Three changes that can make drug discount programs work for consumers

Three changes that can make drug discount programs work for consumers

By Rhiannon Naslund, Kalderos

The drug discount system used to keep down costs for American consumers and other healthcare stakeholders is broken. This confusing and costly system is creating unnecessary burdens for drug manufacturers, Covered Entities (CEs) in the 340B program, state Medicaid agencies and, most important of all, patients.

A major byproduct of the drug discount system’s inefficiencies is revenue leakage caused by misapplied discounts, which are estimated to cost drug manufacturers more than $10 billion each year. Misapplied drug discounts make it hard for drug manufacturers to know how much to charge for a specific medication. Inaccurate discounts cause unpredictable revenue leakage and affect financial forecasting, which influences drug-pricing strategies. Inevitably, these factors affect manufacturer profitability as well as how much consumers pay for medications they need to manage their health.

One of the great challenges for drug manufacturers is balancing the need to keep costs low across the system with the need to ensure individual patients can get the drugs they need at a price they can afford. When manufacturers can’t confidently track and verify discount claims, they will struggle to make optimal pricing decisions.

As drug discount programs continue to grow, so, too, will revenue leakage from misapplied drug discounts. The growing and unpredictable impact on manufacturer gross-to-net can impede operations, disrupt new drug pipelines, and make financial forecasting more difficult. Meanwhile, the operations teams sifting through endless streams of data to find and correct misapplied discounts will be given mounting administrative responsibilities.

For CEs in 340B programs and state agencies participating in the Medicaid Drug Rebate Program (MDRP), the byzantine drug discount system creates extra work that decreases operational efficiency and puts additional strain on already understaffed organizations. Worse, the effort devoted to identifying and resolving duplicate discounts siphons time and resources from tasks that more directly benefit patients.

When you have a system that isn’t working for any stakeholder, change is imperative. Here are three ways to make the drug discount system more efficient and equitable while instilling trust among drug manufacturers, CEs, and state Medicaid agencies.

1: Greater data transparency. Data around drug discounts can’t stay trapped in siloes. Every stakeholder should be able to access the same information and index around the same set of facts. Unfortunately, a lack of systemic transparency across the drug discount space has made it exceedingly difficult to grasp the true scale of inaccurately paid discounts. Agreeing on the same set of truths is foundational to resolving some of the conflicts and obstacles that have arisen among participants in drug discount programs. Sharing verifiable data enables mutual understanding and engenders trust.

2: Increased collaboration. There has been a lot of conflict, legal action, and public relations initiatives in recent years among drug discount program stakeholders that have become increasingly entrenched in their respective positions. None of this dissension, however, helps patients. But when we look at the big picture, we remember that across the ecosystem, everyone in healthcare is working to support patients. Putting the patient back at the center of drug discount programs hopefully can bring everyone to a place where they can remember their common missions and goals. By collaborating in good faith and assuming positive intent, we can work together to more effectively solve problems. 

3: Updated infrastructure to facilitate drug discounts. The IT systems used to organize and administer drug discounts are sometimes decades behind current technology. So many other industries have built out incredible digital infrastructures using cloud computing, artificial intelligence (AI), and other modern technologies far more aggressively than healthcare, where faxes still are commonly used. Drug discount management is overdue for that kind of infrastructure modernization that would provide value for all stakeholders.

How do we get there?

Greater transparency, collaboration, and trust in the drug discount system are worthy goals. But how can stakeholders transform these goals into reality?

It most certainly won’t happen with point solutions developed to address a single problem for a manufacturer, CE, or state agency. While well-intentioned, those types of solutions only create more information silos throughout the drug discount ecosystem. And when data does move across (often incompatible) systems, point solutions can’t track it.

What’s needed is a technology platform that unifies these different point solutions and addresses the root dysfunction in the drug discount system, rather than the symptoms or the specific problems of one stakeholder. A platform that ensures full transparency for all stakeholders will make it far easier to optimize drug discount programs in a way that works for manufacturers, CEs, state agencies, and patients.

Conclusion

Drug discount programs won’t be fully effective until manufacturers, CEs, and state Medicaid agencies can effectively collaborate to make drugs affordable for all consumers who need them. A technology platform that ensures transparency, collaboration, and greater efficiency – and vastly reduces revenue leakage from misapplied discounts – can be the force multiplier that allows these programs to do the most good for patients.

Rhiannon Naslund is chief marketing officer of Kalderos, a data infrastructure and analytics company.