Happy Price Transparency New Year, round two!
2024 comes with another big price transparency development - mandated prescription drug price disclosures. We’ve been keeping a close eye on the shifting disclosure timelines and enforcement ‘safe harbor’ rules regarding prescription drugs; according to the KFF, costs of prescription drugs account for 21.6% of fully insured health plan premiums. Even if we used the existing payer price transparency data to identify outrageous ‘negotiated’ rates and optimize our choices for procedures and visits, 21.6% of spending would still remain a black box, probably rife with the same levels of outlier rates.
Disclosures for negotiated prescription drug rates were included as part of the original Transparency in Coverage mandates scheduled for go-live 7/1/22, delayed indefinitely due to lawsuits and lobbying, then recently announced to have a 1/1/24 enforcement date.
The 1/1/24 deadline took a lot of folks in the price transparency community by surprise, as three months notice for a broad disclosure like this approximately represents asking for near-lightspeed travel from industry participants. The deadline even seems to have taken CMS by surprise, as the organization hasn’t even had time to restore schema guidance for drug disclosure on their transparency Github (thankfully, Github keeps history, for those trying to generate the files or build parsers).
But it didn’t take Serif Health by surprise - we’d actively been refactoring our ingestion and parsing pipelines to handle this schema, so when 1/1 hit, we could easily leverage our existing ingestion and conversion pipelines to deliver prescription drug data in a preprocessed, normalized form to our customers along with facility-administered J-Code drug pricing data already included in existing disclosures.
Prescription Drug Posting Compliance Rates Are Low Out the Gate
Well, 1/1/24 is past us, and the results are in! We used our ingestion infrastructure to scan indexes from all of our payer sources and crawled all PBM websites for any new disclosures landing in the past 48 hours.
According to Becker’s, six PBMs make up ninety-six percent of marketshare in the US, and three of those top six are directly vertically integrated into the largest commercial health plans - OptumRX / United, CVS / Aetna, Evernorth / Cigna.
So, how many of those payers and PBMs do you think have posted transparency disclosures in time for the mandate?
Drumroll please….
And the answer is: One!
Blue Ribbon goes to OptumRx. They posted four ‘prescription drug’ files on their index, representing a small fraction of commercial plans that probably funnel through OptumRx, but hey, it’s something.
Examining an OptumRX Prescription Drug File
Let’s dig into those files and see what’s inside.
The JSON roughly matches the schema proposed by CMS several years ago. Inside the ‘drugs’ array, you have the drug name, type, and NDC code. Inside the nested ‘prices’ array, you have various recorded fees for distributing the meds, and the TIN + list of pharmacies eligible for that negotiated rate.
You can see the first NDC (001210581) in this file is for HALOPERIDOL LACTATE, a schizophrenia drug:
According to HIPAASpace, this EIN maps to Memberhealth Inc, which rolls up to Universal American, which is under WellCare Health Plan, which is under Centene, while the list of pharmacy IDs seems to be a list of community health clinics and pharmacies.
So what do we learn? Seems like at those pharmacies, OptumRX is paying just over a dollar for dispensing a prescription, and a pre-negotiated rate of about 52 cents per mL. For a standard 15mL package of Haloperidol, we’d expect to spend at least $9.22 (.83 + .59 + (.518 * 15) ) at these pharmacies.
Let’s look at the next price entry. This TIN is…”Optum RX Administrative Services”, with a different set of community pharmacies listed. Those pharmacies are getting a substantially lower dispensing fee, transaction fee, and negotiated rate for the same drug. A 15mL package at these pharmacies nets out at $5.26 (.07 + .3 + (.326 * 15)).
$5.26 and $9.22 isn’t too crazy, given what we’ve seen in procedure pricing, but it’s still a pretty massive spread. Let’s sanity check this versus real world using a publicly searchable competitor like GoodRx.
If I bought a 15mL bottle at a Walgreens pharmacy near me, I’d pay $13.36:
Whereas at Kroger, the price is only $7.48:
Like we saw earlier, a pretty massive spread.
It’s important to repeat what’s printed right on the GoodRx website - GoodRx is not insurance, and rates you pay under your insurance will be different, and GoodRx couponed rates won’t accumulate toward commercial insurance deductibles or other spending limits.
Unfortunately, due to lack of disclosure and opaque pre-negotiated rates and fees, it’s been challenging for anyone to have a “GoodRx-like” shopping experience and visualize these differences under their actual insurance plan. If you can’t understand which pharmacies were contracted at what rate for which drugs until you literally got to the pharmacy counter, at that point it’s probably too bothersome to attempt shopping around.
Preprocessing Data for Comparison
Serif Health can preprocess these JSON files down to a simple 9MB parquet file, which is trivially query-able to build a more efficient comparative experience.
Loading the parquet file into duckdb and querying for key fields ordered by rate via SQL shows that several even cheaper rates are available! The cheapest TINs include the NIH (ok, you’re probably not getting that rate) and Sav-Mor drug stores. Definitely more achievable.
When we look at the worst rates, well, that’s where the sadness comes in. The worst rate for this particular drug is attributed to Navitus Health Solutions, a private company whose mission is, ironically, to “...make medications more affordable for the people who need them, so they can live their lives more fully.”
Googling around, Navitus seems to be owned by Costco. Checking back with GoodRx does seem to agree that this drug costs substantially more at my local Costco.
In fairness, a single schizophrenia drug might not be the best barometer of overall costs but it begs the question of whether my family should stick to the Kirkland products and stay away from the pharmacy counter on our next Costco run.
Announcing the New Serif Health Prescription Drug Data Feed
Serif Health has been watching and patiently waiting for price transparency disclosures of prescription drug rates. We believe transparency in prescription drug pricing will increase informed choice and reduce overpayments to non-competitive pharmacy operators.
We’re thrilled these files are starting to roll in, and we’re also thrilled to announce we already have an ingestion and conversion pipeline already set up to deliver prescription drug data in preprocessed, normalized form to healthcare builders and stakeholders, similar to our other data feeds for payer and hospital data. We can deliver in CSV or Parquet formats, and enrich TINs and pharmacy NPIs with pharmacy geolocation and tagging as needed.
If you’re working to build your own cost-effective pharmacy operation, a consumer drug shopping tool, or a plan portal to help your members, we’re happy to collect, clean, normalize, enrich and deliver prescription drug transparency data files for you via the feed each month - just get in touch!
Happy price transparency New Year, readers!
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