Something Minnesota can do now about prescription-drug costs: Change 'rebate' practices

Thankfully, many people in our time are able to live longer and more productive lives because of new and better treatments that stave off once-deadly diseases. According to the American Cancer Society, "the cancer death rate declined precipitously between its peak in 1991 and 2016. Absent that decline, 2.6 million more cancer patients would have died during that period."

Three-quarters of those survivors can thank innovative new medicines for the ability to live longer.

Yet those innovative treatments often come with substantial costs that can put them out of reach for some. The Kaiser Family Foundation recently reported that "one in four people taking prescription drugs report difficulty affording their medication." One key factor in helping patients taking brand-name and sometimes very costly prescription drugs is reducing what the patient has to pay at the prescription counter. If we could find a way to lower what the patient pays in out-of-pocket costs at the pharmacy, the outcomes are likely to be better and future health care expenditures such as hospitalization and emergency room care are likely to be lower.

Earlier this winter, Health and Human Services (HHS) Secretary Alex Azar announced the beginning of a prescription drug price reform for Medicare patients. HHS declared that manufacturer rebates on prescription drugs will now be returned to customers instead of flowing to middle men in the prescription-drug supply chain.

These drug rebates are substantial. In 2017, they totaled $150 billion nationwide.

This is a solid first step. Now Minnesota has an opportunity to lead the nation with a unique solution that will help non-Medicare consumers pay less for prescription drugs.

Under our current system, a patient pays a negotiated price at the pharmacy counter for a brand-name prescription drug. That price we pay is determined by our insurance company, which has likely contracted with a "pharmacy benefit manager" (PBM) to secure the best price — that is, for the insurance company.

The difference between what you and I pay at the pharmacy counter for brand-name drugs and the negotiated discount is called a "rebate" — and it is paid back to your insurance company or pocketed by the PBM.

If those rebates were returned to the customer at the pharmacy, many commercially insured patients could save between $145 and $800 annually on brand-name prescription drugs. Patients who have a high-deductible health insurance plan could save up to $200 per month per prescription.

Broader savings to the whole system might also result from reducing patients' out-of-pocket costs. Patients with chronic diseases such as high blood pressure, diabetes or asthma are often faced with unthinkable decisions each month at the pharmacy: to turn back medicines for chronic conditions due to their high, upfront costs. The Congressional Budget Office stated recently that "pharmaceuticals have the effect of improving or maintaining an individual's health" and that "taking the medication may also avert hospital admissions and thus reduce the use of medical services."

Policies such as a point-of-sale discount on prescription drugs would truly help ensure that patients can afford to take the prescription drugs as prescribed by their doctors and likely have better long-term health outcomes.

If Republicans and Democrats agree on anything this session, it's that something needs to be done to make prescription drugs more affordable for every Minnesotan. We can lead the nation with this innovation, and its effects would be felt almost immediately: Patient costs at the pharmacy counter could drop significantly starting next January.