In the United States, generic drugs, constituting a significant 90% of filled prescriptions, represent 18% of the country’s prescription drug spending. Recent studies highlight that health insurance coverage contributes to inflated costs for common generic drugs. Simplifying the insurance process for these medications is proposed to yield substantial savings for patients, workers, employers, and taxpayers.
For commonly prescribed generic drugs, Medicare Part D reportedly paid over half of the cash prices charged by Mark Cuban Cost Plus Drug Company or Costco. Notably, patients’ out-of-pocket expenses surpassed the Amazon cash price for 40% and the GoodRx cash price for 79% of prescriptions during the deductible phase across all insurance programs.
In the case of over-the-counter (OTC) generic drugs, Medicare Part D payments were 2.3 times higher than the OTC cash prices. Strikingly, OTC prices were sometimes even lower than patients’ out-of-pocket payments. For instance, Medicare Part D paid $28.75 per capsule for omeprazole and sodium bicarbonate (heartburn relief), while the OTC price stood at a mere $0.80. Similarly, for mometasone furoate nasal allergy spray, Medicare Part D paid $5.22 per spray compared to the OTC price of only $0.18.
The complexity of insurance administration, designed to shield enrollees from the financial impact of high-cost catastrophic events, seems to outweigh its benefits for low-cost events. In health care, extending insurance coverage to services and products with minimal initial costs has led to wasteful spending for patients, workers, employers, and taxpayers.
Recognizing this issue, businesses like Amazon Pharmacy, Costco, GoodRx, and Mark Cuban Cost Plus Company have introduced cash-pay models to meet the demand for lower out-of-pocket payments. The competitive landscape has put downward pressure on generic drug prices, exemplified by Amazon Pharmacy’s RxPass cash-pay program, requiring a $5 monthly payment—comparable to the copayment for a single prescription with insurance.
To address the spread pricing problem associated with pharmacy benefit managers, it is suggested that insurance plans be given the option not to cover common generic drugs. This approach aims to eliminate wasteful spending and reduce insurance premiums for all. Policymakers are urged to consider relaxing restrictions on Health Savings Accounts (HSAs) to provide enrollees with flexibility, allowing contributions for self-directed purposes, including cash payments for generic drugs.
In conclusion, while health insurance plays a crucial role in covering high-cost events, using it for low-cost products like common generic drugs may contribute to unnecessary inflation. Advocates argue for a shift toward direct consumer purchases to exert control over spending in these instances.
