Se­nate panel stud­ies by­pass­ing in­sur­ance plans to drive down drug costs

Modern Healthcare - - News - By Su­san­nah Luthi

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. ●

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