It’s time. We need some muscle…

Already in play is the push from pharmacies for private plan support of the higher price; that is, acceptance of the higher price in the payment of group drug claims. Some pharmacy chains and independents have also increased dispensing fees. Whether it’s a drug manufacturer or pharmacy, the top of the supply chain aims to recoup revenue lost on their ODB business as a result of the TDSPA through higher costs to the private plan market.

Perspective
Within the current regulations, a manufacturer can sell their drug for the price they wish, subject to competitive pressures. A pharmacy will purchase and manage inventory to maximize revenues. In the same position, you and I would do the same. But what is missing from this equation? Where is the other fundamental market force? Where is the negotiation process with the ultimate buyer of drugs? Who represents employers as the buyer today? No one. At least not entirely. In the future? The pharmacy benefit manager(PBM)? A new collective arrangement?

Where lies current responsibility for drug pricing? Plan Sponsor? Insurer/PBM?
If we first look at plan sponsor control over drug plan costs, we see responsibility for plan design, the choice of supplier and more recently, increased influence on the health status of employees in the provision of wellness programs. Do these initiatives involve the management of drug prices and, therefore, respond to the impact of dual pricing? No, they only offset drug price increases.

Let’s then look at the administrative contract between an employer and their insurer or PBM. This business agreement is essentially transactional: a list of covered drugs along with the reimbursement level to be applied. The agreement does not reflect a negotiated ceiling on the acquisition cost of the drug; that is, the price of the drug before pharmacy markup and dispensing fee.

To be fair, we have not had to worry about drug prices before now for a good majority of drugs. In Ontario, private payers have had the benefit of the “one price for all purchasers” rule within the ODB Act. Taking advantage of this, pay direct drug plans have enjoyed the Government’s negotiated price for the list of drugs on the ODB formulary. Insurers and PBMs had only to enforce the ODB price to offer a managed drug price offering to their clients.

The TDSPA removed the “one price for all” rule. This creates a significant gap in the supplier market offering.

In the U.S., drug plan management includes price controls. As a result, the competitive landscape achieves transparency on this point in the form of negotiated ceilings on drug prices to be charged to the plan and plan members. How fast can we get there?

With employer plans representing an estimated 25% to 30% of prescription drug expenditure, why would pharmacy or drug plan manufacturers not negotiate in good faith with the employer plan market? How quickly will PBMs achieve drug price guarantees in their contracts with pharmacy? Will they need to set up their own pharmacy? Is there another vehicle? Whatever the answers are to these questions, private payers will have to stand together to gain more control over how much they pay for drugs. What has become transparent as a result of The Transparent Drug System for Patients Act (TDSPA)is employers’ immediate need for collective purchasing power in the face of the dual pricing system that is falling into place. What does this mean?

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