The prices we, as patients, pay for medicines, are hardly the real prices. Instead, they are the negotiated rates with the payer one side of the negotiation, and the drug manufacturer on the other side. The payer is often either a private insurance company or the federal or state government. Also, on the other side, sometimes there is a pharmacy benefit manager who acts as a middleman. We, as customers, are in the middle of this negotiation though we have no role in it and just trust the payer to negotiate the most reasonable price for us because it will benefit them, too. But that might not be the whole story.
New York Times published an article with the headline ‘Prescription Drugs May Cost More With Insurance Than Without It’. The article pointed out that contrary to the common belief, insurance does not reduce the cost of our medication. It gives an example of someone who found out his cholesterol drug was $84 with his Medicare, but without it, the drug cost $46.
According to the article, since negotiations involve many different parties, including the drug company, the pharmacy, the insurer, and the pharmacy benefit manager, the customer is often forgotten. But the article makes an interesting point: the negotiated prices usually save money on brand-name drugs, which typically cost more than other drugs. The story also estimates that getting a better deal without insurance is possible only 10% of the time.
This is a transcript from the video series The Skeptic’s Guide to Health, Medicine, and the Media. Watch it now, on The Great Courses Plus.
How Do Doctors Decide about Prescriptions?
Most of the time, patients buy prescription medications based on what their doctors prescribe. Since the physicians do not know the prices or profit margins, they prescribe the best medicine as it does not involve any personal profits for the doctor.
But according to a story from the New York Times, doctors receive gifts from drug companies and ‘The More Lavish the Gifts to Doctors, the Costlier the Drugs They Prescribe’. the Times quotes a 2017 study that reveals the gifts that doctors receive from drug companies influence their prescription habits. These gifts are legal, but the companies are required to report them to public databases. Using data from those databases and data from companies that track prescribing habits, the study correlated the gifts and the prescriptions.
According to the study, nearly 60% of the doctors did not receive any gifts. But the other 40% were influenced and, on average, wrote twice as many prescriptions for those specific medications. Interestingly, their prescriptions cost the patients an average of 60% more. The senior author of the study concludes that ‘You shouldn’t see doctors who see drug reps’.
In an article published on STAT, a medical news site, physician Robert Yapundich defended drug reps and their role. He gave them credit for helping busy doctors stay up-to-date by providing them with educational materials and the latest information. But it was revealed that Yapundish hadn’t written the article. He had received over $300,000 from a pharmaceutical company, and a public relations firm had written the article under his name.
What is interesting about this story is that the details were revealed by ordinary people on twitter, not by a major news outlet. Pharmaceutical companies are required to report payments to doctors on the public Open Payments database, and that’s where people accessed the information. The public attention to the payments made behind this article was so much that STAT finally retracted the article. STAT went on to modify its authorship and transparency policies. This is because the information is accessible by the public, and there are people out there who are interested in revealing the truth. The role of public media is still significant, but they are no longer the only source of such information.
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Medications and Media Advertising
The role of media advertising is also significant in drug prices. The advertising on brand-name drugs and generic companies in 2015 cost $5.5 billion and $5 billion, respectively. But there are tight regulations on these types of advertisements. The advertising agencies find clever ways to circumvent these regulations
An interesting example regards advertising a drug called Selden, an allergy medication. The NPR reported this case in their article ‘Selling Sickness: How Drug Ads Changed Health Care’. This drug had a lot of side effects, and they couldn’t advertise it because they had to list all of these side effects. So, they decided to run the ad without mentioning the name of the drug. They finished the ad with ‘Your doctor now has a treatment that won’t make you drowsy. See your doctor’. This ad led to a significant increase in sales of Selden from $34 million a year to $800 million a year. This is how the media can reveal the tricks behind this whole medication business.
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Common Questions about the Role of Media in Revealing Tricks in the World of Medication
Medication prices are determined through negotiations among various parties. They include the drug company, the pharmacy, the insurer, and the pharmacy benefit manager.
There are very tight regulations for advertisements regarding medications. For example, they have to list all possible side effects.
Media advertising for medications is a huge business. For example, in 2015, the advertising on brand-name drugs and generic companies in 2015 cost $5.5 billion and $5 billion, respectively.
Many factors are involved in determining the price of drugs. The pharmaceutical companies state that the high costs of development affect the list prices. Also, many parties have a role in negotiating medication prices.