When was the last time you went to pick up a prescription? Was it fairly cheap? These days copays have gone up, but generally generic medications cost patients $3 to $10 or so. Seems like a bargain.

But what about the real cost of the medication? Chances are it’s a lot higher in this country than others, and while consumers may be lulled by low copays, they still bear the cost in the end through higher insurance premiums.

There’s got to be a better way.

Rebates, patient copay cards and patient assistance programs are all designed to mask the true cost of medicine in America.


Prescription coverage is included with most medical insurance plans. This could be run directly by the insurance company, or by a pharmacy benefit manager as an intermediary. For traditional Medicare, it’s the optional Part D plan. Medicare Advantage plans have their own drug coverage programs, and their own rules as well.

Many formularies have a listing of preferred drugs, with the generic medications usually at the lowest cost considered Tier 1. Brand name drugs are either preferred, leading to Tier 2 status, or non-preferred, leading to Tier 3 status. In some cases, coverage is limited to the first tier, or costs are managed by charging more for the higher tiers. Some plans have up to six tiers, with all different coverage requirements.

Copay amounts may be the only visible change for patients when they go to pick up their medication from the pharmacy. However, for the insurance plan, the cost for medications for a single patient can be in the thousands of dollars per year, and in some cases, per month.

For some branded medication, the copay for patients might be the same, but the cost to insurance varies greatly, with pharmaceutical companies offering a savings on the charge in the form of a rebate.

Pharmaceutical companies have no oversight regarding how much they charge for medication. Their only limiting factor is market competition, and if their product is the only one in that class, then the sky is the limit.

These rebates are in the crosshairs these days. Health and Human Services Secretary Alex M. Azar II has singled out rebates as a contributing factor in the high cost of prescription drugs. With rebates, the insurer or pharmacy benefit manager get a certain amount of money back from the pharmaceutical companies for the prescriptions that are filled with their medication.

The theory is that the elimination of rebates will lead to lower overall drug prices, or at least a shared savings model between the insurance company and the patients. However, even with that, it’s doubtful costs will go down substantially.

Why are rebates needed at all?

Pharmaceutical companies have no oversight regarding how much they charge for medication. Their only limiting factor is market competition, and if their product is the only one in that class, there is no limit.

Consider the cost for Solvadi, the first medication to market to treat Hepatitis C. With its initial release, the cost was $1,000 per pill for a total cost of $84,000 for a course of treatment. When this drug was combined with another one to make Harvoni, the cost went up to $94,500 for the 12-week treatment.

Pressed to explain the exorbitant prices, the pharmaceutical company Gilead and others have contended that the overall benefit of curing Hepatitis C is worth the cost, i.e., reducing the need for more expensive therapy for those who might otherwise need a liver transplant from cirrhosis, and reducing future transmission and subsequent cases of Hepatitis C.

Once competition arises, the cost of the medications decreases. Rebates, like those targeted by Azar, are offered by the more expensive brands, and the availability of the medication increases to cover more patients with Hepatitis C at various stages of liver damage.

Even with this automatic kickback from the pharmaceutical companies, the cost to insurance plans for the full treatment of one patient for Hepatitis C remains much more than the annual premium that one patient would pay for their coverage plan.

What if the cost was cheaper in the first place?

The makers of the Hepatitis C treatments know that other countries can’t afford to pay the prices charged in the US. In an effort to avoid knock-off medicine prior to their loss of the patent, the companies offer the same exact pill for pennies. Total cost for Hepatitis C treatment in other countries such as Egypt is $1,200 for a full course, and in India $900.

Canada recently negotiated a more favorable price for the medication and is expanding the offering of Hepatitis C treatment in several of its provinces.

So what’s the problem with all this?

In the U.S., the costs are driven by the market, and that results in ever-increasing premiums to cover the charges for expensive treatments. Without any power to negotiate lower overall prices, the only one left holding the bill is the consumer, in this case, the patient.

Even if their copay is a small amount each month, the cost to their insurance can be so great in the aggregate that the cost for the coverage goes up exponentially over time. Medication is not getting cheaper. With the newest immune therapy for cancer running in the hundreds of thousands of dollars, it’s only a matter of time before the system crashes and no one can afford their treatments.

Rebates, patient copay cards and patient assistance programs are all designed to mask the true cost of medicine in America.

Someday soon, there has to be some type of control established for the costs of the prescriptions we need the most, and not in the form of a rebate, but in true lowering of drug prices.

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