In 2019, we launched a streamlined flow in our patient app to handle a surprising scenario: when the out-of-pocket price for a medication is less than the insurance copay.

Since launching our price selection feature last year, we've saved thousands of patients money by bringing this disparity to their attention. On average, patients save 30% off their total copay when their out-of-pocket price for a medication is cheaper than the insurance copay. The average savings per prescription is $23.30. 

While several factors impact how drug pricing works, here are two trends we’ve seen in the data so far.

These Two Therapeutic Classes Are Most Likely to Be Cheaper Out of Pocket

A therapeutic class is a method of categorization that groups medications based on the conditions that they are intended to treat. Here's what we found when we aggregated prescriptions by therapeutic class:

Across the 394,367 prescriptions we examined, roughly 0.5% had lower out-of-pocket costs. Comparing different therapeutic classes, anti-parasitic drugs (example: permethrin) appear most likely to have a cheaper out-of-pocket price by a fairly wide margin at 2.94% of cases. Cardiac/cardiovascular drugs (example: rosuvastatin calcium aka Crestor) and blood medications (example: tranexamic acid) stand out as well with over 1% of cases.

Looking at the results in terms of median percentage savings, a few classes stand out as having a fairly high disparity between prices: anti-histamines, contraceptives, anti-neoplastics and anti-infectives. 

Brand Medications Are Less Likely to Be Cheaper Out of Pocket

You're up on Family Feud, and Steve Harvey asks you to name some differences between brand-name and generic medications. The first thing that probably comes to mind is cost: In general, one expects generic medications to be cheaper than their brand-name alternatives. We might expect brand name medications to incur higher copays and thus a larger opportunity for Alto to provide savings. However, we see a surprising trend in our data:

In fact, only .01% of brand name medications we've delivered since shipping this feature had lower out-of-pocket prices (compared to .6% for generics).

So what gives? The cash price we’re able to offer for a medication is mostly determined by the cost we paid a wholesaler or manufacturer to buy it. The copay set by insurance plans, however, is often impacted by behind-the-scenes negotiations between the drug manufacturer and the pharmacy benefit manager, or PBM. As a result, the cash price isn't always strongly correlated with the insurance copay:

Among a set of equivalent products, the one with the cheapest cash price might not be the one with the lowest insurance copay, and that difference can be significant enough to make it worthwhile to forego using insurance.

What’s Next? 

As engineers who are tasked from time to time with investigating issues with our billing system, we've experienced our fair share of bewilderment at the surprising outcomes we sometimes see. The complexity of pricing is why we've invested so heavily in making sure both our internal tools and patient-facing applications present users with the information they need to understand their options and make well-informed decisions.

We have countless opportunities to help our patients achieve better health outcomes, save money, and be more informed about their choices when it comes to their medication. There’s a lot of exciting work to do, and if this sounds interesting to you, please reach out to us on LinkedIn. We’d love to hear from you!