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Health Plans Explore Direct-to-Patient Drug Discounts

“A risk worth taking.”  That’s how insurance giant United Healthcare describes requiring new employer health plans to pass drug discounts directly to their beneficiaries.  The decision, effective beginning 2020, could be a win for patients. It could also signal to skeptics that direct-discount programs are feasible on a large scale.

The new model is a departure from the traditional rebate system, where middlemen called pharmacy benefit managers negotiate with manufacturers on health insurers’ behalf.  The system is common but often criticized because savings from rebates do not always reach patients.  For instance, some patients are required to pay a percentage of their medication’s list, or “sticker” price, out of pocket.  Because rebates do not alter the list price, these patients’ out-of-pocket expense can remain high – even while pharmacy benefit managers profit from their negotiations.  

Direct-discount programs apply negotiations directly to a drug’s list price, reducing costs and improving patient access.

United Healthcare began piloting its direct-discount program in January.  Several other insurers, including CVS Health, have introduced similar models.  In fact, the Wall Street Journal reports that about 20 percent of employer plans already pass prescription drug savings directly to patients, while 31 percent are considering the model for 2020 or 2021.  United Healthcare is the first to make direct discounts mandatory for new contracts.

The direct-discount model has generated national attention since January, when it became the newest Trump administration proposal for lowering prescription drug costs.  In a proposed rule, the Department of Health and Human Services suggested ending rebate discounts for Medicare plans and instead allowing those plans to institute direct-to-consumer drug discounts.

Pundits have questioned the model’s practicality.  Most recently, the controversial Institute for Clinical and Economic Review issued a white paper suggesting that direct discounts could yield “unintended consequences” such as higher monthly premiums for patients.  The organization counts major health plans and their foundations among its funders.

United Healthcare reports that its pilot program has resulted in an average savings of $130 per eligible prescription.  The company says that, absent high out-of-pocket costs, patient adherence to a medication plan improves by four percent to 16 percent under the direct-discount model.