Rise of Cash-Pay Pharmacies: What It Means for the Industry

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Photo credit: Depositphotos

By Jeremy V. Gross, co-founder and CEO of Vytal

The pharmaceutical industry is designed to work with insurance to provide more cost-efficient options for patients. Yet, in 2020, there were 44 million Americans without insurance and 38 million that did not have adequate health coverage. This led to many individuals opting to pay cash for their prescriptions and caused major industry players like UnitedHealth to announce programs to sell prescription drugs online to reach people interested in the cash option. As a result, we’re experiencing a new shift within the healthcare industry that gives more control to both patients and manufacturers.

Cash pay means drug pricing will benefit the patient

High drug prices are nothing new. According to a poll done in June of this year by the Kaiser Family Foundation, nearly 90% of consumers believe the federal government should negotiate directly with drugmakers to drive down prices. But with the timeline for government intervention remaining cloudy, consumers are opting to pay cash for their prescriptions rather than go through their health insurance pharmacy benefits. 

As more and more consumers go the cash route, avoiding the steeply priced name-brand drugs for their generic or lesser known counterparts, pharmaceutical companies are going to have to adjust in order to stay competitive. Those that continue to charge higher prices will be pushed out of the market. Consumers now have more options – and thus more control – when it comes to pharmaceutical purchases. If manufacturers want to remain profitable, they’ll have to price their products accordingly.

Cash pay means manufacturers can control their own pricing

A study conducted in 2017 showed that 69 percent of commercially insured patients didn’t fill their prescriptions when the out-of-pocket cost exceeded $250. Currently, if denied by insurance, patients are priced out of the cash option, and therefore the medication itself. However, manufacturers are now recognizing this gap in the market. If they’re able to appropriately price and sell medications that would have otherwise been abandoned, these pharma companies can capitalize on this market and improve their own ROI. 

Consumers may ask, how are they able to price and sell their medications independently? By selling directly to their patients via online platforms

Through the direct-to-consumer model, manufacturers are able to control their own pricing by circumventing prescribed minimum benefits (PMBs) and passing the savings on to patients. Going DTC is an independent way to leverage brand loyalty, take back control post-loss of exclusivity (LOE) and compete against rebranded generics. With companies like Vytal available to help these pharma companies set up custom online storefronts, it’s easier than ever for independent brands to get in front and in the hands of patients.  

Where we go from here

As more startup pharmaceutical companies enter the marketplace and more patients capitalize on the cash pay option, the legacy pharma companies will either have to evolve or fall by the wayside. While it may still be some time until prescription drug prices are no longer inflated, the increased popularity of cash payments for medication is putting more control into the hands of patients and more pressure on pharma companies to price competitively. It also provides a gap in the market for startup pharma companies to capitalize on by offering their products directly to patients through online storefronts and better pricing. 

As consumers continue to demand fairly priced, convenient prescription options, it will be interesting to see how the healthcare industry as a whole evolves. 

About The Author

Jeremy (“Jerry”) V. Gross is the chief executive officer and co-founder at Vytal, a healthcare technology company. As CEO, Jerry is responsible for overseeing the vision, strategy, and growth of the company as well as its newly launched platform-as-a-service, VytalOS, which offers consumers frictionless prescription management and delivery. Jerry has 30+ years of experience leading development teams and leveraging emerging technologies to create disruptive innovation within biopharma, healthcare, and the financial technology industries.