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3 Trends That Will Shape the Future of Pharmacy Pricing

I recently attended the 14th Annual Yale Healthcare Conference at the Yale School of Management in New Haven, CT. It was a daylong affair with an impressive array of presenters from provider organizations, academia and insurance companies. Many breakout sessions were conducted throughout the day, but there was one, in particular, that caught my interest. It was titled, “Pharmaceutical Pricing Transparency and Sustainability,” and the panel consisted of representatives from a national Pharmacy Benefits Manager (PBM), pharmaceutical services organization, a clinical pharmacy manager and a consultant working with drug manufacturers.

Unsurprisingly, the cost increases for pharmaceuticals have been rising at incredible rates, along with an increase in the use of specialty medications.

During the session, “Orphan Drugs,” or drugs developed to treat a rare disease or condition that affects 200,000 or fewer individuals, were also discussed. These medications have significant development and marketing costs that cannot be recovered with so few individuals using the medications. The panelists commented on the industry and societal challenges, while providing some insight as to how the pricing challenges are being met, now and into the future.

Specifically, we can expect to see the following 3 trends and services emerging:

  1. Greater Transparency in Patient Cost Share at the Time a Physician Writes a Prescription

    In the future, physicians will have access to their patient’s pharmacy coverage and cost share. That will allow them to determine how much out of pocket expense the patient will be subject to based on the prescription dispensed. This practice can help avoid the “sticker shock” when picking the prescription up at the pharmacy, or worse, the decision by the patient to not fill the prescription because of affordability.

  2. Innovative Payment Arrangements With Drug Manufacturers

    Payment processes which are designed to pay for the performance and outcomes of medications, have been evaluated and sporadically tested in the past, but are predicted to increase as more insurers adopt these types of payment contracts. Also known as “outcomes-based payments” one example of this is related to a cholesterol-lowering medication when the insurer has entered into an outcomes-based contract with the manufacturer of that medication. A payment or penalty to the drug manufacturer will be made based on the measured cholesterol levels over a period for patients using that medication and who are enrolled in that insurer’s plan. This model is a true pay-for-performance structure, which will likely be expanded to other medications in the future.

  3. Acceleration of Drug Development and Testing With Greater Speed to Market

    The drug industry will increase the use of artificial intelligence (A.I.) to analyze data and help bring more impactful drugs to patients at a quicker rate. Currently, there are over 70 organizations that are engaged in A.I. and drug trial optimization, with new startups continuously emerging. This number is critical because according to a study conducted by the Tufts Center for the Study of Drug Developments, the average cost to develop and have a drug approved is $2.558 billion, with an average time from discovery to market being approximately ten years. A significant opportunity exists for extreme cost savings using A.I. in the process.

It was encouraging to hear that the awareness of affordability and pricing is significantly high throughout the industry, as well as in Washington. Actions are being taken to help control the cost of medications, but will only be achieved if all segments of the industry are willing to work together. Much more information on this topic will be forthcoming. If you have any questions about the evolving world of pharmaceuticals, contact your OneDigital consultant today.