Health Care Price Transparency/Pharmacy Benefit Managers

WM: Hearing on Health Care Price Transparency: A Patient’s Right to Know, May 16, 2023 

My personal experience is as an uninsured individual during the time when I was married and adding me to my wife’s insurance would have been cost prohibitive. Worker and child policies were much cheaper than family policies.. During that time, I never saw an upfront price, except when I tried to take advantage of the Affordable Care Act’s right to a colonoscopy. Apparently, unless you have insurance, it is not a right. The initial consultation was made before that little detail was ironed out. Needless to say, no procedure was completed.

During that time period, my primary care physician ordered a stress echocardiogram with my cardiologist because there had been a problem with an EKG (mostly due to getting a lead seated). On the initial visit, they ran another EKG with no issues, but did the procedure anyway - but with no pricing provided. Because I previously had my adrenal gland removed and my high blood pressure had resolved and my heart muscle was actually in better shape than a few years before. Then I saw the bill. It went on my tab.

When I was hospitalized at a later date, INOVA waived hospitalization charges. They did not waive added consultations and testing. There had been no disclosure on what was not covered or any opportunity to request that it be added to the free care side of the ledger. That was also added to my tab.

This mythical tab existed in the computer systems of various collection agencies and group practices that had never quoted me a price. When the value of the condominium we purchased at the top of the market in 2006 was half of our debt - and because we both lost jobs when the debt deal led to budget cuts in training for government personnel (leading to job loss), we stopped paying our mortgage and this resulted in Chapter 13 bankruptcy. 

Because the marriage was ending, no further payments were being made during that period - which is not allowed, so we shifted to Chapter 7, turned in the keys and started  divorce proceedings. My “tab” was settled in bankruptcy. Had there been disclosure before service, some pricing would have been changed or free care insisted upon. The unwillingness of doctors to do so simply resulted in the true costs being shifted to other payees. Whether cost shifting or price shifting is a more interesting question. There is a lot of margin built into private healthcare.

Finance: Pharmacy Benefit Managers and the Prescription Drug Supply Chain: Impact on Patients and Taxpayers, March 30, 2023

The next comments rely on my experience as a member of the Cost Management Systems project of what was then called Computer-Aided Manufacturing – International, now the Consortium for Advanced Management – International. The project produced Cost Management for Today’s Advanced Manufacturing. I created a handbook based on the project, the U.S. Air Force Orientation Guide to Advanced Cost Management.

A key concept in cost management, supply chain management and cost accounting is non-value added cost. Pharmacy Benefit Managers are a non-value added cost. While they do have an impact on the price manufacturers can charge, they are the primary, if not the sole, beneficiaries.

As I learned as a proposal manager in the public sector contracting world, price and costs are different things. Healthcare is not a cost problem, it is a pricing problem and the lack of transparency means the problem must be faced by the uninsured or by employers.

The answer to this problem is some form of single payer healthcare, whether it be through Medicare for All, an expanded Public Option (to replace Medicaid) or having employers pay for medications, healthcare workers (and education) and specialist/hospital care either directly or as a part of the organization. Please see our Single Payer Attachment for more on this issue.

The other significant driver of drug prices is the question of funding orphan drugs. The answer is easy. Keep control of orphan drug intellectual property in the hands of the National Institutes of Health. Let them, and other agencies such as the National Science Foundation, fund grants and research contracts to generate breakthroughs, as well as to manage clinical trials for FDA approval (if appropriate for the population that needs the drug). When the drug is approved, NIH can then contract for its manufacture and distribution. 

This methodology will get more done faster, without relying on profiteering to do what is necessary to help our most vulnerable patients.

Attachment: HHS Budget, F Y 2022 Video