Push for Healthcare Price Transparency Mobilizes Industry

Push for Healthcare Price Transparency Mobilizes Industry

By Lauren Clason, CQ

A sudden push to shine a light on the shadowy world of medical prices is putting the industry on alert as hospitals, insurers and pharmacy benefit managers work to counter recent questions raised by lawmakers and Trump administration officials.

The pressure has largely targeted drug manufacturers and industry middlemen, like insurers and pharmacy benefit managers, that function as the gatekeepers for medical care. But lawmakers and officials are also taking aim at providers that either can’t or won’t provide patients with the true cost of a medical service.

President Donald Trump and Health and Human Services Secretary Alex Azar plan to unveil a drug pricing proposal in the coming weeks, which could contain a measure aimed at including patients in prescription drug rebates given to insurers and pharmacy benefit managers, or PBMs. Centers for Medicare and Medicaid Services Administrator Seema Verma also told reporters Thursday that upcoming policies will require more information about providers' prices.

"You're going to see us just get started on that with the payment rules but there's a lot more coming around that," Verma said. "When we look at the Medicare system, we all know that if you go to one place it might be cheaper than another place.... What we can do is make it more transparent to the consumer so they understand, hey, if I go here, it might be cheaper. So you’re going to see us do a lot on that.”

And Louisiana Republican Bill Cassidy, along with a bipartisan cohort of senators, is planning on introducing a bill targeting price transparency in the next several weeks.

Cassidy’s bill will focus on prices at the point of sale, according to his office. The senator has been in contact with Azar about the bill, and is shopping the framework to leaders of the relevant committees in both chambers.  

The ramped-up pressure has industry groups working to shape the coming proposals. The drug pricing plan from the Trump administration is just now in its “formative stages,” Mark Merritt, president of the Pharmaceutical Care Management Association, the PBM trade group, told CQ.

Merritt offered Azar a number of proposals the industry says would save billions of dollars, including speeding generics to market and eliminating protected classes of drugs where discounts are not allowed. Passing through drug manufacturer rebates in Medicare, he noted, is expected to cost the government $42 billion over 10 years.

“I’m not taking it lightly, but if you’re in health care, this comes with the territory,” he said. “Everybody is in the same place because there’s a lot of pressure to bring costs down, and we welcome that debate.”

Federal Officials' Warnings

Azar delivered stern remarks to multiple industry groups in recent weeks, identifying transparency from both payers and providers as one of his top priorities in what he called the country’s “bizarre third-party payer system.” He recently delegated a point person to handle price transparency, according to Cassidy’s office, but HHS did not return requests for confirmation.

“I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service,” Azar told the Federation of American Hospitals, a trade group of for-profit hospitals. “This is a pretty simple principle. We’ll work with you to make it happen — and lay out more powerful incentives if it doesn’t.”

The hospital industry, for its part, is working to introduce some level of transparency. The American Hospital Association recently assembled a toolkit for its members on how to improve consumer information and has endorsed legislation requiring hospitals to report pricing data.

Azar's warnings were echoed by Food and Drug Administration Commissioner Scott Gottlieb in a speech to America’s Health Insurance Plans, calling out the “Kabuki drug pricing constructs” negotiated between payers and drug manufacturers that he said encourage hefty price increases to “fuel the pricing schemes.”

Industry groups are quick to point the finger at each other over the sensitive nature of their contracts. Daniel Nam, executive director of federal programs for AHIP, told CQ the group is working to clarify the rhetoric around the concept of the “middleman” after Gottlieb’s speech. Passing on the rebates would allow drugmakers to better calculate the rebates of their competitors and elevate prices even further, Nam said. The list prices are the problem, he maintained, because it sets the conversation for discounts.

“One of the other things that I think we have to recognize is there are a lot of fixes in our system that need to be done, but we’re working with a system that has been developed and shaped over the last decades and decades and decades, so any sort of change, first, probably isn’t going to be immediate and probably shouldn’t be immediate,” Nam said. “We need to make sure it’s well understood and we need to make sure that the policies are going to be shaping things in the future the right way for decades to come.”

Nam said the insurance industry needs to be better at engaging with patient and community organizations, even if the groups are backed by the pharmaceutical industry.

“It does become a toxic environment at times,” he said. “But maybe we should just buck up and do it anyway.”

A recent study published in the Journal of the American Medical Association found that health care prices were the main drivers of rising medical spending. The U.S. spent about 18 percent of its gross domestic product on health care in 2016, compared with other wealthy countries that spent from 10 to 12 percent.

While transparency will help, consumer groups contend, further action will be necessary to make a dent in rising costs. Because consumers don’t purchase medical products and services directly, but rather through their employer, insurance company or the government, price transparency in and of itself is often unhelpful.

“Price transparency is an important tool, but it’s only one tool that has to be used in combination with others,” Niall Brennan, president of the Health Care Cost Institute, told CQ. “If we rely solely on price transparency to fix our problems, what we’re doing is placing responsibility of 20 to 30 years of unchecked cost growth on the least powerful people in the system.”