The United States is a highly competitive retail market of prescription pharmaceutical products. There are no limitations on the price a company can set for its new drug; prices reflect what the manufacturer thinks the market is willing to pay. However, to obtain optimal reimbursement for your product, you must understand that the ecosystem is complex – one of the most complex in the world.
US Payer Stakeholders
The three primary US payers are governments, employers and individuals. The public sector is the largest single payer, but private payers cover more than half of those who have health insurance. The Affordable Care Act (ACA), or “Obamacare,” has increased the government’s payer role, but it has not yet surpassed the size of the private system.
The combined federal and individual state governments pay prescription drug benefits primarily through one of two public insurance programs, Medicare and Medicaid.
Medicare is the federal health insurance program for people over age 65 and people under 65 with long-term disabilities. It is comprised of three parts:
- Part A (hospital services, supplies and drugs dispensed during inpatient care)
- Part B (outpatient clinics, doctor offices and payment for some cancer drugs)
- Part D is the Medicare prescription drug benefit
Medicaid is the government-funded health program that serves the poor. Each of the 50 states is responsible for the majority of funding for Medicaid, and each determines its level of coverage.
Due to the size of the program, medicines covered under Medicaid are subject to government-mandated prices and also receive extra rebates from manufacturers to ensure that states get the best price for drugs. As manufacturers compete for business, they frequently offer discounts even beyond these government-mandated “best prices.”
Employers are major sponsors of health plans and thus constitute a significant US payer group. Organizations (companies, government agencies and non-profit organizations) usually purchase group health plans through large commercial providers such as for-profit United Healthcare, WellPoint, Humana, Aetna and others as well as non-profit organizations such as Blue Cross Blue Shield.
Individuals pay for prescription drugs by cost sharing (insurance premiums and co-pay or coinsurance when receiving actual care) for part of their cost of care. The health care cost, including prescription drugs, is shared between employees and their employers. An individual can also purchase his or her own plan.
Important Points to Keep in Mind
Unlike in Europe, there is no US pricing and/or reimbursement authority that determines inclusion, price or treatment course on a health plan’s drug list. Reimbursement negotiations and decisions are not transparent; they vary greatly according to the payer channel, therapeutic category, unique product attributes and manufacturer strategy. A manufacturer might negotiate with different payer organizations (health plans) with varying degrees of success.
Due to this fragmented market, payers often contract third-party Pharmacy Benefit Managers (PBMs) to negotiate discounts when a new product comes on the market. Additional discounts are also granted to health plans serving Medicaid and other programs. These interdependent actors add to the complexity of the US pricing and reimbursement ecosystem.
Demand Drives Drug Prices
In the United States, drug companies can adjust their prices according to demand. This could occur based on additional indications, new entrants or the introduction of a generic, for example. As a result, the United States has become the best case study of a market in which demand-side controls, or utilisation management techniques, have become necessary to control payers’ health care costs.
Demand control is achieved in a number of ways:
- Benefit (health plan) design, cost sharing programs (influencing manufacturers to offer patient assistance initiatives)
- Formulary decisions informed by Pharmacy & Therapeutics Committees within health plans, possibly the closest thing the United States has to Healthcare Technology Assessment (HTA) reviews
Implications for Industry
The United States is known for having some of the highest drug “sticker” prices worldwide. However, these do not reflect the actual prices to US payers. This often leads to incorrect and unrealistic country-to-country price comparisons by the media, policymakers and the public alike. In fact, drug company representatives have even been called to testify to policymakers on Capitol Hill to defend the price of their medications due to inappropriate list price (ex-factory price) comparisons with ex-US price benchmarks.
To avoid these pitfalls, you must position your innovation to succeed with all of your stakeholders and audiences. You need a partner who knows the complexities of both the US market access and communications landscape.
In the world’s largest pharmaceutical market, there is also tremendous opportunity. GLOBALHealthPR has years of experience in navigating complex payer landscapes, positioning products for success, and defending innovations against critics.
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