Empowering Health Care Consumers

Grantee Name

Manhattan Institute for Policy Research

Funding Area

Empowering Health Care Consumers

Publication Date

October 2019

Grant Amount

$116,484

Grant Date:

October 2017-March 2018

Rising prescription drug prices have become a major focus of public discourse over the past several years.While the costs of most prescription drugs have grown, the costs of specialty drugs have risen much faster than traditional medications.

This is a result of a complicated system where patients pay co-insurance rates or deductibles at the pharmacy based on a drug’s full list price, rather than the lower rebated price that a payer has negotiated with the manufacturer. As a result, many patients pay more for drugs through their insurance plan than they would if they paid out of pocket without insurance. The higher costs borne by consumers often lead to higher rates of prescription abandonment. Although New York State has taken steps to address this issue by passing budgetary measures to cap the growth of prescription drug spending in the State’s Medicaid program, more needs to be done to protect health care consumers.

In 2017, NYSHealth awarded the Manhattan Institute for Policy Research (MI) a grant to research how transparency reforms would affect drug pricing and reduce patients’ out-of-pocket costs.

Outcomes and Lessons Learned

MI set out to conduct a two-part study on how prices might be affected if transparency reforms were introduced into drug pricing. As initially envisioned, the first part of the study would analyze New York State’s health care market to understand formulary structures and what patients may be paying out-of-pocket for selected classes of commonly used medicines. The second half the study intended to use the acquired data to model several transparency reforms to see their impact on patients’ out-of-pocket costs. The project’s aim was to empower patients and policymakers with more information on how drug pricing interacts with different plan designs—enabling them to better understand how the market is performing and make better decisions to reduce patients’ out-of-pocket costs.

The success of the project hinged on the research of an essential personnel member at MI; however, that staff member left the organization shortly after the grant was awarded and could no longer carry out this project. As a result, the project goals shifted, and MI reshaped the study to examine New York State’s drug-pricing landscape, with a focus on Medicare and Medicaid. Under this new direction, MI found that:

  • Co-pays in New York State are typically set by State regulation and that there was little room for prescription drug price competition.
  • The prescription drug market is not set up in a way that allows patients to shop around for lower prices, unlike how they can, to some extent, for hospital and physician services price variation.
  • Transparency can play a useful role, if undertaken in the context of realistic objectives and specific regulatory reforms.

Based on these finding, MI released a report with the following recommendations for policymakers to consider:

  • Deregulate cost-sharing to enable insurers and pharmacy benefit managers to set cost-sharing arrangements in ways that provide more appropriate incentives for consumer engagement;
  • Inform regulators of the nature and circumstances under which rebates are provided; and
  • Reduce regulatory barriers to entry for generic drugs or therapeutically equivalent competitors.

The Foundation learned an important grantmaking lesson through this project. Having experts as part of a project team is important, but hinging a project’s success on the knowledge and expertise of one person can present some challenges. Although project personnel changes do happen, it was particularly disruptive to this project. The Foundation remains interested in increasing transparency in many areas of health care and is exploring projects that seek to shed light on the cost of care. There is still much to be done to break down barriers and empower consumers in shopping around for health care services.

Co-Funding and Additional Funds Leveraged: N/A