Comparing International Drug Prices to Prices in the United States

Many studies have examined the pricing differences in prescription drugs between the United States and other countries around the globe. Those studies have consistently found that the U.S. is paying more for prescription medications than our global peers.

For years, policy proposals at both the federal and state levels have sought to address the affordability of prescription medications in the U.S. by accessing international prices.

At times, these proposals have been to benchmark U.S. drug prices to international prices. Other proposals have sought to directly source the medications internationally at their lower cost rather than through using the existing U.S. distribution system. Overwhelmingly, studies of international prices have resulted in aggregate figures of savings but have been sparse on which drug prices are actually producing the savings.

In this report, we undertook a study of international drug prices that sought to not only confirm that international prices remain cheaper than the prices incurred by prescription drug programs in the United States (like Medicare), but to provide transparency around price differentials on a product-to-product basis.

3 Axis AdvisorsApril 14, 2023Drug Pricing, International drug prices, rebates, Medicare, Australia, Canada, WAC

Understanding pharmacy reimbursement trends in Oregon

Oregonians, like many Americans, currently experience hardships due to high healthcare costs. A 2021 survey of Oregon adult residents found that 55% encountered cost-related barriers to getting healthcare, including cutting medication in half, skipping doses, or not filling a prescription due to cost. It is well documented that the United States spends enormous sums on healthcare. And while the common perception may be that “you get what you pay for” in regard to health outcomes, the data does not support that perception with regards to U.S. healthcare. The reasons for the low performance are undoubtedly multi-factorial, but an area of increasing interest is disparities of care, which arise based on social characteristics of a population. Indeed, one of the primary goals of the Centers for Disease Control and Prevention (CDC) is to achieve health equity by eliminating health disparities and achieving optimal health for all Americans.

While prescription drugs represent just one component of healthcare costs and utilization, they provide one of the most transparent ways to contextualize potential healthcare inequality. This is because the reimbursement structure of prescription drugs is inherently unequal. There are more than a dozen pricing benchmarks that could be utilized from a typical drug reference file to determine a drug’s price. Such benchmarks might be “objective” in that they could be sourced from a drug reference file directly, but rarely does that objectivity translate into a consistent price at the pharmacy counter for any particular drug. The options for how to pay for drugs become nearly limitless when you consider that each payer for prescription drugs potentially pays for the same product and service in a different way despite the same reliance on the same pricing benchmarks. When there are many prices for a product, there is effectively no price for that product.

The disparities in pharmacy pricing and the inequality of payment experienced across provider types resulted in 3 Axis Advisors being commissioned by the Oregon State Pharmacy Association (OSPA) to review reimbursement trends between payers and retail pharmacies between 2019 and 2021. The primary request was to identify if there may be the existence of differential pricing in payment or PBM-to-pharmacy spread pricing among Oregon Medicaid retail pharmacy networks, which could compromise the sustainability of some providers and create barriers to care for many Oregonians.

We ended up uncovering so much more.

Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers

Pharmacy benefit managers (PBMs) are situated at the center of the U.S. pharmaceutical ecosystem, overseeing pharmacy benefits on behalf of payers, including employers, multi-employer and other health plan sponsors, and public and private insurers, for the vast majority of individuals with prescription drug coverage. While the primary role of PBMs is to provide administrative services to payers, revenue flows to PBMs from multiple stakeholders in the supply chain, not just their clients. Given that PBMs claim to be the “only members of the prescription drug supply chain that are working to lower drug costs,” discussions concerning PBMs’ impact on the market can be informed by a better understanding of the overall financial incentives driving PBM behavior, as well as possible sources of conflict with their assertion. This analysis reveals that PBMs utilize multiple avenues and business activities to exert influence over, and derive revenue from, others in the pharmaceutical supply chain.

3 Axis AdvisorsDecember 2, 2021PBM, Drug Pricing, rebates, Spread pricing

Pharmacy Reimbursement Trends in Massachusetts

The Massachusetts Independent Pharmacists Association (MIPA) commissioned 3 Axis Advisors, LLC (3 Axis) to investigate pharmacy reimbursement trends following the Massachusetts Health Policy Commission (HPC) published a DataPoints issue titled, “Cracking Open the Black Box of Pharmacy Benefit Managers.” This report further explores the concerns raised by HPC including investigating PBM “spread” pricing, underwater claim reimbursements, high cost specialty medication trends and more. Overall, this study presents strong evidence that current pharmacy compensation is, by Massachusetts’ own standards, not appropriate. The transparency on the data and methods, combined with ample education on the inner workings of the drug supply chain provided in this study, should assist Massachusetts in achieving its goal of providing “appropriate compensation for both pharmacies and PBMs.”

Sunshine in the Black Box of Pharmacy Benefits Management: Florida Medicaid Pharmacy Claims Analysis

Much of our previous state Medicaid program drug pricing work has been concentrated on diagnosing and sizing a largely overlooked practice called “spread pricing.” The tactic, typically deployed by pharmacy benefit managers (PBMs), involves a PBM paying a pharmacy one price for the dispensing of a prescription, billing a different rate back to a plan sponsor, and pocketing the difference as a spread. As this massive cost-driver is eliminated from state Medicaid programs across the country, 3 Axis Advisors was asked to analyze 350+ million claims worth of pharmacy data in the Florida Medicaid program to assess spread’s influence on the state’s drug costs. Our analysis found very little spread pricing in the program up until 2019, where it appeared to be all but eliminated. However, in our research, we found a slew of other perplexing practices embedded in the prescription drug supply chain that highlight several warped incentives, pricing distortions, and conflicts of interest that stand to drive up costs and compromise robust provider access. As spread pricing is eliminated from more state programs, this report highlights how PBMs and MCOs pivot their pricing and management of pharmacy benefits in a post-spread world.

3 Axis AdvisorsJanuary 30, 2020Medicaid, Managed Care, Florida, Centene, WellCare, Drug Pricing, CVS, Pharmacy, Specialty, rebates

Purple Haze: How a little purple pill called Nexium exposes big problems in the U.S. drug supply chain

In 2018, the U.S. Department of Health and Human Services (HHS) released a report detailing Medicare Part D spending on brand-name drugs that were also available as multi-source generics. At the top of that list was a popular medication known as Nexium, for which Medicare spent $1.06 billion (pre-rebate) in 2016, despite its manufacturer losing its patent exclusivity in early 2015.

Motivated to understand the root cause of the elevated spending on this high-profile brand-name drug in 2016, we started to research the story of Nexium, and the old drug from which it was derived, Prilosec. We struggled to find a comprehensive overview of the entire Nexium story that was supported by data and analytics needed to fully understand its many moving parts. To fill this void, we received funding from Waxman Strategies through a grant provided by Arnold Ventures to complete and publish this work. Our goal was simply to provide a full data-driven analysis of the Nexium story to help educate lawmakers and the general public on how a drug commonly viewed as a line extension first became a blockbuster drug for AstraZeneca and then exposed a host of warped incentives across the U.S. drug supply chain that continue to be exploited today. The information in this report can serve as the foundation for a more constructive debate on what regulation is needed to help reduce waste in the drug supply chain without sacrificing innovation.

info@3axisadvisors.com

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