Look up Pharmacy Benefit Managers. They are middlemen who control which drugs insurers cover and which ones end up in pharmacies. Pharma companies are incentivized to jack up the price of drugs so that they can offer a bigger rebate to the PBMs (which they pocket) so that the PBM will put their drug on the formulary (list of drugs insurance companies will cover).
PBMs are not the profit reapers you think they are. We operate on slim margins and increasing pressure leads us down a path to zero margins. The PBM industry is not what it used to be. Everything is in the hands of the pharma co’s these days.
Come in CVS. Express Scripts makes over 100 billion a year.... Just because the margins are lower that their previously high margin, doesn't mean that pbms don't drive up drug costs. They absolutely do. That's why transparency in pbm pricing had even gone to Congress.
I think pharmacies negotiate pricing with pharma companies on their own, which leads to pricing fluctuation. Add in the insurances that negociate pricing with pharmacies and you have one more level of fluctuation.
The manufacturers bid out products to the pharmacies and if the price is agreeable it goes on contract. The patient though may not get the contract price though. Like other medical services medicines are billed to the insurance at a rate agreeed by both parties( not the manufacturer) and its this cost you see. So a pharmacy may buy an bottle for med for a $1 but then bill your insurance company 100 of which you pay 30 (copay) and the insurance will pay 70.
We all know saline is cheap. But if you look at the billing for how much it is when you need an IV in the hospital it’s way more expensive. This is for the same reason.
I never said insurance didn’t play a big part. And sterile manufacturing is complicated and costly but the the per unit cost for a bag of saline compared to what the hospital bills the insurance/patient for is indefensible.
Dude, CVS - you are off. Insurance and PBMs absolutely drive pricing (in addition to the pharma company) - As someone who has worked in healthcare at a provider working w patients in access and coverage, as a pharmacy consultant which included pricing and access strategy, and at a pharma company.
We negotiate prices with a wholesaler and set prices based on contracts. The spread between these negotiations leads to our small margins. Ultimately drug prices are set by the manufacturer based on the US consumer’s willingness to pay.
The pharmaceutical distribution system is complicated and is subject to many of the same market forces that impact other industries. The industry is moving towards more vertical alignment where based on your coverage, the pharmacy, pbm and wholesaler have contracts in place to incentivize utilization at entities owned in part or whole.
From a manufacturer perspective, it’s incredibly expensive to develop drugs and includes substantial inherent risk. Lots of hands also touch a drug between the time it leaves the production line and gets dispensed, everyone takes a cut.
The real ‘monopoly’ here is big pharma. No one else has as GRE war of pricing power as the patent holder. Some patents are even held by the government, but contracted out to private pharma companies. Even the scripts that go generic can be controlled by the same manufacturer, effectively rendering the generic pointless.
Awp is what the insurance companies base their pricing though no one else uses it. Compare WAC and AWP for the same product. If you want to reign in consumer prices without reinventing the wheel regulate the wac and awp differential
Greediness across the board. Manufacturer(big pharma), pbm, retail pharmacy, mail order pharmacy, specialty pharmacy, insurance company and employer... everyone passes the blame on one another. It’s gonna be the case forever too. Let’s move on.
As someone who has worked in pharmacy for 15 years, the aggregate of the above responses is correct and there are multiple factors that contribute to the cost of medicine in this economy. In the end, we have a system that encourages massive RD investment due to potential profit and patent protection in a market where maximum pricing is possible compared to other world markets as they have different laws, different health care systems and how those health care systems are paid for. The question of health care is a right or priviledge still needs to be decided and in our capitalism market, what you see are numerous pharmacy field players arranging in a market dynamic intended for maximum profit distributed (unevenly) among the players who have built near permanent positions through market share and lobbying (various government rules regulating our workflow are illogical and favor certain dynamic favorable to those paying for the rule setup). Althought true that developing better drugs that further progression free survival or offer near curative therapies or simpler administrative regimens are an effective way to improve quality of life for Americans, the associated increase in cost of medicine is debatable pending your point of view. One thing is certain: our rate of drug increases is not sustainable if we want to control costs with current budgets and not increase health care premiums to the point where community access isn't severely negatively impacted. Hope this helps.