Insurance Update
July 2016
Issue No. 70
In this issue

Trends in retail prices of prescription drugs 



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Dear ,

"The price is never the price" has been said of prescription drugs, and it's one of the few things that can be said with some certainty. In this month's issue we try to unpack the disturbing and puzzling realties of the rise in prescription drug prices, especially for brand-name and specialty medications. There have been some ridiculous and almost criminal efforts to boost prices on certain drugs. You likely have heard of these in the news. There are further instances of extremely high prices, especially of new drugs, that don't seem to make sense.
Our research shows us that even the experts and the journalists who track the pharmaceutical industry cannot always make sense of all this, so we are not promising to make everything clear, but we do hope this issue of Insurance Update will shed some light on the problem. Further, you will find some tips for cutting your prescription drug costs.
Finally, some of you have told us you enjoy the brain puzzles we have begun to include in each issue. This month we have a challenging problem that is in part the result of high drug costs.
May you have a blessed time as you move into the heart of summer; may nothing ever cause you to need high-priced prescription medications; and if you do need them, may you find ways to keep them affordable.

The price is never the price
The rising cost of prescription drugs

Everyone agrees that the cost of prescription drugs is rising. Surveys show this is one of the top causes of anxiety over health care. A study released by the American Medical Association in November 2015 and cited in The Washington Post showed that three of every five Americans (60 percent) take a prescription drug.
An extensive seven-year study by AARP looked at a "market basket" of 622 widely used prescription drugs and concluded that retail prices "consistently increased faster than general inflation in every year from 2006 to 2013." Of those 622 drugs, 397 were on the market for the entire eight-year period, and for those 397, the average retail price "increased 81 percent over eight years, compared with an 18.4 percent increase in general inflation in the same period." The study further asserts that these increases were due to the strong price growth among brand name and specialty drugs.
The first inclination, with good reason, is to blame rising prices on the big pharmaceutical companies. There is no question there are shocking instances of price gouging. According to a September 2015 article in The New York Times, Daraprim, a 62-year-old drug that is the standard for treating a life-threatening parasitic infection, was acquired by Turing Pharmaceuticals, which immediately raised the price from $13.50 per tablet to $750 per tablet. Another company, Valeant Pharmaceuticals, acquired two heart drugs, Isuprel and Nitropress, from Marathon Pharmaceuticals and raised its prices by 525 percent and 212 percent respectively. This came on top of the fact that Marathon had acquired the drugs from another company in 2013 and had at that time quintupled its prices. In a third example, the antibiotic doxycycline went from $20 per bottle in October 2013 to $1,849 per bottle by April 2014.
The drug industry wants to separate itself from these companies and claim they are unfortunate exceptions, but insurers, hospitals, and others in health care are concerned about the larger picture of rising prices, especially the cost of new specialty drugs that treat cancer, hepatitis C, and rare diseases. Some of these drugs can cost as much as $300,000 per year.
Higher costs have a ripple effect. They cause a rise in insurance premiums. They cause patients to have to pay more out of pocket. Taxpayers pay more because of Medicaid. The pharmaceutical companies remind us of their huge investments in time and research and argue the high prices are necessary to cover the cost of bringing a new drug to the market. They argue that their drug, however expensive it may be, can prevent even more costly interventions like surgery and hospitalization.
Rising prescription costs have another worrisome effect. The average monthly Social Security benefit in 2013 was just $1,294, which works out to $15,526 per year. Furthermore, the median income of a Medicare beneficiary in 2013 was roughly $23,500. You can see how prescription drug costs paid out of pocket by older Americans could gobble up large portions of their Social Security benefits. This makes affording proper medical care difficult, and can result in seniors foregoing medicines that could be beneficial to their health.
There are many reasons why the drug companies set the list price for their brand-name drugs astonishingly high. "The structure of the system is such that the only way they can get any increase in prices is to raise the list price by a very high percent," said Adam J. Fein, president of Pembroke Consulting, a management advisory and business research company. "It's kind of baked into the system, and it's so complicated, you can't really unwind it without blowing up the entire health care system."
And the truth is that hardly anyone pays these astronomical prices. Insurance companies and pharmaceutical stores negotiate discounts and rebates. Often these negotiations are carried out by a firm called a pharmacy benefit manager.
PBMs act as an intermediary between the person paying and everyone else in the health-care system. They administer prescription drug programs for commercial health plans. They increase the buying clout of plan sponsors and individuals, enabling them to obtain lower prices for their prescription drugs through price discounts and rebates. They make their money from service fees, and their contracts include incentives to cut costs. So PBMs appear to be good for the consumer even though they are middlemen who get a slice of the price.
But there is another puzzle in this picture that makes the drug price reality even more complicated. While the list price for drugs rose about 12 percent in 2015, the net prices - what people actually pay - rose only about 2.8 percent, the lowest rise in years. This seems to indicate that the insurers, PBMs, and pharmacies are having some success at negotiating with the drug maker.
Further, the AARP study cited above makes the seemingly contradictory observation that there were "substantial price decreases among generic drugs." It is true that generics have stayed surprisingly affordable. What's going on?
People in the industry say these lower prices disguise the larger price increases for specialty drugs, especially for cancer treatment. This is an area where there is less competition. Buyers are stuck with the company that produces the drug. The drug makers know there will be discounts and rebates, so they say they are driven to exceed the already high prices to assure their profits.
Further, they know there are middlemen who have to be paid. The drug goes from the maker to a distributor to the pharmacy to the patient, with the PBM taking a fee for trying to reduce the cost and for processing the transactions with the insurer. There is an irony here that the company whose job it is to negotiate better prices contributes to the overall rise in price.
So buying a prescription drug is not like buying a loaf of bread or a carton of milk. You don't have choices. You are buying the drug prescribed for you. And you may not be paying for all of it or in some cases even most of it, but the price you are paying is inflated by all these factors. It is a crazy system.
Now let's return to the "lower" prices cited above. More than 80 percent of the drugs dispensed in the U.S. are generics -- low-cost alternatives to brand-name drugs. Many prescriptions will cost you $10 or less. It's the serious illnesses that require the new brand-name drugs with the high price tags. And in these instances, insurance companies have been requiring patients to pay a larger part of the cost.
However, there is evidence that the prices of some generics are spiking too. What has usually made generics cheap has been competition. But mergers and acquisitions are reducing the number of companies making certain generics. According to AARP, "Between 2002 and 2013, for instance, the number of manufacturers making oral digoxin, a heart drug, fell from eight to three -- and the cost soared by 637 percent.
High drug prices affect everyone who uses prescription drugs, but they fall heaviest on the poorest and sickest of patients. If your health plan has a large deductible, you may pay out hundreds of dollars until you hit your limit. Some drug companies do offer assistance plans (see "Tips for reducing your drug costs").

One option would be to cap prescription drug prices. But some argue there would be downsides. First, it might discourage drug companies from innovating. Second, illnesses or diseases with a very small patient pool might be ignored by the drug companies, who would not be able to recoup the cost of research and development. Third, profits for U.S. drug-makers would be reduced, and with less profit the companies might become less willing to operate in poor countries. And fourth, jobs might be lost in the U.S. if drug developers move offshore to escape the added regulation.
"It's sort of embedded in the health care system that the price is never the price, unless you're a cash-paying customer," said Fein. Despite these bewildering realities, Dr. Steve Miller, chief medical officer at Express Scripts, a PBM, was quoted in The New York Times in April of this year as saying that the actual price of drugs is rising. He concludes, "The main point is this is still faster than your income is growing. You're falling further and further behind, and it's not sustainable."
TipsTips for reducing your drug costs

  1. If your doctor has prescribed an expensive brand-name drug, do some research. Look for a generic. If there isn't one, ask if there is another similar generic drug that will work as well.
  2. If you are retired and on Medicare, ask if it might be possible to have an expensive drug administered in the doctor's office. Sometimes drugs cost less when they are paid for by Medicare Part B, which covers medical care in the doctor's office or hospital, than when they are acquired by you and covered under the Part D drug plan.
  3. Ask about a "biosimilar" drug. These are just coming onto the market. They are similar to but not an exact copy of a drug and are expected to be considerably less expensive.
  4. Ask if you can switch from a specialty medication to a "traditional" drug. For example, hydroxychloroquine is a non-specialty drug that treats rheumatoid arthritis and costs about $93 per month. Specialty drugs like Humira and Enbrel can be as much as $3,100 to $6,000 per month.
  5. Consider using an online or mail-order pharmacy.
  6. If you are on Medicare, consider a Medicare drug plan with lower costs. Use the Medicare Plan Finder. Also, if you are looking for the best price on a particular drug, you can look at all Medicare Part D and Medicare Advantage plans that cover your drug. Here is a website that might help.
  7. If you are on Medicare and you meet certain income and resource limits, you might qualify for extra help from Medicare to pay the costs of Medicare prescription drug coverage.
  8. Some drug companies have patient assistance programs. Click here to go to a government site and see what might be available for the drug in question. There are other organizations that offer patient assistance programs too. Here is a website that will tell you about programs run not only by drug companies, but by states and nonprofit groups, and will tell you about discount cards.
  9. Don't buy at the chain drugstores. According to Consumer Reports, the chains consistently charge the most. Among them, Costco offers the best prices. You don't need to be a member to use their pharmacy, but joining gets you discounts.
  10. Look at the independent pharmacies. These smaller stores do not always have higher prices. You may find some bargains. Consumer Reports found it was easier for them to negotiate a better price.
  11. Always ask, "Is this your lowest price?" This will cause your pharmacist to dig a little deeper for discount programs, cards, coupons, or special cash-only prices. Check often because prices change.
  12. Consider not always using your health insurance. If you are still in your deductible period and are paying out of pocket, you can sometimes get a generic for much less if you pay cash, though this does not count against your deductible.
  13. If you have a deductible to meet at the beginning of the year, save ahead so you can cover those costs without stressing your budget.
  14. Ask your doctor to prescribe a 90-day supply. This is more convenient and can be cheaper.
  15. If you are a retired veteran, you may be eligible for prescription drug coverage through the U.S. Department of Veterans Affairs.
  16. Ask your doctor for samples.
As a last resort -- ask your doctor if you may split your pills, thus taking a smaller dose and making the medication go further.

For additional information:
Valeant Pharmaceuticals International and one man's predicament
Excerpt from The New York Times, Oct. 4, 2015
J. Michael Pearson has become a billionaire from his tough tactics as the head of the fast-growing Valeant Pharmaceuticals International.
And consumers like Bruce Mannes, a 68-year-old retired carpenter from Grandville, Mich., are facing the consequences.
Mr. Mannes has been taking the same drug, Cuprimine, for 55 years to treat Wilson disease, an inherited disorder that can cause severe liver and nerve damage. In the summer of 2015, Valeant more than quadrupled its price overnight.
Medicare will now have to cover about $35,000 for the 120 capsules he takes each month, and he will have to pay about $1,800 a month out of pocket, compared with about $366 he paid previously.
"My husband will die without the medicine," said his wife, Susan, who is now working a second part-time job to help pay for health care. "We just can't manage another two, three thousand dollars a month for pills."
Cuprimine is just one of many Valeant drugs whose prices have spiked as part of the company's concerted strategy, which has richly rewarded its investors and made it one of Wall Street's most popular health stocks.
Brain Puzzles
The staff of Insurance Update is excited to bring you a new, regular monthly feature -- BRAIN PUZZLES!

Blue Pill Problem
You've been placed on a course of expensive medication in which you are to take one tablet of Sildenafil and one tablet of Citrate daily. You must be careful that you take just one of each because taking more of either can have serious side effects.

Taking Sildenafil without taking Citrate, or vice versa, can also be very serious, because they must be taken together in order to be effective. In summary, you must take exactly one of the Sildenafil pills and one of the Citrate pills at one time. Therefore, you open up the Sildenafil bottle, and you tap one Sildenafil pill into your hand. You put that bottle aside and you open the Citrate bottle. You do the same, but by mistake, two Citrates fall into your hand with the Sildenafil pill.

Now, here's the problem. You weren't watching your hand as the pills fell into it, so you can't tell the Sildenafil pill apart from the two Citrate pills. The pills look identical. They are both the same size, same weight (10 micrograms), same color (Blue), same shape (perfect square), same everything, and they are not marked differently in any way.

What are you going to do? You cannot tell which pill is which, and they cost $300 a piece, so you cannot afford to throw them away and start over again. How do you get your daily dose of exactly one Sildenafil and exactly one Citrate without wasting any of the pills?

Click here for the answer.

Cat's Meow 
For each of the following clues, what is a synonym that contains the letters CAT?
    1. Baseball position
    2. Copy
    3. What you get with a doctor's prescription
    4. Underground cemetery
    5. Time off from school or work
    6. Ten-event contest
    7. Disaster
    8. Mimic
    9. Cows
    10. Teacher
Click here for the answers.
 LTCILong-Term Care Insurance
High drug costs -- another reason for long-term care insurance
Let's hope that you never suffer a circumstance that robs you of your ability to care for yourself and then adds insult to injury by saddling you with an extremely high-priced specialty medication. But in case this happens, you will be grateful to have Long-Term Care Insurance.
Despite your best efforts, there is always the chance you might suffer a debilitating condition or a disabling injury. And, of course, if you live long enough, the time will come when you will need some extra care. Long-term care insurance makes sure that you can get the care you need. It assures that your medical bills will not eat up your savings. Finally, and this is one of the best things about LTCI, it protects your children and other relatives from having to use their resources to care for you.
Brethren Insurance Services offers Long-Term Care Insurance for all members and employees of the Church of the Brethren and their family and friends; and also for employees of Church of the Brethren-affiliated agencies, organizations, colleges, and retirement communities and their families and friends.
If you are interested in obtaining this coverage, contact Brethren Insurance Services at or 800-746-1505 for a free, no-obligation proposal or click here to request more information.