Why Hawai‘i must prohibit reference-based drug pricing

Thousands of state and county workers and their families will soon experience a fatal blow to their prescription drug plans.

Members of the Employer-Union Health Benefits Trust Fund, which oversees health benefits for state and county workers, are slated to switch to “reference-based pricing” on Jan. 1. With reference-based pricing, patients must switch to lower-cost alternatives in three categories of drugs: cholesterol-lowering statins, anti-heartburn/ulcer drugs known as proton pump inhibitors, and allergy medications known as low or non-sedating antihistamines.

If a patient wants to stay on their current drug that is controlling their disease, they must get a doctor’s exception or pay substantially more to stay on their original medication.

While these changes might sound insignificant on the surface, upon closer inspection reference-based pricing is a more costly, less transparent approach to prescribing drugs. Reference-based pricing is a little-known practice used in Canada to steer consumers away from brand-name drugs and encourage them to use cheaper generic-drugs within the same class.

Reference-based pricing can lead to patients sacrificing their own health, as they are being forced to pick a chemically different, cheaper drug because they can’t afford the brand drug they really need and that the doctor prescribed.

It is critical to note that all medicines within a specific drug class are not the same. Medications intended to treat the same condition have different active ingredients and work in different ways — they also have significantly different side effects, safety profiles, dosages and risks. Under reference-based pricing, certain classes of drugs are targeted and patients that remain on a drug that has been effective for treating their condition are charged a much higher price when a cheaper, chemically-different generic drug is available.

Here in Hawai’i, one of the commonly-used drugs included in the three categories that would be affected by the proposed switch is Lipitor. The current Lipitor co-pay is $15 a month. Under referenced-based pricing, the co-pay for Lipitor 10 mg will go up to $62 a month, and for Lipitor 20 mg and 40 mg the co-pay will go up to $90 a month. This is just one example where the average state worker could end up paying significantly more each year for prescriptions — an expense that most local families simply cannot afford.

There are other “hidden” costs associated with referenced-based pricing that must be considered. For example, if a patient decides to switch from Lipitor to the generic drug, Simvastatin, the doctor will typically order several lab tests be conducted and require the patient to come in for multiple office visits to ensure the new drug is working effectively and not causing any harm. If it is determined that the patient cannot tolerate the generic Simvastatin and has to go back on Lipitor, this lengthy and expensive process repeats itself.

In short, reference-based pricing is often times a more expensive approach to health care and, more importantly, it rarely leads to better patient health. It is important to note that contrary to what some may believe, pharmacists do not get most of their profits from brand name drugs. Pharmacists actually get most of their profits from selling generic drugs.

According to statistics from Maui Clinic Pharmacy — a typical local pharmacy — 11,076 prescriptions were sold from Sept. 28 to Oct. 28. Of that total, 8,029 were generic drugs, while 3,047 were brand name drugs. The gross profit from the sales of those generic drugs was $151,000, while the gross profit from the sales of the brand name drugs was $72,690.

While Hawai‘i should find ways to trim health care costs and operate more efficiently, we cannot — and must not — slash health care costs at the expense of people’s lives by forcing them to use a less effective drug. The best strategy is to prohibit reference-based pricing in Hawai‘i. Our state and our people deserve better.

• Kevin Glick, president of the Hawai‘i Independent Pharmacists Association, is the owner of Lihu‘e Pharmacy on Kaua‘i.