Revolutionary drugs call for revolutionary pricing strategies – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading From The Field Exclusive News
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
From The Field Exclusive News
From The Field Exclusive News RSS Get our newsletter
Order Prints
January 13, 2023 From The Field Exclusive News No comments
Share
Share
Tweet
Email

Revolutionary drugs call for revolutionary pricing strategies

By Girisha Fernando

The consumer price index has been shooting up, but the real inflation story is in prescription drugs. While prices in the general economy were up 8.5% year-on-year in July, drug inflation for that period was over 30%. A Harvard study shows that nearly half of new drugs marketed now cost $150,000 or more annually. 

 

Girisha Fernando

The rate of increase is clearly unsustainable; insurers will, of course, pass increased costs onto consumers and organizations that buy insurance for employees and members. With higher drug prices come higher insurance premiums, as providers seek to recoup the ever-increasing expenses they face – and especially to cover the cost of a large coming wave of new, innovative specialty drugs, often based on advanced gene technology and aimed at specific diseases and conditions. A solution will have to entail an overhaul of the way insurers pay for drugs – with value-based pricing, where pricing is based on data that determines the real effectiveness of a drug - among the best solutions available. 

Related stories

  • Why your client’s income is important enough to protect
  • The added perks of boosting workplace benefits

 

A study by the California Department of Insurance, for example, showed that in 2017, specialty drugs – newly-developed treatments for relatively rare conditions– accounted for about 3% of all prescriptions written in the state, but cost insurers nearly half their drug outlay that year. And the bill for those drugs – in California and elsewhere – has only likely gone up, as a number of even more expensive drugs have been developed since then. And to make matters worse, experts say that pharmaceutical makers in 2023 are likely to raise prices they charge private health insurance plans – because of the impending price limits they can charge Medicare as a result of the Inflation Reduction Act.

 

As prices go up, calls for regulation and cost ceilings will rise as well – and insurers may find themselves holding the short end of the stick, paying pharma makers high prices for their drugs, while limited in their ability to charge customers higher rates. Clearly that's not a sustainable business model. Currently, the only relief for insurers are rebates pharma makers give them against list prices of drugs, but here, too, the costs remain high and are at best just shifted around, industry experts say.

 

Is there any way to ensure fair prices – both for insurers and consumers? Some look to the Inflation Reduction Act, and the power it (finally) gives Medicare to negotiate drug prices, as a solution to high drug prices. But as we have seen, the plan is not foolproof; drug companies could shift the profitability from drugs with mandated, negotiated prices to drugs that are purchased by doctors and hospitals without negotiations. And if among those drugs are the high-priced gene therapy treatments, then premiums and expenses – both for insurers and premium payers – will only continue to rise.

 

But if that negotiation model were expanded to all drugs – especially the expensive ones – insurers, whether private businesses or government programs like Medicare and Medicaid, would be able to provide full coverage without breaking the bank. This system, integral to value-based drug pricing, would enable all patients to have access to the drugs they need, and ensure that the “right” price is paid for a treatment. 

 

Those negotiations can be based on the effectiveness of a drug, with higher prices charged for drugs with better outcomes. New data analysis capabilities based on advanced AI and machine learning, enable all those involved in treating patients - hospitals, caregivers, insurance companies, and governments – to derive insights about outcomes from specific drugs. Armed with that data, insurers can work with pharmaceutical makers to determine what the “real” price of a drug should be, based on how it reduces long-term healthcare costs. For example, a treatment for an advanced cancer that puts patients in remission for an extended period of time – saving the caregiver, and insurance provider, the cost of ongoing treatment – will be “worth more” according to this formula. 

 

And with the savings generated, caregivers and insurers will be able to ensure that more patients get access to these life-saving treatments. A good example of this is the advanced therapies being developed for sickle-cell disease. Medicaid currently covers 70% of sickle-cell patients. The disease brings in its wake many negative consequences – from high disability and unemployment rates to high rates of depression to heavy use of opioids, all of which take not only a terrible human toll, but present society with a very high bill. 

 

Advanced gene therapies that have shown good results are being developed in the lab, but they are likely to be expensive. But based on advanced data analysis, it will be easy to discover just how much these therapies are worth; if they significantly reduce the pain of patients, free them from ongoing treatments, and enable them to avoid depression and pill addiction, they will not only benefit patients – they will benefit payers , and overall reduce the cost of care. Those saved resources can then be plowed into expanding treatment for sickle-cell patients – or be used to help patients suffering from other debilitating diseases.

 

Pharmaceutical makers, too, realize there is a problem with drug prices, and some are working with insurers to reduce the cost of some of their most expensive treatments. But the best solution would be one that could be applied to all drugs – especially the most expensive ones. It's up to all players involved to arrive at a solution – before the government does it for them.

 

Girisha Fernando is founder and CEO of Lyfegen. He may be contacted at [email protected]

© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

 

Older

CEO survey: Recession is the biggest worry in 2023

Newer

AHIP focusing on health care affordability and accessibility in 2023

Advisor News

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%
  • 1 in 3 Americans struggling financially but goal-setting is a game-changer
  • Advisors bet on US stocks to outperform in 2023 amid tech rebound
  • Investors want more ESG information from companies
More Advisor News

Annuity News

  • Study: Does pessimism really suppress annuity sales?
  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
Sponsor
More Annuity News

Health/Employee Benefits News

  • State: all insurers failed to comply with Oregon Reproductive Health Equity Act
  • Will plan fix California health care?
  • Insurance giant Elevance to move into 15th state
  • Medicare card scam targets seniors for personal info
  • Yes, states are re-checking Medicaid and CHIP eligibility starting in April
More Health/Employee Benefits News

Life Insurance News

  • Maid's son tells judge Alex Murdaugh took $4M for her death
  • Chris Wilson tells court former friend Murdaugh confessed he was ‘stealing money’
  • State's motive testimony could prolong Alex Murdaugh murder trial
  • Equitable expands portfolio in VUL market
  • New date set for billionaire suspect accused of bribing state cabinet member
More Life Insurance News

- Presented By -

Top Read Stories

  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • Gov. Carney: Enrollment on Delaware's Health Insurance Marketplace for 2023 Reaches All-Time High
  • 25 people charged in fake nursing diploma operation
  • Connecticut addressing broker shortage amid The Great Unwinding
  • Missouri Department of Insurance: Over $24 Million Returned To Missouri Insurance Consumers In 2022
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.