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Recently, the Biden-Harris Administration announced a new initiative aimed at making prescription drugs more affordable for Medicare beneficiaries. The proposal focuses on a Medicare $2 Drug List, ensuring that essential generic drugs for chronic conditions like high cholesterol and high blood pressure are available at a flat copayment of just $2 per month. While this initiative marks an important step toward reducing out-of-pocket expenses for seniors, it’s critical to examine how it impacts the true cost of medications, and why copay reductions alone aren't the ultimate solution.
What Does a Lower Copay Mean?
A copay is the fixed amount a patient pays for a prescription medication, with insurance covering the rest. While lowering copays, as the proposed $2 Drug List would, makes medications more affordable in the short term for patients, it doesn’t address the true cost of those drugs. The $2 copay may reduce what a patient directly pays, but it doesn't change how much the system—insurance companies, government programs, or taxpayers—pays for that drug behind the scenes. In other words, the total cost of the drug is still high, but the out-of-pocket portion is masked by subsidies or insurance.
The issue with this approach is that it provides temporary relief without tackling the root problem: high drug prices. Pharmaceutical companies and intermediaries, such as Pharmacy Benefit Managers (PBMs), continue to set prices that strain the healthcare system. Without addressing those prices, the burden is shifted rather than eliminated.
The Cost-Plus Model: A Sustainable Alternative
Here in Fort Worth at Forest Park Pharmacy, we take a different approach to reducing healthcare costs, focusing on the cost-plus model. This model offers more transparency and fundamentally changes the status-quo, not just the copay.
Here’s how it works:
True Cost Transparency: The cost-plus model reveals the actual price of the drug, often the wholesale price, plus a modest markup for the pharmacy's services. By offering medications at cost with a small, transparent margin, we eliminate the hidden costs and markups that drive drug prices up in the traditional system.
Affordability Without the Gimmicks: Instead of using insurance to artificially lower the copay while keeping the overall drug prices high, the cost-plus model advertises the price of medications. This means that whether you're insured or paying out of pocket, you get medications at a fair and predictable price—no hidden charges, no inflated prices to offset low copays.
Cutting Out the Middlemen: A big part of the problem with traditional pharmacy pricing is the role of PBMs, which negotiate drug prices on behalf of insurers. While they claim to lower costs, PBMs often complicate the system by adding their own fees and profits. By removing unnecessary middlemen, the cost-plus model simplifies the pricing structure and lowers drug prices across the board.
Why the $2 Copay May Not Be Enough
While the $2 copay proposed by Medicare may seem like a game-changer, it doesn’t address the broader issue of inflated drug prices. If a medication costs $300 and the copay is $2, Medicare or insurers are still footing the bill for the remaining $298. This burden is eventually passed on to taxpayers or results in higher premiums for everyone.
The cost-plus model, on the other hand, goes straight to the source of the problem: high drug prices. Instead of manipulating copays, it ensures that drugs are priced fairly from the outset. By exposing the true cost of medications, it provides a sustainable solution to long-term healthcare affordability.
Conclusion
While initiatives like the $2 Drug List are a step in the right direction for improving access to essential medications, they don’t fundamentally lower the cost of drugs. For true healthcare reform, we need a model that not only reduces out-of-pocket costs but also addresses the systemic issue of inflated drug prices.
At Forest Park Pharmacy, we believe in pricing transparency and affordability through the cost-plus model. By advertising the true cost of medications, we’re working to alleviate the burden on both patients and the healthcare system as a whole—providing a sustainable, long-term solution to the rising cost of prescriptions.
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