TruDataRX Insights

Single payer? What we need is an informed payer.

Catalina Gorla

There is strong agreement that the American approach to paying for medications and health care is not working for everyone. In the US, we spend considerably more than other countries on healthcare yet have dramatically worse health outcomes. Clearly, we aren’t getting our money’s worth.

One contentious solution – often cited and hotly debated – is to overhaul our market system, emulating nations like Canada or the UK by concentrating payment decisions in one payer (presumably the government). Obviously this is a polarizing topic, but politics aside, there is something we can learn from single payer models without actually adopting a single payer system.

What seems to be working in places with a single payer model is that the payer is an informed payer, and that makes all the difference.

  • First, organizations like the EMA (comparable to our FDA) review drug applications for basic safety & efficacy.
  • Second, organizations like the National Institute for Health and Clinical Excellence in the UK, the Canadian Agency for Drugs and Technologies in Health, and Institute of Quality and Efficiency in Healthcare in Germany (comparable to organizations in the US like AHRQ and ICER) vet the comparative effectiveness of a drug versus other alternatives by reviewing all relevant clinical data.
  • Third, payers use this information to decide which drugs to pay for. This is where the US model breaks down: We have a disconnect between the organizations that decide which drugs are paid for (PBMs) and the organizations that pay for the drugs (employers & government).

In the informed payer model, the organization that decides which drugs to pay for (i.e. by designing the drug formulary and determining reimbursement) is the organization that pays for the medications. As a result, the markets in these countries will not support a new drug that fails to outperform older drugs for the same condition. The informed payer sees no value in paying more for a drug that offers no additional benefit over existing alternatives. Elementary, my dear Watson!

But in the US, Pharmacy Benefit Managers (PBMs) work on behalf of payers (including self-insured employers) to decide which drugs get paid for, and then self-insured employers actually cut the check. Given that 80% of PBMs’ revenue comes from the sale of drugs, there is an inherent conflict of interest in this model. As a result, it’s of little surprise in that in our country we pay so much and get so much less.

By increasing the number of informed payers in our system, we can promote the use of higher-value, lower-cost medications in the US without major regulatory overhaul. We have the data – what are we waiting for?

If you’re interested in learning more about how you can bring sophistication to your pharmacy benefit plan, get in touch with us. TruDataRx has helped clients save 10% and more with simple solutions grounded in science, generating significant returns within months of engagement.