Discounts by Drug Firms
Drug firms give discounts voluntarily to increase their net sales volumes and consequently their profits. Moreover, they also provide discounts according to their price discrimination policy. Also, the products under discount have a higher elasticity while their demand also makes them price sensitive.
Routinely Discounts to Customers
Healthcare providers give routinely discounts to their customers because this increases their overall profit through different insurance companies. Moreover, as insurance companies are the primary source of income for physicians, they find physicians’ offices as some kind of a profitable asset to increase sales by adding discount incentives.
Highest Prices for Uninsured
Hospitals charge different prices to their patients for the same healthcare services. However, the uninsured sometimes pay two times higher prices as compared to insured patients (Parsons, 2007). This is because they do not have the protection that an insurance policy provides. Therefore, the uninsured miss the opportunity to negotiate over prices, and therefore they have to pay for healthcare services at face value. Furthermore, healthcare providers also can discriminate against the patients and sometimes recover their money from uninsured patients often giving them as discounts to insured patients. But if we view this discrimination from a biblical perspective considering that God has bestowed common grace to his creation, marketers should ensure even power distribution to build authentic relations with all customers.
Cash Price Vs Insurance Price
The cash price can sometimes be lower than the insurance price but it mainly depends on the type of product being purchased and its demand in the market. Moreover, as noted by Thomas, (2017), the prices of drugs for insured patients are determined collectively by considering the overall expenses of the insurers’ clients. Therefore, while seeking deals for generic drugs, insurers reach an agreement for a set of drugs and not for each drug separately. This way the price for a particular drug can increase from its original price in the market for uninsured patients.
Better Price of Drugs for Hospitals
Hospitals mostly get a better price for a drug as compared to insurance companies because they are the direct service providers. Although both hospitals and insurance companies can negotiate on prices and can enjoy a significant discount on certain products, insurance companies being an intermediate entity cannot offer as much profit as hospitals do by creating demand in both healthcare and medication.
Low Prices for VA
The primary reason for the Department of Veteran Affairs (VA) to get significantly low prices is its political authority is controlled by the Federal Government. This provides an additional privileged bargaining position to demand relatively higher discounts which are often accepted (D’Angelo, 2007). However, the number of drugs with low prices is often limited.
Medicaid and VA Prices Under Law Enforcement
If a law was enacted to provide both state Medicaid agencies and the VA with sane prices, there would be a significant reduction in the prices being charged to Medicaid considering the aspect that the VA prices are always lowered. However, this will cause a great loss to the drug firms which will consequently ask for compensation from the federal government. So, to counter the drastic decline in the prices, they will be ultimately resorted to their higher rate to stabilize the revenues of the drug firms.
VA Formulary Adoption by Medicare
Medicare can adopt the VA formulary if they pursue the same goal as that of the VA to benefit its recipients. Moreover, if the price difference between Medicare and the VA is removed, the existing cost-share ideas can be replaced with the higher objectives of creating a healthy society. But if we compare the size of the recipients for both Medicare and the VA, an increase in the prices for the public sector can be expected in case Medicare accepts the VA formulary.
References
D’Angelo, G. (2007). The VA Drug Pricing Model: What Senators Should Know. The Heritage Foundation. https://www.heritage.org/health-care-reform/report/the-va-drug-pricing-model-what-senators-should-know#:~:text=The%20VA%20does%20not%20use
Parsons, T. (2007). Hospitals Charge Uninsured and “Self-Pay” Patients More than Double What Insured Patients Pay. Johns Hopkins Bloomberg School of Public Health. https://www.jhsph.edu/news/news-releases/2007/anderson-hospital-charges.html
Thomas, C. O., Katie. (2017). When Buying Prescription Drugs, Some Pay More With Insurance Than Without It. ProPublica. https://www.propublica.org/article/when-buying-prescription-drugs-some-pay-more-with-insurance-than-without-it
