Dive Brief:
- Nearly one in four patients picking up their prescription drugs from the pharmacy counter paid a copay which exceeded the price the insurer paid the pharmacy, according to an analysis of sampled reimbursement and insurance claim data published in JAMA Tuesday.
- The research compared national average retail price (NARP) reimbursement data with a sample set of copayments from pharmacy claims recorded in Optum's Clinformatics Data Mart over the first half of 2013.
- Among 9.5 million claims, 2.2 million (approximately 23%) involved overpayments. Sixty percent of the most commonly prescribed drugs involved overpayment more than a third of the time. The drugs most often linked to overpayments were the calcium channel blocker Norvasc and the sedative Ambien.
Correction: This article was updated to clarify how an overpayment as defined by the study occurs.
Dive Insight:
The prescription drug pricing system remains something of an enigma. Academic research into the topic usually runs up against limits in what information can reliably be obtained.
That's mostly because the data are "closely held by key players in the pharmaceutical supply chain," according to Darius Lakdawalla, a professor at the University of Southern California, who was not involved in the study.
The JAMA research found overpaying for a generic occurs more commonly than overpaying for branded medications — 28% of the time versus 6%, respectively. Interestingly, overpayments for branded medications, although not as frequent, were nearly twice the amount than overpayments for generic drugs ($13.46 versus $7.32).
Mean overpayment across all drug types was $7.49, with aggregate overpayments totaling $135 million in 2013. This sum represents a total overpayment of $10.51 per member.
Regardless of branded or generic status, lead study author Karen Van Nuys of the University of Southern California said she was shocked by "how common these overpayments appear to be — [happening in] almost one in four prescriptions."
Although industry insiders are aware that a copay for a drug can sometimes exceed the price the insurer or pharmacy benefit manager (PBM) pays the pharmacy for the drug, most consumers are likely not aware if the difference between their copay and the true price of the drug (what the insurer is paying for it) has changed.
The disconnect between what patients pay out of pocket and the true cost of the drug (including rebates) is the real problem, according to Walid Gellad, associate professor of medicine, health policy and management and co-director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.
"Consumers are free to buy the prescription on their own without insurance, but the challenge is they are not aware of when their prescription might be cheaper."
In some states, a pharmacy can just inform the patient that it would be cheaper to bypass insurance.
However, so-called gag rules in some states require a pharmacy to agree in its contract with PBMs/insurers not to tell patients this is an option. Currently, at least 16 lawsuits have been filed over the practice of making copays costlier than a drug's cash price, targeting some of the biggest insurers, including Cigna, UnitedHealth and Humana.
Data in the study on overpayments are from 2013 — a limitation that was acknowledged by the study authors — so the findings are difficult to apply to current conditions, as the pricing landscape changes so frequently, Gellad said.
He takes issue with the characterization of the term "overpayment" in this context — patient copays are something consumers agree to when they buy insurance, he pointed out, "with the understanding that they will 'underpay' for copayments in which the brand is very expensive."
"In the future, when [the patients] need the $300 drugs, they will pay only $40. No one would call a brand copay of $40 an 'underpayment' if the pharmacy is then reimbursed $300 by the PBM."
The report also found that 12 of the 20 most commonly prescribed drugs involved overpayment rates above 33%. Those being treated for pain with hydrocodone/acetaminophen — the most commonly prescribed drug — felt the sting the most: patients were found to overpay for that particular medication in 36.15% of claims.
"Van Nuys et al. make judicious use of the publicly available data on this topic and shed light on an unpleasant side effect of the confidential rebate system: Insured consumers can end up paying more than the price paid by their insurer for a drug, particularly for cheap medicines," summarized Lakdawalla.