Blue Cross President: Drug Prices Have “Lost All Relationship to Any Sort of Sanity”

A Healthcare Cost Institute report named Dallas as one of the most expensive places in the country to get healthcare. At the Dallas-Fort Worth Business Group on Health’s Forum this month, Dr. Paul Hain put the blame at the feet of local consolidation and increased drug prices.

The HCCI report is a visually pleasing infographic where one can see how their city’s healthcare costs compare to other metro areas around the country. Called the Healthy Marketplace Index, it names Dallas as the 17th most expensive city in the country in 2016. Overall, DFW’s healthcare costs are five percent above the national average, but our outpatient healthcare costs are 12 percent above the mean, which could be due to consolidation of outpatient practices, Hain says.

Hain, the President of Blue Cross Blue Shield’s North Texas Market, described how specialty drug prices are no longer connected to cost, but rather to the patent, which allows for monopoly control and price-hiking. “They have lost all relationship to any sort of sanity,” he said.

He described the difficult tension between wanting the best medical care for one’s family and the exorbitant prices. If one’s child has cystic fibrosis, and there is a new drug that can treat it, families are left little choice. “That’s not a negotiation, that’s a hostage situation,” Hain said. “Pharmaceutical research and development budget is equal to advertising budget. It works and it helps them keep their prices high.”

Hain also described how Blue Cross is battling hospital systems to keep costs down. He said that in contract negotiations with hospital systems, they have been fighting over a single paragraph that kept Blue Cross from guiding its customers toward lower cost providers. “We think it is imperative to allow the market to impact prices,” he said.

Hain says that consolidation in the North Texas market has contributed to our record-setting prices. “As soon as healthcare entities consolidate, prices go up,” he said.

With all the consolidation in the market, he described the halo effect that practices receive when they merge or are bought out. Hain said the hospital is buying a stream of referrals when it purchases a physician group, and guaranteeing a salary for the physician. When a practice is now affiliated with a big name provider, cost often goes up, but “quality care is uncorrelated to cost or reputation,” Hain said. “The reason hospitals buy cardiologists – it works in driving up costs.”

He noted the variety of an MRI in Dallas, where rices range between $500 and $3500, as an example of how prices vary widely and have gone up. But for most people with health insurance, employers are the ones who pay the costs, and insurance companies merely administer the plans. “In the end, you pay, not us,” Hain said.