How to control prescription drug costs

Regulatory barriers, financial incentives promote wasteful spending

Choosing costly prescription drugs over cheaper alternatives drains Medicare of $29 billion per decade, a June Health Affairs study found.

Case in point: Doctors prescribe Avastin and Lucentis (ranibizumab and bevacizumab) to treat causes of blindness in Medicare beneficiaries. Made by the same company, these drugs are similarly safe and effective; but Avastin costs $55 per dose while Lucentis costs $2,023.

Patients may need up to 12 doses per year, and Medicare paid $2 billion for these drugs in 2010. If beneficiaries received Avastin instead of Lucentis, Medicare could save $18 billion and patients $5 billion in 10 years, with $6 billion in additional savings, the study concluded. But there's a thicket of briars blocking those savings.

First, prescribing Avastin to help prevent blindness is considered an "off-label" use since the drug was originally developed and approved to treat cancers. Its manufacturer, Genentech, won't seek approval from the U.S. Food and Drug Administration to market Avastin to treat eye problems, Vox reported.

Further, financial incentives may cause providers to favor the costlier drug. A dose of Lucentis nets a prescriber $95 dollars versus $29 for Avastin, Vox noted. Medicare's high reimbursements to ophthalmologists--recently publicized in 2012 provider payment data--largely stemmed from Lucentis use, the article noted.

Payer can embrace several strategies to manage prescription drug costs, as noted in CVS Caremark's 2014 Insights report. For example, they should maximize generic drug opportunities, the report suggested, and see if specialty medications are more effectively managed as pharmacy (as opposed to medical) benefits. With cost conscious customers increasingly willing to sacrifice provider access to save money, payers should consider narrowing networks. Plans also should align prescription drug cost sharing requirements with overall business goals and embrace "whole patient care" to cut hospital admissions, readmissions and emergency department visits, the report noted.      

For more:
- here's the Vox article
- see the Health Affairs study abstract
- here's the Insights report (.pdf)

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