Companies Looking Outside Government Oversight For Lower Drug Prices

Mar 14, 2018

Companies looking for better ways to negotiate drug prices for employee benefit programs

A Utah bill that would have allowed for the importation of cheaper pharmaceutical drugs into the United States was debated during the 2018 legislative session. House bill 163 failed, but there is an increased interest by some companies to find market-driven ways to bring down the cost of medications

Representative Norm Thurston sponsored House Bill 163 to deal with the growing problem of costly medication. He believes buying drugs from outside of the U.S. would make it cheaper for the state to operate Medicaid programs and would benefit businesses who insure their employees.

“What if those exact same drugs that Canadians are buying and in fact Americans are buying in Canada are available at your local pharmacy?”

CHG Healthcare, the 2,600 employee company in Utah provides health care staffing. They have turned to a California company, VIVIO health, to negotiate pharmaceutical product prices. VIVIO health compares the cost and quality of medicines available through a variety of prescription drug providers. This approach has dropped CHG’s employee benefited costs for prescription drugs by 30 percent.

“Our company focuses on using market mechanisms and asking the question of what market mechanisms could we use,” said Pramod John, CEO of VIVIO Health.

By working with a pharmaceutical negotiator, John believes owners of smaller companies and their employees can save money, without purchasing prescriptions from a country like Canada.

“The pharmacy benefit manager acts as an intermediary who’s supposed to be negotiating and trying to work with the market or creating the market on the back end with the manufactures so you can buy and acquire those drugs at the best price,” he said.

John said pharmacy benefit managers act like travel agents used to, before we started buying our own airplane tickets.

“They don’t help decrease the price,” he said. “They help inflate the price of these goods and as a result, part of the problem is with the existing system the economic incentives are organized in a way that the existing entities actually drive up the price of goods.”

John said his job is to take the complexity out of the system and make it easier for employers paying for these benefits.

“That’s really how the markets are controlled today,” he said. “People have intentionally made it so complicated. We really can’t understand what it is or what we’re buying or purchasing. That’s the paradigm that we’re shifting or changing.”

If consumers want to pay less for their prescription drugs, John said business owners and their employees need to better understand how the pharmaceutical industry works.