This month, Congress sent the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act of 2018 to President Trump’s desk for signature. These bills, which were sponsored by Sens. Susan Collins (R-Maine) and Debbie Stabenow (D-Mich.), help protect Medicare patients and those with private insurance from overpaying for prescription drugs by outlawing pharmacy “gag clauses.”
In some cases, a patient’s copayment may be more than the cost of a prescription medication, making it less expensive for patients to pay cash for the drug than to use insurance. Gag clauses are agreements between health plans or pharmacy benefit managers and pharmacies that allow pharmacies not to disclose that customers they can save money by paying for their medicines out-of-pocket.
{mosads}Sen. Collins, who is the chairwoman of the Senate Aging Committee and serves on the Senate Health Committee, has worked with colleagues on both sides of the aisle to investigate causes of the high costs of prescription drugs and propose solutions to enhance their affordability and accessibility. The bans on gag clauses passed overwhelmingly with bipartisan support.
Nobody knows for sure how often patients pay their insurers more in copayments than the costs of their medicines. The Pharmaceutical Care Management Association, a trade organization that represents pharmacy benefit managers, is on record as opposing gag clauses but claims they are rare.
However, a University of Southern California study released this year suggests it may be common. In 2013 the authors found that nearly a quarter of pharmacy prescriptions involved a copayment that was greater than the average sale price of the drug. These overpayments are also known as “clawbacks.”
Given the estimated $348 billion dollars in retail spending in 2016, this could represent an enormous transfer of funds from consumers to pharmacy benefit managers and insurers. In a 2016 survey by the National Community Pharmacists Association (NCPA) a whopping 35 percent of pharmacies reported witnessing overpayments more than 50 times the previous month.
Elimination of gag clauses has been a priority of the Trump administration’s efforts to increase transparency in drug pricing and lower costs for patients. In fact, Medicare policy already requires that Plan D sponsors ensure that enrollees pay the lesser of the negotiated Part D price or the co-pay. However, the NCPA survey indicated that this requirement is sometimes ignored.
In a May 17 letter to sponsors of Part D plans, Centers for Medicare and Medicaid Services Administrator Seema Verma reinforced this policy, writing, “We want to make it clear that CMS finds any form of ‘gag clauses’ unacceptable and contrary to our efforts to promote drug price transparency and lower drug prices.”
Further, Verma informed plans that their network pharmacies must disclose the difference between the Part D drug price and the price of its lowest cost, therapeutically-equivalent generic version.
States have also been active in legislating to ensure that pharmacists can tell patients when it is cheaper for them to buy their medicines outright rather than utilizing insurance. As of August 2018, at least 26 state legislatures had prohibited insurance plans and pharmacy benefit managers from instituting gag clauses. Collins’ bills fill the gap, extending this fundamental patient protection nationwide.
Many experts blame the overall lack of transparency in the bio-pharmaceutical supply chain as a key contributor to our escalating drug prices. Elimination of gag clauses takes an important step in the direction of transparency and helps to ensure that patients understand their most cost-effective options for purchasing needed medications.
Dr. Roger Klein, MD JD is a molecular pathologist and attorney in Cleveland. He is a member of the Regulatory Transparency Project’s FDA and Health Working Group. He is a former advisor to the FDA and HHS. Dr. Klein graduated from Yale Law School and completed his postgraduate medical training at Yale Medical School.