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Drug-Price Sticker Shock: Blue Shield of California Takes A Dramatic Step to Lower Drug Prices

Blue Shield of California is joining with other partners to produce lower-cost drugs with Civica Rx

For many Americans, a trip to the pharmacy can be a harrowing experience.

It’s not because prescription drugs aren’t bringing relief and better health. It’s the prices. They’re expected to rise  5.8 percent this year. And that isn’t even the worst of it. In 2018, some of the most common drug prices for seniors surged 10 percent, and a dozen of those saw increases of 50 percent to 100 percent.

It’s not just a headache for consumers, but for the whole healthcare system. The government is grappling with unhappy constituents. Insurance companies are struggling to rein in costs for members. Drugs costs represent 23 cents of every dollar spent on health care.

New partnership drives down drug costs

Now, Blue Shield of California is joining other insurers and lawmakers in an effort to curb those prices. Along with 18 other plans in the Blue Cross Blue Shield Association (BCBSA), Blue Shield of California is joining with Civica Rx to initially produce five to 10 generic drugs at low cost.

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The Civica Rx and BCBSA group hope to have the first of these low-cost alternatives available by early 2022.

“Drugs are too expensive for the wrong reasons," said Paul Markovich, president and CEO of Blue Shield of California. “They’re not too expensive because of innovation; they’re too expensive because of intense profit-seeking in a low-competition environment.

“We plan to introduce competitive alternatives to the marketplace to ensure we have affordable drugs available to our members," he continued. "This is not happening naturally now. The only way to do it is to create a strong, competitive alternative, which is what we’ve done with the Civica Rx partnership. Anytime a drug is off patent, it’s an opportunity for us to create an alternative and ensure that consumers are getting high-quality drugs that are also affordable. This is a first step for us, and there is more to come."

Founded in Sept. 2018, Civica Rx is formed by three national philanthropies and health systems that represent more than 1,150 hospitals and one-third of all licensed hospital beds in the country. Unlike for-profit companies, Civica Rx is a public asset whose mission is to ensure that essential generic medications are accessible and affordable.

Bold support for public policy reforms 

Partnering with Civica Rx aligns with  Blue Shield of California’s advocacy efforts, aimed at ensuring high-quality care while driving down costs.

Last week, California Governor Gavin Newsom’s proposed state budget proposed to create a state-backed generic drug label. Under the proposal, the state would negotiate contracts with drugmakers. The budget also expands Medi-Cal coverage to low-income undocumented Californians aged 65 and above.

Markovich has supported Newsom’s bold moves to help lower healthcare costs and improve access. Markovich explained, “We look forward to working with the Governor and his team on how this could potentially contribute to that effort. Our partnership with Civica Rx could serve the purposes that he and his team have in mind and could be a launching pad for his effort.”

In October, Blue Shield threw its lobbying muscle and public support behind H.R. 3, a federal bill that could potentially lower the cost of drugs used to treat critical chronic conditions like rheumatoid arthritis and diabetes, which are among the highest drug costs that Americans face, year after year.

In 2017, Blue Shield championed California’s S.B. 17, one of the nation’s first drug-pricing transparency laws. The new law requires drug manufacturers to inform purchasers in advance of any excessive price increase with an explanation as to why the increase was made.

Paul Markovich Boardroom square
Paul Markovich, president and CEO, Blue Shield of California

And in April 2018, Blue Shield announced a deal with the tech company Gemini Health LLC to give healthcare providers instant access to a list of low-cost alternative medications that they can prescribe to their patients.

“Now, participating providers in our network can see in real-time the actual out-of-pocket costs of each medication for their patients who are Blue Shield members,” Markovich said. “This helps the prescriber identify less expensive, equally effective medications for their patients and make their care more affordable.”

Blue Shield’s efforts come amid a heightened effort statewide and nationally to rein in drug costs. The California Medical Association also has been lobbying lawmakers. In a statement supporting federal drug-pricing legislation, the CMA said “drug spending reached $328.6 billion, more than double what was spent in 2002. One in four patients report that they or another family member did not fill a prescription in the last year because of cost.”

Civica Rx and Blue Shield of California’s efforts to lower prescription drug prices may be an antidote to that ominous trip the pharmacy and the sticker shock that comes with it.

Markovich added, "The pharmaceutical manufacturers and biotech companies that want our business need to demonstrate that they are improving quality and affordably, or we’re going to take action and do it ourselves.”