid an average $884 that year, the two organizations said.
“Mark Cuban’s company appears to be a response to the clarion call by consumers for greater transparency in prescription-drug prices,” Kelmar told MarketWatch. “The current system of middlemen receiving kickbacks and rebates from the drug manufacturers, only profits the [pharmacy benefit managers] and leaves the consumer paying more with no added health value. The rebates are never passed on to the consumer, and drug prices keep rising.”
Of course, Cuban’s company isn’t the only one trying to change the status quo when it comes to the ways Americans get their prescriptions.
In November, Amazon AMZN, -0.74% unveiled its Amazon Pharmacy. It’s not a manufacturer like Cuban’s company, but it is trying to underscore the possibility of cost savings. Someone with a Prime membership might save up to 80% on generic medication and up to 40% on brand names when paying with out insurance, Amazon said. During checkout, customers can see what the costs will be if co-pays apply, what prices are without insurance and what a Prime membership could shave off the price.
Meanwhile, there are also new federal rules going live that seek to boost price transparency, remove surprises and generally whack at the black box of medical costs.
Beginning this month, hospitals now have to list the price of at least 300 services in a consumer friendly format. These are the prices that insurers agree to pay hospitals, not the ultimate out-of-pocket costs for patients.
Next year, a law goes into effect that ends surprise out-of-network medical bills. President Donald Trump enacted this law in the $900 billion relief package.
Then in January 2023, another federal rule is slated to go live, mandating that insurance companies have consumer-friendly tools giving prices and rates for various types of care and procedures. This rule would tell people their out-of-pocket costs, according to Nisha Kurani, senior policy analyst at the Kaiser Family Foundation.
“People generally agree price transparency is necessary for patient fairness,” Kurani said, including herself. But lawmakers are ultimately trying to find ways to drive down consumer costs through competition, and Kurani said it remains to be seen if that will happen.
At least with the hospital price disclosures, Kurani said, “it’s probably not going to be a magic bullet to bring down costs.”
Industry reaction to the report
The Senate Finance Committee report was two years in the making, coming after the review of 100,000 pages of internal documents from drug makers Eli Lilly LLY, +2.19%, Novo Nordisk NVO, +1.41% and Sanofi SNY, +0.73% and pharmacy benefit managers CVS Caremark CVS, +1.61%, Optum Rx and Express Scripts.
“We found that the business practices of and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof,” Grassley said in a statement.
Wyden added that, “This investigation makes clear that consumers are the only ones losing out in America’s broken drug pricing system, since every part of the pharmaceutical supply chain benefits from higher list prices.”
In a statement, Eli Lilly LLY, +2.19% said the report showed how “the health-care system has evolved in recent years, exposing some people to higher prices at the pharmacy. We welcome systemic solutions and new public policies such as increased transparency and first-dollar coverage for insulin, which could bring much-needed relief to people who are paying the highest prices at the pharmacy.”
Until reforms occur, Lilly said it is committed to insulin’s affordability and anyone who needs it from the company can buy a monthly prescription for $35 regardless of their coverage status.
“We share the Committee’s concerns about the high prices set by insulin manufacturers, and we will continue our work to make insulin more affordable and accessible for consumers,” an OptumRx spokesman said. Just over three-quarters of the people using insulin and served by OptumRx either pay nothing or have a set co-pay at $35, he noted.
CVS Caremark referred comment to the Pharmaceutical Care Management Association, a trade association of pharmacy-benefit managers, which said it shared the Finance Committee’s “urgency in addressing affordability and access for insulin-dependent patients.” Some managers have capped or ended out-of-pocket costs, the organization said.
Novo Nordisk, Sanofi and Express Scripts did not immediately respond to a request for comment.
