The ever-increasing cost of prescription drugs poses a significant challenge to the healthcare system, impacting the GDP and creating financial burdens for employers and individuals. Private equity firms that own portfolio companies and plan to acquire other firms face these challenges head-on. The United States is paying significantly more for prescription drugs than other high-income nations, due to expensive specialty medications and gene therapies. As a result, self-funded employer health insurance plans within portfolio companies bear a substantial portion of these costs.
Private equity firms can explore innovative solutions, such as international prescription sourcing programs, to manage this financial burden. These programs enable access to high-cost medications from Tier 1 countries at lower prices while maintaining US quality standards.
The Escalating Prescription Cost Scenario
Prescription drug costs consistently increase as a percentage of healthcare GDP, driven by the introduction of high-cost specialty medications and gene therapies. These cutting-edge treatments often involve complex manufacturing processes, extensive research and costly clinical trials. As a result, the pharmaceutical companies that produce them charge higher prices to recoup their investments and maintain profitability.
As drug prices continue to rise, stakeholders must collaborate and explore strategies that balance innovation, affordability and access to necessary treatments.
The Disparity in Prescription Drug Prices
The United States pays 2.5 times more than similar high-income nations for prescription drugs, creating a significant price disparity. This financial strain affects the overall expenses and profitability of the companies.
Insurance companies play a pivotal role in negotiating drug prices and determining prescription medication coverage and reimbursement policies. However, the complicated dynamics between insurance companies, pharmaceutical manufacturers and patients could potentially lead to higher drug prices. Insurance formularies and tiered pricing structures can limit access to affordable medications and contribute to price disparity.
The Burden on Self-Funded Employer Health Plans
Private equity firms and their portfolio companies face a significant cost burden for prescription drugs within their self-funded employer health insurance plans. The rising prices of prescription medications pose financial challenges for these firms and their employees, impacting the bottom line and the well-being of individuals who rely on these medications for their health.
It is important for private equity firms and their portfolio companies to proactively address the issue of high prescription drug costs within their self-funded employer health insurance plans. By implementing strategic measures to manage these costs, they can support the financial well-being of their businesses, provide affordable healthcare options to their employees and ensure the growth and sustainability of their portfolio companies.
The Benefits of International Prescription Sourcing Programs
To effectively manage these rising costs, private equity firms can consider international prescription sourcing programs for their portfolio companies. These programs allow access to high-cost medications from Tier 1 countries, such as Canada or the UK, while meeting the same quality standards as in the US. Importantly, these programs can often work alongside existing Pharmacy Benefit Manager (PBM) arrangements without disruption.
Implementing international prescription sourcing programs can yield significant cost savings for private equity-owned portfolio companies and enhanced affordability that ensures improved access to critical medications.
Considerations for Private Equity Firms
Private equity firms that own portfolio companies and plan to acquire other firms should evaluate the potential of international prescription sourcing programs. Partnering with experienced consultants, such as The Horton Group, can help you assess the feasibility of implementing this strategy across their portfolio. It is very important to be aware of current regulations and any possible compliance issues that could arise. They will address concerns and challenges associated with international sourcing to ensure the implementation is successful. Contact The Horton Group today to explore the possibility of international prescription sourcing programs and learn more about the potential benefits for your private equity-owned portfolio companies.
Alec Wohlever
Alec Wohlever is a Vice President for Horton’s Employee Benefit Solutions. In this role, Alec is responsible for providing expert employee benefits consulting, bringing new clients on board, and servicing and retaining existing clients. He is part of a team of employee benefits-focused specialists dedicated to delivering innovative healthcare solutions to employers.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.
