Expressing Value in an Era of Outlier Drug Pricing: Our Round Peg, Square Hole Problem

Pharmacy Times, October 2016 Diabetes, Volume 82, Issue 10

It seems that just about every month now, there is another public outcry in response to a new innovator product that is priced well above convention or to a dramatic price hike for a product that has been in the marketplace for years.

It seems that just about every month now, there is another public outcry in response to a new innovator product that is priced well above convention or to a dramatic price hike for a product that has been in the marketplace for years. Justified or not, these wild variations in existing product pricing, and sometimes jaw-dropping price points for new innovator products, cause employers, taxpayers, policy makers, care team members, and the public at large to furrow their brow at the entire pharmacy sector.

The result? Everyone in the sector retreats into their foxholes. Pharmacy benefit managers respond with utilization management processes, relying more on leverage for rebates, or even delisting the drug from their national formulary. Manufacturers respond with increased lobbying, direct-to-consumer advertising, and greater emphasis on select providers and provider groups to initiate high-priced therapies. Community pharmacies say, “It wasn’t me. I had nothing to do with this, but we can help you with therapeutic interchange and keeping drug costs down!” Thus, the expression of value that the pharmacy sector brings health to hundreds of millions of lives gets confused, muddled, and off course.

According to the most recent data, outpatient retail prescription drug costs remain at or below 10% of our total national health care expenditure (Figure1), roughly the same as it was in 1960.2 The vast majority of drugs on the market are remarkably affordable for the value potential they have. We dispensed more than 3 billion prescriptions last year, at a generic dispensing rate exceeding 80% and an average cost per generic fill hovering around $20.3

Pharmacy benefit managers, manufacturers, and policy analysts spend an enormous amount of time and resources, as well as hundreds of millions of dollars, in justifying, denying, and otherwise lamenting the costs of various drugs individually, by class, and in aggregate. An epic, seemingly never- ending battle over what should be covered and at what levels of reimbursement burns red hot—all to achieve one objective: spending the appropriate amount for a product.

However, the product often fails—not because of lack of inherent promise to deliver better health, but because of the real-world environment in which it must be used. Among the hundreds of barriers to optimal drug use are patient nonadherence, lack of proper titrations, inadequate dosing or monitoring, undertreatment, contraindications and conflicting regimens, poor coordination, intolerable adverse effects owing to suboptimal use or administration, failure to discontinue, failure to reauthorize, polypharmacy and other drug misadventures, lack of patient understanding, dose too high, dose too low, overuse and abuse, and, of course, inability to pay.

We make a $300-billion annual investment in the procurement of medications in the community to improve and extend life,1 but we spend practically nothing to optimize their use. That makes little sense economically and humanistically, but in every instance where momentum begins to build toward socializing the recognition of this important care gap in our health care system, another outlier pricing story hits the news and drowns out the conversation. Subsequently, funding medication optimization programs takes a back seat to drugcost minimization.

Meanwhile, most patients are prescribed generally affordable drugs and rarely realize the full promise of those medications. If we directed even 1% ($3 billion) of the amount we spend on procuring a product to services meant specifically to optimize the use of those medications, how much more health and well-being could be gotten? How much could be saved in nondrug expenditures?

Skepticism abounds about the value of medication therapy management, perhaps rightly so since we’ve yet to see program implementations at scale that are well aligned with the purchasers of these programs. Unfortunately, this nascent set of services has yet to find financiers at scale whose profit and loss are driven primarily by increased health trajectory, not drug cost minimization. Round peg ... square hole.

Fortunately, there are a few emerging signs of breaking through the wall that divides drug costs from medical costs. The Enhanced Medication Therapy Management program endeavors to incentivize Medicare Part D programs to reduce Part A and Part B costs. Sunflower Health Plan, a Medicaid plan in Kansas, recently announced an enhanced fee for community pharmacy accreditation. Other pilots and demonstrations are emerging, as well, that include clinical and global outcomes that allow pharmacy to express its intended value. Hopefully, that outlier drug pricing won’t take the oxygen out of the room if these programs are successful.

Troy Trygstad, PharmD, PhD, MBA, is vice president of Pharmacy Programs for Community Care of North Carolina (CCNC), which works collaboratively with more than 1800 medical practices to serve more than 1.6 million Medicaid, Medicare, commercially insured, and uninsured patients. He received his PharmD and MBA degrees from Drake University and a PhD in pharmaceutical outcomes and policy from the University of North Carolina. He also serves on the board of directors for the American Pharmacists Association Foundation.


  • CMS, Office of the Actuary, National Health Statistics Group. The nation's health dollar ($3.0 trillion), calendar year 2014, where it went. CMS website. Accessed September 12, 2016.
  • Centers for Disease Control and Prevention. Table 103 (page 1 of 2). National health expenditures, average annual percent change, and percent distribution, by type of expenditure: United States, selected years 1960—2013. CDC website. Accessed September 12, 2016.
  • Look back, moving forward: 2014 report on prescription drug costs. Prime Therapeutics website. Accessed September 12, 2016.
  • Aitken M, Berndt ER, Cutler D, Kleinrock M, Maini L. Has the era of slow growth for prescription drug spending ended? Health Aff (Millwood). 2016;35(9):1595-1603. doi: 10.1377/hlthaff.2015.1636.