Could direct-to-consumer drug pricing compete with prescription insurance

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Could direct-to-consumer drug pricing compete with prescription insurance?

Study shows slightly higher out-of-pocket payments, significantly lower total costs

A new study offers a glimpse at how direct-to-consumer pharmacy pricing could one day present stiff competition to the private prescription drug insurance model, researchers say.

A team led by researchers at The Ohio State University compared the annual out-of-pocket and total costs of 33 neurologic medications either covered by insurance and sold by commercial pharmacies or bought online through the Mark Cuban Cost Plus Drug Company. Out-of-pocket costs include copay, coinsurance and deductible charges, and total costs reflect all consumer out-of-pocket and insurance premium payments as well as what insurers pay.

Overall, direct-to-consumer out-of-pocket neurologic drug costs were 75% higher than for insured medicines at retail pharmacies, but the total annual costs of the drugs from Cuban's online pharmacy were 431% lower than those sold by commercial pharmacies to insured patients.

Because health plan out-of-pocket costs are in addition to insurance premiums paid by beneficiaries, the findings suggest the direct-to-consumer pharmacy may offer uninsured patients similar pricing for medications without having to pay the premium.

The higher out-of-pocket costs at Cuban's pharmacy reflected an average across the board, but many of the medications are inexpensive - so the higher price did not reflect a significant amount of money, said first author Amanda Gusovsky Chevalier, assistant professor in the Division of General Internal Medicine at Ohio State's College of Medicine.

For 76% of the online pharmacy drugs, the difference in out-of-pocket payments was less than $200 per year.

"The difference was close to zero for a lot of these different medications," Gusovsky Chevalier said. "The reason that's notable is because this price that patients can get directly from a website is the same as the cost to patients who, on top of buying medications, are paying a premium for an insurance plan that's probably coming out of their paycheck.

"So the cost you're paying that is subsidized by your insurance provider is the same as what you could pay at the Mark Cuban pharmacy. This could be a great option for uninsured patients who are paying completely out of pocket."

The study was published recently in JAMA Network Open.

Gusovsky Chevalier and colleagues had previously published an analysis of neurologic drug costs from commercial pharmaceutical and Medicare supplemental insurance claims databases from 2012-2021, enabling the team to calculate 2024 estimates for out-of-pocket and total costs of the medications. For this new study, those estimates were compared to prices posted on the Cost Plus Drug Company website on Dec. 10, 2024.

"I had heard about the Mark Cuban pharmacy through colleagues and thought it would be interesting to compare the costs because his pharmacy is very direct-to-consumer - they cut out the middleman and whatever is advertised on the website is what you're paying for, and that's your only cost," she said.

The analysis included drugs used to manage 11 neurologic conditions, among them Alzheimer's disease, multiple sclerosis (MS), peripheral neuropathy and Parkinson's disease.

The highest-priced medications (annual costs) in the direct-to-consumer pharmacy - and therefore all paid out of pocket - were the MS drugs glatiramer acetate ($24,186) and fingolimod ($2,185), and cyclosporine ($2,185), a treatment for myasthenia gravis. All other medications examined in the study from the Mark Cuban pharmacy cost less than $635 per year.

The medications with the highest 2024 insurance plan annual out-of-pocket and total costs, respectively, were teriflunomide for MS ($286 and $11,739), droxidopa for orthostatic hypotension ($238 and $11,618) and fingolimod ($240 and $8,394).

Out-of-pocket costs for only two medications, teriflunomide and droxidopa, were lower (40% and 18%, respectively) in the direct-to-consumer pharmacy compared to commercial insurance plans. Eighteen of the 33 medications had lower total annual costs at Cuban's pharmacy compared to private plans.

Those two drugs and one other MS medication, dimethyl fumarate, stood out for their markedly reduced total costs: Results estimated aggregate annual savings of at least $11 million each by using the direct-to-consumer pharmacy instead of commercial insurance plans at a retail pharmacy.

"Total costs represent system-level spending, and we look at them because we want to know how much money is moving around to be able to cover these medication costs," Gusovsky Chevalier said.

The authors noted that there can be drawbacks to relying on a direct-to-consumer pharmacy - the Cost Plus online pharmacy listed only 33 of 79 commercially available neurologic medications at the time of the analysis. And patients who work both sides of the system to pay the lowest prices would risk having fragmented prescription records that could lead to unintended drug interactions.

Even so, the findings suggest direct-to-consumer online pharmacies may be an attractive alternative source of prescription medications, especially for patients who lack insurance coverage, the authors concluded.

"Our research has shown that the costs of medications just continue to rise through insurance plans, and it's really important to find ways for patients to access medicines," Gusovsky Chevalier said. "I think this adds to a larger body of evidence showing that these direct-to-consumer pharmacies have the potential to disrupt the market in some significant way in the future.

"It's important for people to know that online pharmacies like this are available."

Co-authors of the study include Chun Chieh Lin, Kevin Kerber and senior author James Burke of Ohio State; Evan Reynolds of Michigan State University; and Brian Callaghan of the University of Michigan.

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