The Hidden Monopolies That Raise Drug Prices
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The Hidden Monopolies That Raise Drug Prices
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Re: The Hidden Monopolies That Raise Drug Prices
#2It's interesting how the villains of drug pricing have gone from the drug companies to the PBMs.
At any rate, I don't agree that PBMs cause drug costs to increase. PBMs are simply purchasing groups for insurance companies. They take advantage of bulk purchasing and offer that service to insurers. They also handle the all the complexities in setting a formulary which includes evaluating new drugs, negotiating with drug companies and adjudicating claims. That has real value.
The best example of how PBMs have controlled drug pricing is in HCV. Express Script directly attacked the pricing of Harvoni and Sovaldi. However there was nothing they could do since they were the only HCV drugs available. However, when Viekira Pak became available, Express Script did an exclusive deal with Abbvie which caused Gilead to scramble to price match. The cost of HCV drugs came down by almost 40% overnight. It saved the health care system a lot of money.
Now, I do agree that PBMs pull a fast one on some insurance companies. They are intentionally opaque when it comes to how much you pay for their services. The smart insurance companies ask for "pass through" pricing and then pay the PBM a fee for their services. The not-so-smart insurance companies don't ask for those numbers and get put over a barrel.
Re: The Hidden Monopolies That Raise Drug Prices
#3> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection against just this kind of concentrated economic power. But in one area after another in today’s economy, federal antitrust authorities and the courts have failed to intervene. In this case, PBMs are sucking money out of the health-care system—and our wallets—with hardly any public awareness of what they are doing.
As I and other have mentioned before, the easiest way to fix this would be to permit re-importing drugs that were manufactured within the US.
For example, permitting trade across the US-Canadian border provides an equalizing force on the prices across the border, even though, at steady-state, no drugs actually need to make the return trip. In other words, allowing the trade puts an upper bound on the difference between the prices charged in the US and the prices charged in Canada: that difference can be no greater than the costs of reimporting those drugs, or else it becomes cheaper for people to source their drugs from Canada.
By disallowing the trade, we allow the difference to grow unbounded.
A few days before Obama left office, there was a bill that would have fixed that, but nine Democrats joined the Republicans in voting it down: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_...
Re: The Hidden Monopolies That Raise Drug Prices
#4I think blaming drug companies and wholesalers just misses the point.
Drugs are really good today. Not even the life saving types, but also things like migraine medication or acid reflux relief. If you suffer and have the means, you'll pay what the market demands for relief. And we live in a wealthy country.
Re: The Hidden Monopolies That Raise Drug Prices
#5It's interesting how the villains of drug pricing have gone from the drug companies to the PBMs. At any rate, I don't agree that PBMs cause drug costs to increase. PBMs are simply purchasing groups for insurance companies. They take advantage of bulk purchasing and offer that service to insurers. They also handle the all the complexities in setting a formulary which includes evaluating new drugs, negotiating with dru…
Interesting and rather specific and niche perspective. Would you agree that the biggest problems in our healthcare system are transparency, i.e., no way of telling how much something is going to cost in spite of all the data existing to provide just that, and the crushing administrative costs of a system that seems to incentivize massive administrative burdens?
Re: The Hidden Monopolies That Raise Drug Prices
#6I think blaming drug companies and wholesalers just misses the point. Drugs are really good today. Not even the life saving types, but also things like migraine medication or acid reflux relief. If you suffer and have the means, you'll pay what the market demands for relief. And we live in a wealthy country.
That's true, but there are also many drugs on the market which are barely better than a placebo, or even more harmful than no medication. However, they are still prescribed and billed for as if they are effective.
Re: The Hidden Monopolies That Raise Drug Prices
#7Interesting takeaway: going forward I'll always ask the pharmacy if paying out of pocket would actually be cheaper than using my insurance and paying a copay.
Re: The Hidden Monopolies That Raise Drug Prices
#8> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection aga…
Or: we could just emulate what those other countries are doing to control prices, which apparently has been empirically proven to be effective. Why set up this rube goldberg export / import system when we could, apparently, just import some good legislation?
Re: The Hidden Monopolies That Raise Drug Prices
#9> Americans pay the highest health-care prices in the world, including the highest for drugs, medical devices, and other health-care services and products. Our fragmented system produces many opportunities for excessive charges. But one lesser-known reason for those high prices is the stranglehold that a few giant intermediaries have secured over distribution. The antitrust laws are supposed to provide protection aga…
The challenge with that is that simply allowing drugs to be imported doesn't prevent drug companies from allocating volume on a country-by-country level and maintaining price discrimination.
This happened back 6-7 years ago when getting your script filled by a Canadian pharmacy was all the rage. The drug companies simply setup quotas for Canada. They have a good estimate of how much drug Canadians need. If a wholesaler tries to buy more, the drug company tells them no. Then all of a sudden Canadian wholesalers are in a bind. Do they sell to Americans and tell the Canadians no?[1]
In an April 8 letter to Canadian pharmacies and wholesalers, AstraZeneca wrote that some prescription drug orders would be reduced because of a new allotment program designed to address "unexpected sales increases"
Re: The Hidden Monopolies That Raise Drug Prices
#10I think blaming drug companies and wholesalers just misses the point. Drugs are really good today. Not even the life saving types, but also things like migraine medication or acid reflux relief. If you suffer and have the means, you'll pay what the market demands for relief. And we live in a wealthy country.
If your drug is so good, you should let the market decide what the fair price.
The problem is that drug companies and wholesalers don't let that happen by lobbying against open markets and government paid healthcare.