In this exclusive Q&A, Vishali Amin, chief of staff to the office of the president and senior director of customer success for Kalderos, discusses the biggest hurdles to drug affordability, how patients can become aware of drug discounts, how drugs are selected for regulatory discount programs, and drug pricing strategies.
Drug affordability continues to be one of the greatest hurdles in the pharma industry. Vishali Amin, chief of staff to the office of the president and senior director of customer success for Kalderos, a data infrastructure and analytics company for drug discount management programs, shares insight with Pharmaceutical Exective® in this exclusive Q&A, specifically about:
Amin: When we think about drug affordability, in general, the challenge begins with the structure of our health system, which is incredibly complex. As a result, many patients are limited in the care they can obtain because of high costs. Drug discount programs were put in place to lower that barrier for patients so they can get both the care and the medications they need.
But the growing complexity of the health system and the growing number of intermediaries add costs and create barriers, preventing the full benefits of drug discount programs from making it to the patient. It's not as simple as a drug coming to a pharmacy, and then a prescription being filled for a patient. There are wholesalers, third-party administrators (TPAs), insurance companies, and pharmacy benefit managers (PBMs). All of these players, at some point, are touching this claim; and all of them are getting a little piece of the pie.
It's difficult to see how that split is happening or where that discount or rebate is going. Until we're able to visualize all that data and all that information about specific claims—from when and where the drug came from, to where the script is being filled—and all of the players in between, transparency will be difficult. For now, though, everything is super segmented.
The bottom line is we need to bring more transparency to the drug discount space before we can pursue solutions. Currently, it’s hard to truly identify where the problem is.
Amin: Most of the regulations in place at the moment have been upstream to the patient. The 340B program, for example, was created to enable covered entities to better serve their communities. So, there hasn’t been a lot of regulation, specifically at the patient level. We still have to see how the Inflation Reduction Act’s (IRA) Medicare Part B drug discounts, which went into effect on July 1, will play out.
To be sure, some of these discount programs have been successful in the sense that they have made drugs more affordable for large groups. The Medicaid Drug Rebate Program (MDRP) makes it more affordable for taxpayers to help cover patients through Medicaid. But when it comes to what a specific patient is actually paying out of pocket, most discount programs are not reaching that level.
Amin: I worked as a pharmacist earlier in my career in both retail and clinical settings. Drawing from that experience, I’d say that most patients aren’t well-versed in the nuances and benefits of MDRP or the 340B program. Some are aware of drug discounts given at the point of sale, but most of the time those have to be initiated by the patient. Even when I was in a hospital setting, many times patients were discharged with a prescription and the inpatient staff had no idea how much the drug was going to cost the patient at an external pharmacy. Often, that cost was prohibitive, and a patient would come to the counter, find out the medication was $120, and then just not even pick it up because they couldn't afford it.
Now, there are drug discount cards and coupon codes that manufacturers give out. But most of the time, they are not available at the register when customers pick up their medications. They are given to patients by providers or upon discharge from the hospital. It's really challenging for patients who have a hard time even getting to a pharmacy in the first place to shop around for the lowest price for their prescriptions, especially if they don't have insurance and they have to pay out of pocket.
But there’s still ambiguity over where to get that type of information, even when manufacturers are participating in upstream discount programs such as MDRP or 340B. I’m not sure many patients even know about discounts downstream at the point of sale through coupon codes and drug discount cards.
Amin: It depends on the program. There are programs where you can't participate unless you agree to allow access to all your products. In the case of 340B, manufacturers that want their drugs covered by Medicaid have to opt into that program. So, there's some give and take. Some discount programs are distinguished by drug class. If you're treating a certain disease type or type of patient, those can be inclusive based on whether a patient qualifies.
There's a lot of chatter about patient definition under the 340B program and now even under the IRA. What defines or is the criterion of a specific patient who should be benefiting from these types of programs? Covered entities certainly are part of the 340B program, while contract pharmacies are included based on specific manufacturer policies. There’s no one solution for enforcing regulation and compliance across all programs.
We’ve been hearing from our manufacturer customers that they lack visibility into which drugs and products will be chosen for the IRA. They have hunches based on how long their products have been on the market or what types of patients they're serving, but no one actually knows for a fact. They’re all trying to guess which products are going to be included in the IRA’s first round for the new drug discount program.
Amin: There are pros and cons to both. Each pricing strategy is trying to do the same thing, which is making sure the discount goes to the right place. If you look at pricing drugs lower across the board, most of those savings get passed on directly to the patient. However, they generally result in a less aggressive discount because you can’t select which patients need it. It's just a flat price and that drug costs less. Everyone benefits regardless of need or demographic.
On the other hand, if you price high, you can offer more aggressive discounts because you're not offering them across the board, but it's harder to regulate where those go. Ensuring every patient has access to the discount is really tough. How do you make sure providers writing a script are assessing which patient needs a drug discount card and then giving it out? It's difficult to manage that. Many times, the discount doesn't make it down to the patient, even if all the infrastructure is in place to price it high and then offer discounts to make sure it's still accessible.
Many manufacturers have felt competitive pressure to price high and then offer commercial rebates because that ensures greater market access. PBMs tend to look for drugs that are priced higher and have higher rebates. The benefit of this pricing strategy is you can expand market access. The downside is you get a higher gross-to-net, which can make financial forecasting more complex and unpredictable. Also, it can be difficult to track all of the data and analytics associated with managing and administering those contracts.
Amin: The lack of visibility and transparency in MDRP and 340B, and even to some extent the commercial side, is causing manufacturers to lose millions of dollars to inaccurate and misapplied discounts, causing revenue leakage. We’ve seen budget cuts to the departments we work with and even layoffs of entire teams.
There has been increased participation in rebates, but drug prices keep going up to fill that gap. Paying duplicate discounts on a claim often causes a manufacturer to lose money as drugs are being dispensed. If we were able to regulate these programs, then the margins would probably be more acceptable to manufacturers.
Losing money through noncompliant rebates also has a negative impact on innovation, especially for disease states that don't necessarily draw attention or impact large patient populations. We don't want to reduce revenue for manufacturers in a way that makes them unwilling to seek treatments and cures for complex disease states. For smaller pharmaceutical companies, in particular, it almost isn’t worth innovating anymore; they can’t generate enough revenue to afford it.
Amin: When I first started at Kalderos, most of the teams I worked with at manufacturers weren’t in the spotlight. They quietly went about their jobs; and as long as they were paying out invoices on the Medicaid side in time, they weren't getting a ton of attention.
And then things shifted. Not only was there a lot of attention put on the 340B program, but state Medicaid agencies started changing their policies, generating more buzz about drug discount programs in general. Then the IRA and concerns about diversion came along. All these things have put a greater focus on drug discount programs.
As pharma manufacturers try to figure out how to ensure their margins remain acceptable, they’re looking at drug discount programs and their compliance as a way to make sure they're not losing money in areas that were previously seen as a cost of doing business. While they knew there was some revenue leakage there, it wasn't enough for them to pay attention.
Now, as the size of those programs has grown, so, too, has the size of the revenue leakage problem. In response, the various stakeholders in the drug discount ecosystem—manufacturers, covered entities, states, and PBMs—all are trying to solve the problem, though they’re all doing it in a silo to some extent.
As for predictions, the only way we’ll make drug rebate programs work is through stakeholder collaboration and cooperation. Everyone still wants the programs there because they help patients get access to the care and medications they need. It’s best for everybody—especially patients—if these programs are compliant because it’s the only means by which we can optimize their value. I’m hopeful this collaboration will happen.