Managing Health Care Costs Number is 252%
We all know that brand name drug pricing has been increasing at an unsustainably high rate – and recently the pharmaceutical industry has been pointing fingers at pharmacy benefit managers (PBMs), which negotiate pricing. As I noted last week, the entire process is opaque, and “average wholesale price” is a misnomer, influencing only payment for those who have no insurance. PBMs negotiate for rebates to lower costs for payers (usually employers who hire them) – and they also negotiate rebates to cover their own costs and profit margins.
The cost of insulin has been a special problem. Many with diabetes would die without insulin – and the pharmaceutical companies only sell name brand biologically engineered insulin. Insulin cost under $30 a vial when I started practice in 1987- at this point most vials of insulin cost over $250.
The Wall Street Journal published data last week showing that for Lantus, a long acting insulin, the “yield” for the manufacturer has actually decreased over the last two years, while the list price has soared. This makes it very likely that the dollars the PBM makes for each Lantus prescription has increased substantially.
There’s been enormous consolidation in the PBM field in the last few years. CVS Caremark, Express Scripts, and Optum (which purchased Catamaran) represent three quarters of all prescriptions. This demonstrates the challenge of antitrust enforcement in the health care field. Higher leverage for PBMs allows them to demand deeper discounts from the pharmaceutical manufacturers, but also leaves them feeling less competitive pressure to pass these savings on to their customers.
Source Note that Optum Rx purchased Catamaran in 2016.
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