The U.S. prescription drug market is fundamentally broken, which explains why a 2018 USC Schaeffer Center study found that commercially insured patients' copayments for generic prescriptions exceeded the total cost of the medicine more than a quarter of the time (28%), with an average overpayment of $7.32 (see https://healthpolicy.usc.edu/research/u-s-consumers-overpay-for-generic-drugs/ for more on its research). Among privately-insured beneficiaries, another 2021 study also concluded that generic drug price declines between 2007 and 2016 were not being fully passed-through to consumers. Other academic research findings looking at government-run healthcare insurance, such as Medicare which covers seniors, have found pretty much the same dynamics at work. For example, Medicare Part D standalone drug plans paid $2.6 billion more in 2018 for 184 common generic medications compared with prices for the same drugs available to cash-paying Costco members according to other USC Schaeffer research. That also explains why researchers at Harvard Business School concluded that Medicare could have saved nearly $4 billion in 2020 simply by having people purchase generic drugs at Mark Cuban Cost Plus Drug Company (see https://store.hbr.org/product/cost-plus-drugs/723362?sku=723362-PDF-ENG for more).
As NPR's Dan Weissmann eloquently described the situation on his "An Arm and a Leg" podcast, in the U.S., "Filling a prescription means swimming with the sharks" https://armandalegshow.com/episode/swimming-with-sharks/ which built upon an issue of its First Aid Kit Newsletter (see https://firstaidkit.substack.com/p/avoiding-prescription-drug-ripoffs for more). The reason, as eloquently described by the director of the "Right on Healthcare" initiative at the Texas Public Policy Foundation David Balat, is because of the corporate middlemen who game the system and inflate the cost of vital prescription medications. In an editorial, he wrote: "Congress Must Protect Consumers From Predatory Drug Middlemen".
I wrote about my own experience a while back in a post I called "Turning PBM 'Arbitrage' On Its Head: Bypassing Insurance to Save" and I did save quite a bit for a while. But then, PBM's changed what they were doing. For example, Cigna's Express Scripts Cash-Pay Mail Order Pharmacy ceased operations on November 21, 2022 (I blogged about that at https://blog.sstrumello.com/2022/11/cigna-express-scripts-by-insiderx.html if you want to read about it). We had been using Express Scripts to buy two prescriptions, and we did save quite a bit of money, including 82% on one generic drug, and 56% on another. So, when we received that letter, we cut Express Scripts/InsideRx out of our process. It wasn't as if we didn't consider it, it's just that we found it was cheaper to use Mark Cuban's Cost Plus Drug Company on both of them. We paid slightly more for one of the two drugs ($1.50 more for a 90-day supply), while we saved about $2.00 on the other, so all told, it essentially cost my household the same thing, and in both cases, we cut our PBM Caremark out of the equation. The only difference is that I feel confident that Mark Cuban's Cost Plus Drug Company won't pull an Express Scripts by InsideRx move on us and stop selling the product or raise the price by a random, unexplainable 40% price increase just because the PBM believed it could get away with doing so. In fact, Mark Cuban Cost Plus Drug Company has been known to make a big deal when the company actually REDUCES prices on selected prescription drugs -- it doesn't happen all the time, but when it does, they like to make a big deal about it.
As the Pharmacists United for Truth & Transparency, a nonprofit organization dedicated to advocating on behalf of independent pharmacy owners described the situation: "The PBM trade organization known as the Pharmaceutical Care Management Association ("PCMA") recently launched a "seven figure advertising campaign...to educate policy makers and the public..." to try and rehabilitate their image, while putting forward policies that will protect their profiteering empire, and continue to shift blame and accountability to anyone but themselves. Oh, and they're trying out a little name change too. PCMA now describes the Pharmacy Benefit Managers ("PBM's"), whom recently been describing its industry as Pharmacy Benefit Companies ("PBC's") instead of Pharmacy Benefit Managers as part of a "seven figure" ad campaign. (see their article at https://puttrx.medium.com/pcmas-seven-figure-ad-campaign-with-pbm-to-pbc-rebrand-is-ironically-transparent-in-motive-7b32a85d277f for more).
However, my own sense is, there has been something of a shift in public opinion on predatory PBM middlemen.
In part, the shift in opinion is because the underlying message about PBM's remains and unchanged, and its a falsehood. PBM's baselessly claim to be the "only members of the prescription drug supply chain that are working to lower drug costs" (see #OnYourRxSide, "PBMs are Working to Reduce Prescription Drug Costs for Millions of Floridians," PCMA, 2021. https://onyourrxside.org/state/florida/ for more) when the evidence suggests otherwise.
Congressional lawmakers have rightly concluded the PBM's are a bad actor operating in a sea of completely unethical organizations. For example, Iowa Senator Chuck Grassley (R-IA) and Oregon Senator Ron Wyden (D-OR), in their 2021 study "Insulin: Examining the Factors Driving the Rising Cost of a Century Old Drug" https://www.finance.senate.gov/imo/media/doc/Grassley-Wyden%20Insulin%20Report%20(FINAL%201).pdf concluded "This industry is anything but a free market when PBM's spur drug makers to hike list prices in order to secure prime formulary placement and greater rebates and fees," Senator Grassley said. "Tens of millions of Americans, from every generation and background, depend on insulin. This report pulls back the curtain on the drivers of spiking prices. It's a perfect example of why we ought to continue pushing for bipartisan legislation and oversight to address this problem."
"This investigation makes clear that consumers are the only ones losing out in America's broken drug pricing system, since every part of the pharmaceutical supply chain benefits from higher list prices. Insulin manufacturers lit the fuse on skyrocketing prices by matching each other’s price increases step for step rather than competing to lower them, while PBM's, acting as middlemen for insurers, fanned the flames to take a bigger cut of the secret rebates and hidden fees they negotiate. Consolidation within the PBM industry has not improved the situation," Wyden said. "These findings make it clearer than ever why Congress must make fundamental reforms to the way drugs are priced and paid for."
For his part, Senator Grassley admitted that any of the much-needed reforms he believes need to happen are likely only to happen under a Democratically-controlled Congress (see https://www.msnbc.com/rachel-maddow-show/maddowblog/grassley-makes-important-admission-dems-drug-prices-rcna20415 for his admission of sorts), the Iowa Republican said in a 2022 Senate Finance Committee hearing "I think you suggested the difficulty of passing something like in a Republican Congress, so you got an opportunity to do it right now, when Democrats and Republicans can work together to accomplish this. If we want to reduce drug prices, then we need to do it now."
Sen. Grassley had tried for four years to bring legislation before the Senate, and Mitch McConnell refused to do so (even while Sen. Grassley warned him it could cost his party control of the Senate, which it did). That's why Sen. Grassley was a very active participant in 2023's Senate hearing on PBM's. He's been around long enough to know what will happen under whose leadership on the matter.
But beyond the shift in the tide against PBM's is the inescapable reality that Americans keep paying more and more for for prescription drugs, the prices never go down even when generic versions become available, and they are concluding some entity or entities are responsible for that. And, by process of elimination, the PBM's are the only entity remaining, hence PCMA's ad campaign is unlikely to have much impact; its repeats a tired message that Americans see is a falsehood every time they go to the pharmacy.
Yet according to the PBM Accountability Project's 2021 report entitled "Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers" (see the report at https://b11210f4-9a71-4e4c-a08f-cf43a83bc1df.usrfiles.com/ugd/b11210_264612f6b98e47b3a8502054f66bb2a1.pdf for details), a better understanding of the overall financial incentives driving PBM behavior, as well as possible sources of conflict with their assertion was documented in its report. And, the conclusion seems to be that PBM's are really only good at one thing: figuring out ways for themselves to profit at everyone else's expense, and the main reason is because they operate without disclosure of what's happening behind-the-scenes.
That said, March 2023 brought an end to the insulin pricing balloon as the three major insulin manufacturers each announced their intention to opt out of the PBM markup game and instead simply bypass it instead. On March 1, 2023, Lilly announced list price reductions on its most commonly prescribed insulins, as well as an expansion of its Insulin Value Program (see the announcement at https://www.prnewswire.com/news-releases/lilly-cuts-insulin-prices-by-70-and-caps-patient-insulin-out-of-pocket-costs-at-35-per-month-301758946.html for more), then on March 14, 2023, rival Novo Nordisk announced practically the same thing (see its press release at https://www.prnewswire.com/news-releases/novo-nordisk-to-lower-us-prices-of-several-pre-filled-insulin-pens-and-vials-up-to-75-for-people-living-with-diabetes-in-january-2024-301771409.html for more info), and finally, on March 16, 2023, smaller insulin rival Sanofi announced that it, too, would slash prices for its own branded and unbranded insulins (see the Sanofi press release at https://www.globenewswire.com/en/news-release/2023/03/16/2629188/0/en/Press-Release-Sanofi-cuts-U-S-list-price-of-Lantus-its-most-prescribed-insulin-by-78-and-caps-out-of-pocket-Lantus-costs-at-35-for-all-patients-with-commercial-insurance.html for details). Collectively, these developments mean that all of three dominant insulin suppliers doing business in the U.S. have all announced their intention to slash list prices for their insulin products significantly.
Make no mistake, there is no altruism involved, they're doing it because doing so will save them money.
The real impetus behind the dramatic insulin price cuts is likely the American Rescue Plan of 2021 (see https://arstechnica.com/science/2023/03/heres-why-slashing-insulin-prices-will-actually-save-big-pharma-money/ for more). That law contained some provisions to improve healthcare access and affordability, including one that eliminates a cap on rebates that drug companies are required to pay Medicaid. If the cap was lifted with insulin list prices set as they are now, insulin makers might have had to pay Medicaid programs more than the price of their insulin products every time a Medicaid program had to cover one, likely totaling tens of millions of dollars in payments to Medicaid. But, with the lower list prices, Lilly, Novo Nordisk and Sanofi will dodge those extra payments. The rebate cap is set to lift January 1, 2024 — which is also when the companies' price cuts will fully kick-in.
And, not to be overlooked is something else also going on: Last summer, the U.S. Federal Trade Commission has been studying the Pharmacy Benefit Manager ("PBM") industry, and its study was approved in a unanimous, bipartisan vote. Ahead of publication of its PBM study, FTC issued a new policy statement (see https://www.ftc.gov/legal-library/browse/policy-statement-federal-trade-commission-rebates-fees-exchange-excluding-lower-cost-drug-products for the statement). The policy statement put both drug companies and prescription drug middlemen on notice that paying rebates and fees to exclude competitors offering lower-cost drug alternatives can violate competition and consumer protection laws and that it intends to ramp up enforcement against any illegal commercial bribes and rebate schemes that block patients' access to competing lower-cost drugs.
The FTC's enforcement policy statement outlines the legal authorities that may apply when dominant drug companies pay rebates and fees to middlemen to foreclose competition from less expensive generic and biosimilar alternatives, including:
- Exclusionary rebates that foreclose competition from lower-cost medicines may constitute unreasonable agreements in restraint of trade under Section 1 of the Sherman Act; unlawful monopolization under Section 2 of the Sherman Act; or exclusive dealing under Section 3 of the Clayton Act.
- Inducing prescription drug middlemen to place higher-priced drugs on formularies instead of lower-cost alternatives in a manner that shifts costs to payers and patients may violate the prohibition against unfair methods of competition or unfair acts or practices under Section 5 of the FTC Act.
- Paying or accepting rebates or fees in exchange for excluding lower cost drugs may constitute commercial bribery under Section 2(c) of the Robinson-Patman Act, which prohibits compensating an intermediary to act against the interests of the party it represents in the transaction.
Of course, the FTC also voted unanimously on a bipartisan basis to initiate a 6(b) study of the PBM industry practices (see the news release at https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry for more detail), which means even more scrutiny of payments paid to PBM's to exclude rival products which could be interpreted as illegal restraint of trade, and that study could potentially conclude sometime in 2023 (maybe 2024), and if evidence of any wrongdoing are uncovered, it could be referred to the U.S. Department of Justice's Antitrust Division, which could sue the relevant companies involved.
That said, insulin makers are first and foremost looking out for themselves and their shareholders, as they should because they have a fiduciary responsibility to their shareholders as publicly-held companies to do so. But the result is that patients will still see price reductions, as well as potentially a restoration of choice of which insulin works best for them. But restoration of patient and doctor therapeutic choice (e.g. the patient and/or their doctor being able to freely choose from either lispro, aspart, or glulisine [better known as Apidra] rather than the brand of insulin which the PBM selects based upon whoever is paying the biggest rebate kickbacks to the PBM). That benefits all patients, and is not limited to any particular sub-segment of the population. PBM's seized that choice from patients and their doctors, but with prices being brought back down to earth, perhaps we should be looking at it as a restoration of therapeutic choice.
Right now, dollars paid as rebates and other price concessions made to PBM's means patients are essentially forced to use whichever insulin variety is "preferred" by their insurance company's PBM (based on whoever pays the PBM the biggest rebate kickbacks), even when the "preferred" insulin varieties are NOT classified by FDA to be "interchangeable" with one another (as some biosimilars are, to get around that, PBM's simply refer to rival non-interchangeable insulins as being "therapeutically equivalent"; in fact they sometimes non-medically switch patients from one non-interchangeable insulin to another).
Also, non-medical switching by PBM's is endemic in the U.S., and that reality has been marginalized as if it were no big deal, but it IS kind of a big deal when you're the patient. For example, when insurance company-affiliated PBM's non-medically switch patients from one insulin to another, insurance company PBM's do not agree to cover any additional blood glucose testing supplies to assist patients in adjusting their dosage ratios in order to accommodate their non-medical switches from one non-interchangeable insulin to another. They SHOULD, but they don't. Hence, restoration of therapeutic choice has genuine benefits for ALL patients with diabetes who use insulin. For whatever reason, no one is acknowledging this restoration of therapeutic choice as a patient benefit.
While the insulin pricing bubble appears to have been burst, let's not delude ourselves into thinking that the dynamics at work for the rest of the prescription drug market have been fixed because they have not...at least not yet.
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