Pricing Strategies For Prescription Drugs Essay

Generally consumers have very little bargaining power as medication is prescribed. Apart from US where there is pricing flexibility, governments in other markets enjoy substantial pricing leverage.

Looking forward, another interesting option for Canada would be the Group-based profit sharing programs. However their applicability in the short to medium term is unlikely because profit-sharing programs allow hospitals to provide bonuses to physicians based on hospital savings created when physicians coordinate their use of drugs and devices (quantity and market share discounts). That is, the more that a hospital purchases of a particular drug or device from a particular vendor/manufacturer, the more they benefit from quantity and market share discounts. Therefore, adding profit sharing programs to the current FFS system may provide a powerful way to align physician incentives with those of the hospital and of policy-makers. However, little is known about the effect of these programs on patient outcomes, as current regulation in Canada does not allow hospitals to pay physicians in such a manner. (1,2)

Within the formulary the drugs are divided into tiers. Co-payments are based on the tier that the drug is in and range from tier 1, the least expensive drugs, to tier 3 the most expensive drugs. Each insurance company plan is allowed to add or drop drugs from their formularies and move drugs from one tier level to another throughout the year. An insurance company can also drop a drug in the middle of the year, but must continue covering the drug for anyone taking it until the next reenrollment period, at which time a new plan will have to be chosen that covers that drug (Gustaitis, 2007). Although not used a lot there is a fourth tier that is for specialty drugs only. Some plans use a flat-rate or assign a percentage co-pay to the higher tier drugs (Gustaitis, 2007). Other characteristics of the insurance company plans that they have control over are requiring prior authorization for a drug, using step therapy, limiting the quantity, participating at certain pharmacies, and having preferred pharmacies (Gustaitis, 2007).

Many people are concerned about rising health care costs. In reaction to this, some individuals and companies are gravitating toward the assumed lower prices of Health Maintenance Organization (HMO) health plans. HMOs spend billions of dollars each year advertising their low cost services. While these savings look good on paper, there are many pages of small print. The explanation after the asterisk indicates that not only do the HMOs lack lower costs, but they also short-change the patient in quality care. Much of the money spent on premiums goes directly into the pockets of stockholders and less is then available for

Medicare, one of the greatest purchasing clients in the medication industry, is not lawfully allowed to bargain first hand with companies for lower medication costs or best possible price. (Kounang, 2015)

The HRSA allowed those eligible entities, even those with in-house pharmacies to contract with outside pharmacies, “In one year, from April 2010- April 2011, the number of contract pharmacy arrangements grew by 161 percent. Based on historical contract adoption rates, by 2019, 90% of DSH hospitals will have contracts with pharmacies as part of their 340B operations. Since, DSH hospitals account for 81 percent of total 340B sales; they will be the primary driver of 340B utilization growth through contract pharmacies,” (Vandervelde, 2014, & Avalere Health, 2011). Pharmacy expansion contracts were supposed to help small clinics without their own in-house pharmacy, but, it seems all 340Be entities are benefiting even the large non-profit hospitals. Hence, those clinics that are treating the uninsured and indigent are not truly the entities benefitting from the

: Insurance companies have the list of formularies that they agree to help cover but it is a tricky and a hassle to deal with. The patient must get a prescription of a similar drug first to make sure it works on them or even getting the doctor to prove that you need it. This is just to get coverage for an expensive drug. This can take weeks to do. It is a complicated list designed to give the patient the right drug for their conditions and that drug may not even be the first one that the doctor prescribes for them. It is a process to find out which one is right. When you fill a prescription of an approved drug of the formulary then you do not have to pay full price. Patients will have a copay through four different tiers. The first tier the patient pays a $20 copay on generic medications or a low cost medication, on the second tier, the patient pays a $40 copay for low cost brand names or a higher priced generic name drug. The third tier, the patient pays a $60 copay for brand name medication in which there is no generic, and the last and final tier which is number 4, the patient pays a $100 for the highest cost medication and/ or specialty drugs such as ones for chemotherapy. Some health care plan require the patient to pay full price for medication until they meet the deductible and then they can pay copays. Some formularies have coinsurance instead. The patient in these pays a percentage of

Prescription drug prices are on the rise in the United States. Currently, the United States does not implement a price control on prescription drugs. Every day the supply and demand for prescription drugs fluctuates. Pharmaceutical companies produce drugs that are necessary for survival. Therefore, it is necessary for research and development to continue in the United States. Those suffering the effects of exorbitant prices must do so until a generic form of a prescription drug is produced. Once approved by the FDA, new drugs will make their appearance on the market and patients will no longer suffer financially. Until then, it is necessary for pharmaceutical companies to price their drugs based on the idea of supply and demand. This produces the profit used to fund research. Price controls discourage innovation. If a price control were set in place, of course the price of prescription drugs would decrease. However, the development of new drugs decreases with it. Today’s generation would benefit from lower prices, while future generations would suffer from the loss of drug innovation.

The first quarter comparison of 2014 and 2015 suggests the success of Discounted MEDS. The APR rate within 30 days dropped 3.77% from the baseline. The APR percentage within 30 days due to medication non-compliance fell 3.9% to 1.91%, and the medication non-compliance due to affordability APR percentage plunged to 0.96%, which is a 1.94% decrease. Additionally, all rates were CRH’s best in the two studied years.

Develop payment strategies to reduce unwarranted price variation, such as reference or value pricing (e.g., analysis of price variation among network providers by procedure and service types, pilot value pricing programs,

Assuming the role of Ben Davis, write a three to four (3-4) page paper in which you apply the approach discussed in the textbook to this problem. You'll have to make some assumptions about the processes used by the HMO pharmacy. Also, please use the Internet and / or Strayer LRC to research articles on common problems or errors that pharmacies face. Your paper should address the following points:

The entry of lower-cost competitors will cause patients and payers to choose biologic treatment options to a greater degree. The net effect on pharmaceutical spending will depend on the relative magnitude of unit cost reductions and increased volume. First, there is limited evidence for the effects of increased volume, as most studies focus on the impact of lower unit cost. Second, the impact on unit cost is likely to apply across the fragmented U.S. health care system, while

Proper healthcare prices enable an organization to remain competitive in the market as well as provide a provided a sturdy financial foundation for the organization. Prices that are too low or too high can result in an organization losing business or unfortunately closing the business. Pricing should be conducent where the company can cover expenses, make a profit, and reinvest for other business related expenditures. In the journaled article “The Price Is Right, by Karen Corrigan it describes the lack of marketing strategies within the healthcare industry. The report suggests the importance of pricing within the healthcare industry and inclusion of marketing pricing strategies. Pricing strategies included regulated reimbursements, negotiated contracts in which I discussed earlier, and focusing on value pricing. “Value pricing will be a critical marketing skill for healthcare organizations in the new consumer-choice market. The switch to higher deductibles, tiered benefits, an individual’s health fund management through health savings account (HAS) represents consumers have more incentives to shop price as part of the overall purchasing decision process” (Corrigan, 2006). A healthcare organization that provides a variety of services along with well-adjusted pricing options guarantees the business will generate

PBM negotiates a contract with the pharmacies. Insurance companies negotiate with the PBM on reimbursement and what goes on the formulary. The patient would pay the insurance and the insurance would then pay the PBM to provide the prescription coverage. The PBM would reimburse the pharmacy for the drugs that are dispensed.

The Veteran’s Health Administration, VHA, uses a systematic government regulated pricing strategy for its pharmaceutical drugs service. The Pharmacy Benefits Management, PBM, service is in place to provide pharmaceutical services to beneficiaries of the VA. PBM’s of the VHA promote wellness, manage disease, ensure patient safety, and optimize health outcomes (VHA, 2015). PBM’s offer managed medication, emergency, and mail order services that help personalize healthcare. They also use research and technology to better serve the VHA and its beneficiaries.