The U.S. is grappling with how to rein in high drug prices. Unfortunately, most of the proposed solutions work better on a bumper sticker than in reality. The debate, however, tends to ignore a key player — the prescribing doctor — who could have a central role in a more sustainable approach to better value in drug pricing.
A major driver of high drug prices is the lack of value consciousness on the part of prescribing physicians. Fee-for-service medicine creates incentives for doctors to care only about effectiveness and patient convenience when prescribing. In most cases, they are not even aware of the price of a drug or how much it costs the patient. To combat physician insensitivity to price, health plans have evolved a series of strategies, but they work imperfectly and often alienate patients and physicians.
For example, health plans have responded to rising drug costs by relying on pharmacy benefit managers, or PBMs, to negotiate better prices and rebates. The plans also impose restrictive formularies of covered medications and make access to expensive medicines more complicated with programs such as “step therapy,” which compels patients to try a lower-cost drug to receive a higher cost one. The most prominent example is prior authorization, which requires doctors to fill out cumbersome paperwork and submit clinical data to justify the prescription. Yet more than 90% or more of prior authorizations are approved, leading many physicians and patients to wonder why a more efficient process isn’t possible.
A more promising way to promote savings involves doctors and is already in practice as a byproduct of new risk-based payment models like Accountable Care Organizations and bundled payments and of increasing participation in the Medicare Advantage program (the private part of Medicare). At their core, these models move away from fee-for-service payment and instead reward doctors for delivering better, not just more, care. In many cases, drug costs are included in the model, and in all cases, medication choices influence total costs of case and patient outcomes.
Doctors know that more tightly managed drug spending can help lower costs. Those in risk-based payment models (in which payment is no longer just based on how much care is provided) tend to take a different approach than under fee-for-service. When the doctors themselves are at least partially on the hook, they prescribe lower-cost drugs when possible; use expensive drugs only when they are most likely to work; insist that patients take expensive drugs as prescribed; achieve the maximal clinical benefits by adjusting dosages more rapidly; and evaluate drugs based on the total return on investment over a year. These steps help boost the likelihood that the benefit of the drug is worth the cost.
Although these models hold great promise for obtaining better value from drugs, they also raise knotty challenges. In particular, doctors manage drugs differently under risk-based contracts because, unless the medicine works, every dollar of additional drug cost is a dollar less income for doctors. That has complex consequences: These payment models diminish the market for low-value medications and instead reward manufacturers of medicines that produce lower health care costs. But they may also lead to underinvestment in innovations that make medicines more convenient for patients or have other benefits but don’t lower total medical cost. More importantly, they increase the risk that doctors may stint on necessary prescriptions.