As Dr. Elisabeth Rosenthal told NPR in 2017 (listen to or read the interview at https://n.pr/2OgsDMt -- it was fascinating), Americans are told over and over again that they need to be good consumers of healthcare services. But she explained that in order to be a good consumer, you need to know a price. Healthcare in the U.S. is one of the few markets in which no one can tell the consumer what the prices for their services actually are. (And she added "P.S., a lot of medicine isn't so elective. Your doctor says hey, you need to have your hip replaced. Or your doctor says, I'm going to fill out a requisition for this blood test. Here's the lab I'm sending it to. You don't really have a lot of choice").
Dr. Rosenthal gave the example, if a doctor tells you that you need to get that your wrist X-rayed after you fall, you can call 10 different X-ray centers. But no one can tell you what the price for those services are. Instead, they're all going to tell you that "it depends on your insurance" or "we don't know".
That's the very definition of a failed marketplace.
If lawmakers expect to reform it, there has to be a lot more transparency. But transparency alone won't fix it because so many entities involved have grown accustomed to collecting money they have not earned, but it needs to be there. Hidden or secret prices does not enable consumers to comparison shop or to be good consumers of healthcare services. In prescription drugs, the amount spent on discounts given to healthcare insurance company payers is routinely defended by pharma as "trade secrets".
Prescription Drugs: The Definition of Healthcare Price Obfuscation
Picking up a prescription from the pharmacy seems like it should be a straightforward process from a consumer perspective: the doctor writes the prescription, the pharmacy fills it, and when it's ready to be picked up, the consumer shows up.
In the background, however, the process is anything but straightforward. And virtually none of the decisions that have an economic impact on the consumer are made by any of the stakeholders involved in the prescription-fulfillment process: few doctors will know the out-of-pocket costs the consumer will face, the pharmacy doesn't set the price, and consumers often face sticker shock when they arrive, unaware that the same prescription may be available at a lower cost at another pharmacy down the street.
Behind the curtain are actors and forces that in general seek to reduce healthcare costs at a system level but, as each has its own set of incentives, whose efforts frequently conspire to put consumers at a disadvantage.
That's why a Los Angeles-based digital health company known as GoodRx (founded in 2011) which successfully went public September 2020 is a rarity because it actually shows how price transparency in healthcare can be very profitable and serve the public interest, too. The nine year-old company is already very profitable, with $388 million in 2019 revenue and, more surprisingly, $139 million in operating profit.
GoodRx is perhaps best known for making prescription drug pricing transparent and offering discount coupons to consumers, allowing consumers to shop for which pharmacy provides the best combination of price and convenience. The company earns revenue only when it saves people money. Thus far, the company estimates it has helped Americans realize $20 billion in savings.
GoodRx fits in by helping different groups of consumers save money on prescription drugs:
- For uninsured or underinsured consumers, GoodRx allows consumers to tap into and leverage PBMs' scale and purchasing power to negotiate drug prices down from pharmacies' bogus "usual and customary" prices'
- For commercially-insured consumers, GoodRx still allows consumers to access PBMs' discounts (which are often denied to patients unless they have satisfied a deductible) to identify when discount card options are actually lower cost than the consumers' own insurance copays are for a given drug. For patients still satisfying insurance deductibles, many find the GoodRx prices are cheaper - often by a substantial amount.
With insulin, for example, patients can get coupons to buy it for roughly 75% off the pharmacy cash price with a GoodRx coupon (in fact, insulin maker Novo Nordisk A/S revealed in its Q3 2020 earnings presentation on slide #103 to investors that it is now spending 74% of its gross insulin sales on rebates paid to PBM's).
In fact, while logic might suggest that the majority of GoodRx users are in the uninsured group, in fact GoodRx reports that almost 75% of its users are actually insured.
All that money is going someplace, and in the post I did on the Right Care Alliance presentation I recently gave, we know where the money is going. Insurance companies are taking the Rx rebates and giving them to employers as "premium offsets" so they can sell more new policies. It is, in effect, a system whereby the sick are subsidizing the healthy, which is not something a functioning healthcare system does because it makes no sense.
GoodRx isn't alone. Like all good ideas, others have copied it. There are now more than a dozen competitors. Not all offer the best discounts, but patients can do their price-shopping before even going to the pharmacy and bring the coupon that offers the price they want to pay with them to the checkout.
That explains why at the 2021 J.P. Morgan Healthcare Conference Pfizer's CEO Albert Bourla spoke with someone from J.P. Morgan. Although I think Mr. Bourla lacks the polish and finesse of his predecessor Ken Frazier, he didn't get the brass ring because he's clueless about how Pfizer runs. Towards the end the session at J.P. Morgan 2021, Mr. Bourla shared an interesting thought on the future of U.S. healthcare reform:
"I think [rising out-of-pocket cost] has become a unanimous concern for all of us. If you ask any of my peers, and good friends, they'll tell you that one of the highest concerns is that in the U.S., patients are getting their medicines like if they DON'T have insurance, even if they DO have it. That's the result of a system that was driven by rebates, and we're stimulating wrong behaviors. We've arrived at a situation where we need reform – that needs to change ... We believe that the #1 priority of any healthcare reform is to reduce the out-of-pocket cost for patients. That's #1. Everybody should contribute to that. But we should contribute, insurance companies should contribute, the state should contribute – everyone should contribute. This is a must because it's not a sustainable situation and that creates a lot of animosity. It is the fundamental base of why things are so tense in the healthcare section..."
Of course, the animosity towards pharma is due to the fact that it defends the $185 billion in prescription drug rebates which the industry spent in 2019. Beyond that, the "state" as he refers to it already contributes a LOT more than anyone realizes which Bourla fails to acknowledge. For example, the Congressional Budget Office (CBO) revealed in 2019 that U.S. taxpayer subsidies for employer-sponsored healthcare insurance plans was $567 billion. Mr. Bourla may be right that all parties need to contribute, there is no denying that the drug industry has defended its use of prescription drug rebates as "trade secrets" and that patients end up paying for it.
Forbes had an interesting article about GoodRx which is worth having a look at, see it at https://www.forbes.com/sites/sethjoseph/2021/01/12/what-could-a-healthcare-marketplace-look-like-goodrx-is-trying-to-show-us/.
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