PBM'S AND DRUG PRICES

https://www.commonwealthfund.org/publications/explainer/2019/apr/pharmacy-benefit-managers-and-their-role-drug-spending Maybe one of our computer savy guys can make a link to this site.

We have been been discussing drugs and drug prices on here for the last couple of weeks with lots of differing opinions but after reading why so many states are looking at laws affecting PBM's I started doing research on these PBMs. Of course this was in my Lupron fog brain in the middle of the night when I couldn't sleep. 😜 Maybe somebody on here has actually had this job and could enlighten us more. What was interesting was the requirements and qualifications needed to get this job with an annual income of 75,000. What was amazing to me was the amount of rebates from 2012 to 2016 given to these PBM Companies yet it doesn't seem like the little guy has benefitted at all from these rebates in fact drug prices have went up. A good example for some of us guys is Lupron and how much the price has increased in just the last two years. It makes me think of how this goes right along with the craziness of Auto rebates! I hustle cars for a Auto Dealership sometimes and all the salespeople say the same thing just forget all this b.s. and offer the cars at a price where everybody can make a little profit!! In the case of medicine it should be regulated just like natural gas and electricity are. Drug Companies should be able to make a little profit after covering research and costs to bring these drugs to market and then that's the price everybody pays and wipe out the PBM's !!!!!! Then these guys could go get a labor's job and make 30 dollars an hr instead of 23 pr hr. Of course Menards wouldn't agree with me do you think for one minute they would keep offering 11% rebates if they weren't making millions off from this program? Oh well gotta head down to the coffee club so we can solve some more of the world's probems! Everybody have a great day😉😉

Larry

Thanks!

“One major factor in high prices is that Medicare is not allowed to negotiate with drug companies on prices.”

Yes, and that is infuriating. Somehow this has to become an issue at the ballot box.

I think it's bipartisan bad politics so not really "political". A lot of problems are bipartisan. But I am not a moderator.

Halbert. You make good points. In both of your comments. And the reality is that it IS an important issue to us all , here.
I’m not totally familiar with other systems (x-US), but I’m curious, and I’m sure someone else here knows, what it is about the system in other countries that results in cheaper drug prices. Is it just about socialized medicine? Or is it the distribution process? Or something else?

Actually, I think you can buy a car directly from an auto manufacturer on special order if you want to go pick it up and drive it home - at least you used to be able to do so. It’s just not practical for most people. Probably the same for a soda. But, I know what you’re saying Rob. I’m just feeling like a smart*** this morning - guess the coffee hasn’t kicked in yet. 😉

RobLee - Your observation is basically correct. Some morning thoughts...

I do not believe that PBM's actually distribute anything. I think it is producer->wholesaler->pharmacy with PBM's just in the middle of the paperwork and pricing. They are actually more like the insurance companies in that they are not patients, doctors, or truckers/distributors and just process paper and money.

Drugs are also little bit different because the products are not freely sold and distributed where the markets take care of "issues" over time. There are excessive patent and regulatory issues involved as well as the third party payer/insurance company arrangements that makes it not behave like other markets with producers, distributors, retailers, and buyers.

No doubt it is complicated (our tax system comes to mind) and hard to fix given the realities of the situation. I might point out the craft brewers for the most part were able to finally beat "liquor distribution system" which was a similar issue and be able to sell a beer they made to the consumer. They were also permitted to self-deliver in many areas also. Not sure this resulted in cheaper beer but made for a lot more choices of where to get it.

It's also reality that medicine and health care are not commodities like cars or beer. It is something that we all need, or will need, or have needed in the past. It's more like electricity or water in that sense. Fairwinds' comment about advertising is also important--the runup in drug prices appears to follow pretty closely in time to the elimination of rules about advertising prescription drugs.

Drug prices, along with the pricing for many medical items, seems to follow the opposite of supply and demand curves. As supply has increased, prices have followed. An example is CT scans. When CT scans were very specialized devices that were only used for special situations, yes they were expensive...but that was expected. Now, where they are as common (almost) as stethoscopes, the price of a scan (at least as far as the list price goes) is still extraordinarily high--and bears little resemblance to the actual cost of installation or operation.

Sky - Yup, “they” set various limits as part of the “Surly Bill negotiation” and sooner or later breweries run into them. Castle Danger ran into the growler limit at 20,000 barrels. They can still sell beer but not take home beer. There is another limit at 250,000 barrels where a producer can not sell beer directly at all to keep the big guys out of this. There is a bill proposed to increase the growler limit since a number of breweries are running into now as you noted. The three-tier system and alcohol regulation in general is ridiculous nowadays and just makes business difficult. A camel is a horse designed by a committee and that is what these bills become after they go through legislative meat grinder.

I have been to Castle Danger, nice taproom in Two Harbors. Of course, good beer which is why they have grown. In small town America, they need any revenue they can get so the growler restriction will cost them some $’s in lost local sales.

The ads must work--why else would they keep at it? Makes me wonder just how many people actually go to their doctor and tell them that they think they need some drug they saw an ad for--and how many doctors will write the scrip.

That being said, medical care--and it's not just drugs, but it's a huge part of it--is fundamentally a monopolistic system. As such, it is not a free market, it is not competitive, and medicine is not a commodity that consumers can choose (or not choose).

I worked for many years in the electric power industry, and I went through the transition from the 'regulated monopoly' to the (mostly) deregulated system we now have. I guarantee, it was better before, even with it's flaws.

There is a way to put the brakes on the out of control costs, but we would have to accept some trade-offs. That we have proven we are not willing to even consider.

Totally agree with 81GyGuy's article. When I was an internist/hematologist/MO in the 70's patients came in even then requesting, some demanding, a certain drug. My daughter is a PA working in an urgent care clinic and it sounds like it's much worse now. Some patients get very angry and will write a complaint if they don't get what they want and think they need. It does put a lot of pressure on the provider because the complaints are reviewed and counted up. Some patients lie when they are mad and don't mention the real reason why they are angry and then she has to explain to the reviewer. It adds stress and some providers just give the person what they want because it is so much easier. Yes, the ads by drug companies absolutely should be banned. Years ago the drug companies liked to call themselves reputable or ethical (or some similar word) to distinguish themselves from, I guess, charletons, because they didn't advertise as those other unethical guys did.

Argent thank you for giving us some insight to the other side and yes Halbert I agree with you that the almighty dollar has probably become the main objective of the CEO's of the big drug companies, my only hope is that major teaching hospitals and hospitals like Mayo and MSK and MDAnderson and good cancer centers will not fall into this way of doing business and continue to keep the health of the patient the most important thing. JMHO

Larry

I came across this string and had to join the discussion. For starters... I am retired from one of the largest PBMs after 37 years. I was an officer of the company. Yes... I did very well because the company did very well. There are a few comments on this string that are extremely inaccurate. PBMs are in fact a “middle man” that gets paid for managing the pharmacy benefit. Hence the acronym, PBM. PBMs provide a valuable service.

There are only 3 payers of pharmacy claims in the U.S., they are Government (Medicare and Medicaid), self-insured (both companies and individuals), and health insurance companies. EVERY one of these have benefited from the “middle man” PBM. The industry is fairly new (first PBM in 1969) and originally just used a computer driven transaction to provide patients a discount at retail pharmacies based on a deal cut on behalf of a paying entity. The discount is/was volume related and the middle man received a 2% fee for creating a method to calculate a discount. Retail pharmacies were happy, payers were happy, and patients were happier.

The business caught on in the 80s with more discount type of innovations. Manufacturer (Pharma) rebates came into play. PBMs negotiations helped payers receive a benefit for branded drug positioning on formularies. Again... PBMs administered the transactions and retained a portion of the rebates for their service. Roughly 2-3%. Pharma had to prove their drug value to a clinical committee in order to receive approval and positioning on such formularies. PBMs did most of the work brokering said “proving” and calculating. Rebates provide a form of net savings as it relates to drug price trending. Even today rebates account for a fraction of the healthcare dollar.

Example: Pharmacy only accounts for 12% of the healthcare dollar spent. Only 20%-25% of drugs are branded therefore, rebateable, and an average rebate is 7% of the cost of branded drugs. It sounds like a lot when you’re talking about a $300 branded drug ($21.00) but there’s far more low cost generics that end up lowering costs and providing the real saving and profit for a PBM. Mail service dispensing is the best method for PBMs to profit by simply packaging and marking up low cost generics, then dispensing robotically. Rebates attract all of the critics but they’re a fart in a windstorm as compared to overall cost of healthcare.

PBMs help keep the fox out of the hen house with all stakeholders, lower drug pricing trends and...they do it for a total gross margin business of 10% on average. If you don’t believe that, perhaps you might read a 10K financial disclosure on any public PBM’s website. How many businesses do you know that serve their customers and charge only 10%?

Let’s talk about Pharma and how the big companies matter to everyone reading this post. If you have advanced prostate cancer like I do, you might tip your hat to the Pharma companies that are keeping you alive. If you know anyone with another type of cancer, they are likely on another drug that has kept them alive longer than years before. Palliative treatments from new drug therapies are the number 1 reason for pushing back cancer enough to enjoy more life. New drugs are the biggest bang for the buck in the entire healthcare system. Remember... they still account for only 12% of all spending. I hate a Lupron. But I love living. God Bless abbvie pharmaceuticals for making Lupron! I’ve owned their stock for many years!

I believe the better discussion would be how do we provide healthcare coverage for more people over the age of 50 and under 65. This is the most expensive population. These are the people who cannot afford to fight cancer without insurance and cannot work to receive an insurance benefit. By the time they get to a Medicare, they are really expensive to keep alive. I believe this is the biggest issue. Many cannot access Medicaid until they deplete their savings and consequently they end up in the Medicaid pool as a result. Guys... this is not a political rant. This is reality. Research what I’m saying. Donate to cancer research entities if you can afford it. Learn about what Pharma companies are doing to keep cancer patients alive. Don’t jump on the bandwagon with statements about PBMs or any company who contributes to healthcare innovation.

I’m thankful for all of the support on this site. I hope this post is perceived for exactly what it is intended...somethings you should consider.

Stay well.