Editorial Outlines Four Potential Paths the Biden Administration Should Consider for Lower Out-of-Pocket Spending
Recently, Robert Popovian, Pharm.D., MS., and Wayne Winegarden, Ph.D., wrote an opinion piece for Morning Consult, advocating for President Joe Biden to take advantage of a bipartisan opportunity to reduce patients’ out-of-pocket costs for biopharmaceuticals. In the article, Popovian and Winegarden outline five potential policy solutions that the Biden Administration can consider that would reduce out-of-pocket spending for consumers.
Popovian and Winegarden first acknowledge the severity of the situation by pointing out that the total expenditure of hospitals was $1.2 trillion in 2019 – three times the total of the spend on pharmaceuticals. However, instead of patient out-of-pocket comparisons for hospital care and prescription drugs being close to that, patients’ out-of-pocket spending on drugs was $54 billion, 50% higher than their out-of-pocket spending for hospital care.
To remedy the situation, Popovian and Winegarden believe one solution is for the Administration to cap patients’ out-of-pocket costs for Medicare Part D drug expenditures, especially because Part D is the only part of Medicare where patients have unlimited exposure to the cost of care. Last year, the American Action Forum researched the potential impact of capping out-of-pocket costs for Part D enrollees and found that if a $2,500 cap were in place, beneficiaries would receive a $7.4 billion savings over the course of 10 years (from 2020-2029). Those savings would mostly go to those patients who are considered high-cost enrollees through reduced out-of-pocket expenses.
The second recommendation made by Popovian and Winegarden is to eliminate rebate contracting between insurers and pharmacy benefit managers and the biopharmaceutical companies, or to pass on all of the concessions currently paid to pharmacy benefit managers and insurers to the patients at the point-of-sale. According to the article, in 2019, total concessions amounted to $175 billion (roughly 40% of gross domestic biopharmaceutical spend).
The third way the Biden Administration can help reduce out-of-pocket patient costs on prescription drugs is by supporting policies that encourage the use of lower-priced alternatives (i.e., generics and biosimilars) when appropriate. One such policy would be to take down the rebate wall, which occurs when drug manufacturers tie their rebates to volume targets. In those instances, the rebates offered by the blockbuster drug often dwarf what new entrants are able to offer, which results in insurers and pharmacy benefit managers discouraging the use of competitive medicines or blocking them from the drug formulary entirely.
Fourth, Popovian and Winegarden advocate, the Biden Administration could encourage new payment models (such as payment based on outcomes or guarantees that tie costs to the value of the medication). Such payment models would help align the incentives of the manufacturers, insurers, and providers with patients and would ensure that patients are not charged high out-of-pocket costs for drugs that do not provide the expected benefits.
Popovian and Winegarden conclude by noting that all federal and state policy makers should hold reduced out-of-pocket spending on drugs as a high priority. The policies mentioned by the authors have bipartisan support and should be considered by all policy makers.