November 9, 2018

Pay Attention to the Man Behind the Curtain on Drug Prices


I'm enough of a nerd that I'm a fan of the blog Drug Channels.  It is written by Adam J. Fein, Ph.D. and consistently brings smart analysis to the drug marketplace. By smart, I mean pealing back the layers of the onion and getting to the root causes of market distortions, like spiraling list prices while manufacturers face stagnant net revenue.

I found this recent piece a particularly good example of why I like it. Drug Prices After the Midterms: Five Crucial Implications of Pharmacy Benefit Design


Going beyond complaining about drug prices, Fien seeks to explain some of what is going on behind the curtain in the mostly invisible drug middle market. This is where the big companies that manage drug benefits (not make medicine or dispense it) do their thing.  The whole post is a good read but here are a few highlights.

This quote should send chills down the spine (bold text added):

Coinsurance amounts are typically based on the negotiated rate between a pharmacy and payer. These amounts typically approximate a drug’s undiscounted, pre-rebate list price. Though patients pay the list price, their employer can still collect a rebate that is not reflected in that pharmacy pricing. For some high-list/high-rebate drugs, the patient’s out-of-pocket costs can even exceed the net cost of the drug to the employer.  
That’s right: Employers can actually profit from certain drugs. Plan sponsors can hoard rebates rather than share the savings with the employees whose prescriptions generated the rebate funds.

Who is likely getting screwed over in these cases?
Employers and their PBMs typically place therapies for such chronic, complex illnesses as cancer, rheumatoid arthritis, multiple sclerosis, and HIV on the fourth and specialty tiers of benefit plans.

So IMHO, PBM reform that applies rebates at the point of sale seems like a really good place to start the conversaton on drug price reform. If anyone is serious about it.