Senate panel studies bypassing insurance plans to drive down drug costs
THE HIGH COST OF DRUGS was in the spotlight again last week. President Donald Trump in his State of the Union address told lawmakers that “we must do more” to lower drug prices. But the speech was short on specifics.
Earlier that day, however, an influential Senate panel delved into a tactic that’s already available in a majority of states— allowing physicians to go around insurance plans and buy generic medications directly from drug wholesalers.
Senate Health, Education, Labor and Pensions Committee Chair Lamar Alexander (R-Tenn.) was struck by testimony from the co-founder of a direct primary-care practice who described the extremely low prices he can secure for his patients for generic drugs. Physicians in 44 states are able to purchase medications directly from wholesalers, and Alexander said he wanted to learn more about how this practice could spread.
“We’re looking for ways to lower healthcare costs, and 17% of healthcare costs are prescription drugs,” Alexander told Modern Healthcare after the hearing. “The manufacturers say their list prices haven’t gone up much the last two or three years. But prices to the consumer have.”
Dr. Josh Umbehr, co-founder of Kansas-based Atlas MD—what he described as a “blue-collar concierge” direct primary-care model that eschews Medicare, Medicaid and private insurance and collects monthly membership fees from patients—said he keeps a cabinet in his facility that holds roughly $50,000 worth of about 200 medications. He marks them up about 10% to sell to patients. “I’m cheaper than 340B,” he said, with the caveat that he doesn’t carry or sell high-cost drugs such as insulin that have no generic competition.
Umbehr said that for the most part physicians don’t know this option is available or they have come to rely on the insurance model and don’t separate various goods and services like generic drugs.
The hearing picked up on the Senate HELP Committee’s examination of high U.S. healthcare costs, which began last year. Alexander is keenly focused on legislative solutions ahead of his announced departure from the Senate in 2020.
Drug wholesalers have been mostly absent from Washington’s conversation about pricing, which has focused on manufacturers and the rebate system for pharmacy benefit managers and insurers. There are two business types for wholesalers, according to Adam Fein, CEO of the Drug Channels Institute and
author of the Drug Channels blog.
Full-line wholesalers typically buy and store a drugmaker’s complete line of medications and sell them to pharmacies, hospitals and physician offices. Specialty distributors focus on specialty medicines for physician-owned and -operated clinics, hospitals and hospital-owned outpatient sites. Specialty drugs account for about 30% of full-line wholesalers’ revenue and most of a specialty distributor’s line, Fein said.
Umbehr posed his own challenge to the current insurance landscape as he touted his direct primary-care model to the senators. His company started consulting with physicians on setting up direct primary-care options about four years ago. He told lawmakers that the firm went from converting about one to two physician practices per month to a direct primary-care option to now coverting 20 to 30 practices per month.
He reiterated that direct primary care is not anti-insurance, but said that in the pursuit of lower costs people shouldn’t rely on insurance for low-cost treatments and drugs. They should reserve insurance for expensive care. He compared the universal use of insurance coverage to insuring windshield wipers as well as the car. ●