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Thursday, March 30, 2017


Anything that smells like money

by Tom Sullivan

Photo via wrnihealthcareblog.

Matt Taibbi's vampire squid imagery for describing Goldman Sachs may end up on his tombstone. But thrusting into "anything that smells like money" is a an apt description not just for Wall Street but for metastatic capitalism in general.

The anti-inflammatory prescription I picked up Friday cost just $5. But for another recent medication the price difference between either a cream or an ointment was well over $100. David Dayen looked into why that is and published his findings at The American Prospect. A pharmacy owner such as Rob Frankil has no idea how much he'll make selling a prescription until he sells it:
Frankil’s troubles cannot be traced back to insurers or drug companies, the usual suspects that most people deem responsible for raising costs in the health-care system. He blames a collection of powerful corporations known as pharmacy benefit managers, or PBMs. If you have drug coverage as part of your health plan, you are likely to carry a card with the name of a PBM on it. These middlemen manage prescription drug benefits for health plans, contracting with drug manufacturers and pharmacies in a multi-sided market. Over the past 30 years, PBMs have evolved from paper-pushers to significant controllers of the drug pricing system, a black box understood by almost no one. Lack of transparency, unjustifiable fees, and massive market consolidations have made PBMs among the most profitable corporations you’ve never heard about.
Originally set up in the 1960s to streamline claims processing, PBMs formed large networks that could negotiate discounts from drug companies and pharmacies, and pass the savings on to you, the familiar pitch goes. That's rarely how it actually works out.
Why haven’t PBMs fulfilled their promise as a cost inhibitor? The biggest reason experts cite is an information advantage in the complex pharmaceutical supply chain. At a hearing last year about the EpiPen, a simple shot to relieve symptoms of food allergies, Heather Bresch, CEO of EpiPen manufacturer Mylan, released a chart claiming that more than half of the list price for the product ($334 out of the $608 for a two-pack) goes to other participants—insurers, wholesalers, retailers, or the PBM. But when asked by Republican Representative Buddy Carter of Georgia, the only pharmacist in Congress, how much the PBM receives, Bresch replied, “I don’t specifically know the breakdown.” Carter nodded his head and said, “Nor do I and I’m the pharmacist. … That’s the problem, nobody knows.”


The PBM industry is rife with conflicts of interest and kickbacks. For example, PBMs secure rebates from drug companies as a condition of putting their products on the formulary, the list of reimbursable drugs for their network. However, they are under no obligation to disclose those rebates to health plans, or pass them along. Sometimes PBMs call them something other than rebates, using semantics to hold onto the cash. Health plans have no way to obtain drug-by-drug cost information to know if they’re getting the full discount.
The higher-priced drugs have more float for offering rebates. So a perverse incentive exists for manufacturers running up prices to allow for rebates the PBMs can collect as a condition for listing the drug.

Naturally, there is a lot more to this in Dayen's report, including PBM involvement in the opioid epidemic.

Middlemen monopolies. Entrepreneurship. The stuff they celebrate in business schools. In the hallway yesterday someone referenced bit of folk wisdom from a colleague: confusion means cash. Those who can generate and/or exploit it profit from it.