Would anyone want to pay 10, 50 or even 100 times more for an item that is nearly identical to another one priced significantly lower? Seems improbable. And yet, altogether too often, this is exactly what happens with some prescription drugs with payers and their plan members bearing the brunt of the cost impact from this. This is because some manufacturers artificially inflate the price of drugs – sometimes exponentially – even when clinically equivalent alternatives, that are also much more cost-effective, are readily available.
Often times the only difference between the high-priced medication and the more affordable alternative is a slightly modified formulation – a capsule instead of a tablet – a different dosage, or even just a new name. For example, chlorzoxazone, a muscle relaxant, is priced at $2,536 for 30-days' supply compared to a nearly identical medication that costs $1.64 for the same duration.
"That kind of exponentially higher price tag is completely unjustified when a significantly more affordable and clinically equivalent alternative exists," said Prem Shah, Executive Vice President of Specialty Pharmacy and Product Innovation, CVS Health.
And unlike many other common purchases, consumers do not have the opportunity to comparison shop for prescription medications. Instead, they rely on their provider to prescribe, and pharmacy to dispense the most affordable, clinically effective treatment. That means consumers, and their benefit plans end up footing the bill for the bad practices employed by some leading to medications with wildly inflated price tags. This is where CVS Caremark, as a pharmacy benefit manager, is the first line of defense.
"Unjustified price hikes on medications go beyond any one member or client. Left unchecked, dispensing of these unnecessarily high-cost drugs can quickly compound to raise overall costs for everyone," Shah said. "We consider it our responsibility to help mitigate their impact on our clients' pharmacy spend and their members out-of-pocket costs."
As the PBM for one third of all Americans, CVS Caremark takes a proactive strategy to managing such overpriced – also known as hyperinflated – drugs.
"We utilize advanced data analytics to proactively look for medications priced significantly higher than clinically equivalent alternatives, and remove them from our managed formularies," added Shah.
In 2020 alone, CVS Caremark identified and took action against 72 medications with unjustifiably inflated price tags. This included an anti-fungal medication called posaconazole, which costs an alarming $4,500 for a month’s supply compared to a readily available alternative called fluconazole, which costs $14.
Adding to the negative cost impact of such drugs is the practice by some pharmacies to dispense high volumes of these drugs.
"Our proactive monitoring shows that there are select – what we call "outlier" – pharmacies that have a pattern of dispensing these high-cost drugs to raise their own profits," Shah shared.
When CVS Caremark identifies such pharmacies, they are given the opportunity to correct their behavior, Shah said. If they don’t, they can face disciplinary action including, and up to, removal from the pharmacy network.
This approach to defending against artificially highly priced drugs has helped mitigate their impact on payor and patient spend. In 2020, CVS Caremark’s hyperinflation strategy helped lower annual spend for its clients on such medications by $1.2 billion compared to 2018.
"Our responsibility is to make sure our clients are protected from unnecessarily high costs and our members get the right treatments at a reasonable cost." said Shah. "Ending these practices completely requires more than any one company or organization can manage. But when we see such egregious practices by others to raise their own profits at the expense of payors and patients, we take action to stop this behavior wherever, whenever possible."