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The essay below was written by Kenneth Mendez, President and CEO of the Asthma and Allergy Foundation of America (AAFA), for the op-ed section of the Boston Globe on March 11, 2024.

A major drug manufacturer recently replaced its popular, branded inhaler, Flovent, with a cheaper generic version. The generic is exactly the same as the more expensive Flovent. Great news for people with asthma? Think again.

Following the launch of the low-cost generic alternative, thousands of people with asthma discovered that their insurers would not cover it. As a result, these people will have to pay for it out of pocket or get a new prescription. Without the right medication, asthma can be deadly. It’s one of the most prevalent diseases in the United States, affecting some 27 million Americans and killing more than 10 every day. It’s also very expensive, exacting a toll of more than $80 billion on the U.S. economy each year.

Flovent’s price odyssey shows how making a medicine cheaper in America’s convoluted drug marketplace can make medicines less accessible. Responsibility for this distorted system rests with employers, health plans, pharmacy benefit managers (PBMs), drug manufacturers, and policymakers. The system needs to change.

The list price of Flovent had grown so much in recent years that the company’s manufacturer, GlaxoSmithKline, would likely be subject to new Medicaid penalties. Replacing Flovent with an authorized generic at a cheaper price allowed GlaxoSmithKline to avoid these Medicaid penalties — and continue to offer the medication to the asthma community.

However, cheaper generics can create new affordability challenges for people when the cheaper generic’s lower price is a disincentive for it to be covered by a health insurance plan. Here’s why.

Insurers keep premium costs down for employers by hiring PBMs to design and manage “formularies,” or lists of covered drugs. PBMs possess enormous bargaining power — and use that leverage to extract hefty rebates and discounts from manufacturers to include drugs on a formulary and, in theory, to keep drug prices in check.

Since rebates and discounts are calculated as a percentage of a medicine’s list price, PBMs have an incentive to select costlier medicines because PBMs get paid for their services by keeping a portion of the rebate. Employers take their share of the rebate, too, so their health insurance expenses become lower. If a PBM’s formulary doesn’t cover a generic because the list price isn’t high enough to create a large enough rebate, then this restricts access by forcing employees to pay a high out-of-pocket cost for certain medications. For employees who need the medication the most, rebates could be used to reduce patient out-of-pocket costs but rarely are.

This perverse incentive hurts people with asthma when Flovent’s generic isn’t covered. As a result, asthma patients across the country who relied on a specific inhaler are scrambling to find alternatives. Different kinds of inhalers work better for some people than others. This has been particularly concerning for children with asthma, for whom continuity of care is paramount. Asthma is a top reason for missed school days and absence from work, accounting for 13.8 million missed school days and 14.2 million lost workdays annually.

Federal lawmakers are beginning to peel back the layers of this complicated system. A Senate committee is currently investigating the cost of asthma inhalers. Last summer, a bill to delink PBM profits from list prices for drugs covered by Medicare made it through the Senate Finance Committee with bipartisan support. The Protecting Patients from PBM Abuses Act, currently pending in the House, would make similar reforms.

Congress must fix the perverse incentives that deny vital life-saving medications for asthma and other life-threatening conditions. All stakeholders — insurers, drug companies, PBMs, employers, and policymakers — must work together to put patients first and help millions of Americans breathe easier.

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