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Snake-Oil Vendors

What happens when medicines become too expensive to purchase? Simple medicines that have been prescribed for thirty years or more - antibiotics, antidepressants, immune suppressants, blood pressure medications, or any drug you might depend on to maintain your health. It does not take much to raise the price of a drug at the point of service in a pharmacy. All that has to happen is that the pharmacy benefit management plan (PBMP) removes a medication from their formulary (which is the list of medications the PBMP will reimburse the patient for using via the pharmacy). It is similar to an executive order written by the President of the United States of America. One stroke of a pen and a four dollar medication can morph into a two-hundred dollar one.

There are many forces that influence the price of a medication. On the most simple level, supply and demand seems to impact the cost somewhat. If a drug is in high demand and the supply has dwindled to small amounts, the price will rise. However, the cost of medications seldom follow the supply and demand model. In healthcare in general, the price of services, surgeries, office visits, medications, procedures, durable goods and many other necessities actually are priced at what the market will bear, similar to selling a piece of real estate. Location, location, location.

Large marketing firms have been established to help purveyors of healthcare services to price their activities in accord with what the market's established usual and customary fees. These prices seldom have anything to do with the cost of the service since most healthcare business managers seldom know what the true cost of a service is in relationship to all the other costs they provide. It sounds strange to most people who run non-healthcare related businesses that someone somewhere in a health care business would not know the cost of running their business, but these managers focus on the reimbursement side of their business, not the cost-effectiveness of their services. Unless they operate under cash, they seldom know the cost of doing business.

The pharmaceutical industry is very different. Drug companies manufacture medications and sell them to wholesalers who then sell the drugs to the retail stores: Rite-Aid, Costco, Kroger, and Walgreens are just a few examples. There are also a number of independent pharmacies scattered around that provide compounding services as well as selling some traditionally manufactured drugs. Many of these independent pharmacies set their prices by calling other independent pharmacies and getting an idea about what their competitor's prices are for similar compounds. It's a world of price fixing, but the independent compounders are most likely not in collusion with each other. They just make sure no one has a lower price.

These compounding pharmacies also hire marketing representatives whose job it is to visit physician offices and detail the doctors just like the larger drug manufacturers. The compounder's representatives sell the physicians on using topical creams and bio-identical hormones made from bulk powders as well as creams for pain management. Many times, the representatives leave behind prewritten prescription pads or prescription forms that can be used for patients. Much of their marketing information originates from large wholesalers of bulk powders or consortiums of compound pharmacists who publish small studies in esoteric journals or on internet websites. There is a plethora of junk science related to compounding, and it grows each and every day.

When a drug is on the formulary of a PBMP, the pharmacy filling the prescription will submit a bill to the PBMP as well as charge the patient a co-pay. The pharmacist may charge a single price for dispensing a prescription or break it down into two fees: a dispensing fee and a drug cost fee. Confused? You should be. This is the smoke and mirror pony act that pharmacies use to manipulate drug prices.

The PBMP reviews the bill submitted by the pharmacy and sanitizes the claim. It pays a certain percentage of the charge based on contractual agreements between the PBMP and the pharmacy. Patients seldom know what that negotiated reimbursement actually is. They just see the price of the medication on the paperwork and know they paid a greatly reduced co-pay for the medication. When a drug is off formulary, meaning the PBMP refuses to recognize the drug as a medication for which they will reimburse the pharmacy, the pharmacist will charge the patient whatever price they determine. The patient is considered a self-pay patient at that point. This is when the patient should walk away. The pharmacist will hammer them most times, charging outrages fees for the medications. This is not a result of the medication being expensive. It's a result of the pharmacist knowing that if the patient needs the drug, they will pay anything for it.

Recently, Armour Thyroid® has been removed from many PBMP formularies. There is no explanation by the PBMP as to why the medication was removed. It just happens. Many patients used to pay on average twelve dollars a month for the medication. Now the pharmacies are charging, on average, one hundred and twenty dollars for the same medication monthly. Our office can purchase a branded generic similar to Armour Thyroid® for about twelve cents a pill. Clearly the pharmacies are not in accord with acceptable retail pricing for a medication that is relatively inexpensive. If this was a gas station selling gasoline in this fashion, someone could file a federal law suit against them for price gouging. No such protection exists for patients depending on pharmacies for their medications. Doxycycline, an antibiotic that was given away freely by pharmacies several years ago, will cost one to two hundred dollars for a month supply. There are many examples of the pharmacies charging exorbitant prices for routine daily medications. Their response to inquiries by patients is relatively simple, "That price is a result of the drug company. Not us. Your PBMP took it off formulary. Sorry."
Or, "You can try something cheaper." As our new healthcare law continues to unfold, I suspect insurance companies in collusion with PBMPs will drop more and more medications from their formulary lists, forcing patients to shoulder the high cost of prescription drugs, as insurance carriers tout healthcare savings to employers and governmental agencies across the country. The cost of medicines has not dropped. It's just shifted to the patient, and it will rise because of greed.

Recently most PBMPs have declined to pay for any medication compounded from bulk powders. Why? Because of the cost. I have seen data from a regional PBMP that covered eleven patients receiving compounded hormones from local independent pharmacies. The cost was twenty nine thousand dollars monthly for just eleven patients. The average charge per patient was almost three thousand dollars. These patients also had to pay a co-pay for the creams. The out-of-pocket expense for the compounded creams was less than twenty dollars per prescription. Since the PBMPs discontinued reimbursement, the cost has dropped dramatically to about sixty to one hundred dollars per month per prescription. A woman can receive USP bio-identical estradiol in tablet form for about four dollars per month. There are no head to head studies showing superiority of creams to tablets as far as efficacy and safety. Bottom line, the high cost of creams to the patients are related to the pharmacists themselves and their insatiable thirst for the almighty dollar.

Tablets, capsules, creams, and patches are all important delivery systems related to the pharmaceutical treatment of disease. Patches are relatively new in the drug industry when compared to tablets, capsules and creams. I prescribe all of them at some point every day. I try to find the most cost effective delivery system to get the best possible result. In my opinion, that's what a physician should do when faced with treating disease since the patient may need to stay on a medication for life.

In the early days of American medicine, snake-oil vendors were on every corner. They each had a specially formulated tonic that could cure any illness. From what I see unfolding, snake-oil vendors are still around.

What's changed is how they do what they do and to whom they make their sales pitch; they tell doctors and patients that their specially formulated creams are better than those that are producing in their pharmacies. When the truth is none of them are better than the others. They're all made the same way.

But some are unnecessarily much more expensive.

Doc
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