Opinion: To reduce drug costs, collaboration is key

America spends more on drugs and prescription medications, on average, than any other country. And it doesn’t matter where those drugs are purchased. Hospital drug spending is up 30% to 40% since 2019, outpacing increases in labor costs and other supplies. Prescription medications are a unique American burden as well. A recent KFF survey found that a full 30% of adults using them say they have not taken medications as prescribed in the last year because the cost was prohibitive.

Part of the problem is that we use a lot of medicines in our hospitals, and we prescribe a lot of medications outside of them. But the biggest issue is our high drug prices–particularly for specialty drugs. The U.S. doesn’t regulate drug prices, and while Medicare is now taking meaningful steps toward negotiating the prices of certain therapies, for the most part, drug companies can set whatever rates the U.S. market will bear.

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As we know, that market is exceedingly complex. From overseas “active pharmaceutical ingredient” manufacturers and domestic pharmaceutical giants, to wholesale distributors, pharmacy benefit managers and the billions of dollars spent each year on direct-to-patient advertising, the U.S. drug supply chain is as opaque as can be, as are its resulting cost structures. And the rest of us—hospitals, insurance companies, employers, and patients—end up paying the price.

Make no mistake—we need pharmaceutical companies, and we need them to be successful. The therapies they develop are lifesaving. The pharma sector’s success, however, shouldn’t come at the expense of patients’ financial well-being. But absent radical changes to how we price and pay for medicines, it’s up to healthcare leaders to think outside the box to get a handle on drug costs, because what we’ve tried so far—such as strict formulary management and inventory control—hasn’t worked. Some suggestions:

Get creative: New ways of procuring and prescribing drugs will require new ideas. At Highmark Health—which owns Allegheny Health Network, a 14-hospital academic medical system based in Pittsburgh, as well as a Blues insurer, Highmark Inc.—we’ve partnered with CivicaRx and other healthcare systems to manufacture in-hospital generics, as well as outpatient medications. Using CivicaRx to create our own generics gives us supply stability and helps guard against price spikes that accompany shortages.

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The Civica project is expanding. Last year, the partnership announced plans to manufacture and distribute insulins that, once approved by the government, will be available at significantly lower prices than insulins currently on the market.

Of course not everyone will want to, or be able to, make their own generics or insulin, but finding ways to bend the pharmaceutical cost curve will increasingly depend on finding like-minded business partners, then working with regulators to pave the way for new solutions.

Don’t go it alone: Insurers can’t drive down prescription costs on their own. Neither can hospitals, pharmacies or doctors. But by working together and aligning incentives, we can leverage claims and outcomes data to develop therapeutics protocols and target prescribing variation. We can establish mutually acceptable standards for the use of certain drug regimens in specific clinical circumstances, attack waste and engage pharmacists to guide prescribers and patients to suitable lower-cost alternatives.

Prescribers might play the most vital role in this process, given that doctors are the gatekeepers through whom patients receive most of their medications. We’ve found that they are more than willing to drive patients to higher-value, lower-cost medications—but first they need access to the right tools, the right data and the right incentives in order to feel confident in their guidance, rather than being second-guessed.

Such collaborations may not affect drug costs, but they can significantly impact a health system’s drug spend, saving money for insurers, employers and others who ultimately pay the bills.

Invest in technologies that can deliver the best prices and results: There’s incredible regional variation in drug prices at the retail and specialty pharmacy levels. But because the patient is often insulated from the true cost of medications, there’s not always incentive for them to price-shop. So in some cases, we do it for them. From an insurer’s standpoint, that might mean incentivizing patients to utilize mail-order delivery or 90-day refills for standard prescriptions.

But we can’t just shop on price—we have to shop on outcomes. Highmark and other Blues insurers recently partnered with Evio, a Colorado-based pharmacy solutions company, to comb through claims and medical records to ensure the right medication gets to the right patient, every time. The goal is to determine not just whether a drug “works,” but how well it works compared with other available therapies, across different patient populations. It serves as a way to collaborate with prescribers and develop best practices.

In trying to reduce drug costs, what works for one organization might not work for another. But this much is certain—insurers, hospitals and prescribers can no longer be adversaries on this issue. Only by working together can we develop effective solutions.