- How health plans profit—and patients lose—from insulin
- A fantastic new analysis of the gross-to-net bubble
- CVS acknowledges how its PBM profits from 340B
- Reconsidering Amazon
Recent posts have covered: outcomes-based contracts, copay accumulators, hospitals’ drug profits, biosimilar interchangeability, managed Medicaid, DSCSA, CVS Health’s networks, unintended consequences of congressional drug pricing legislation, Walmart and TRICARE, McKesson’s European retreat, and more.
Please join me for my upcoming live video webinar, Drug Channels Outlook 2022, on December 17, 2021, from 12:00 p.m. to 1:30 p.m. ET. Hundreds of people from your competitors, customers, and suppliers have already signed up. Will you be there, too?
Flash finding: How drug money from sick people really works, 46brooklyn
Here’s an excellent reminder from 46brooklyn: Health plans profit—and patients lose—from highly rebated brand-name drugs.
This article analyzes a highly rebated brand-name insulin as used by a consumer with a high-deductible health plan. As you can see from its chart below, the patient pays more than twice the true discounted net price of the drug. Meanwhile, the health plan pockets a large rebate.
Insulin exemplifies the warped economics of the U.S. drug channel, as I noted a few weeks ago in Why PBMs and Payers Are Embracing Insulin Biosimilars with Higher Prices—And What That Means for Humira .
Nearly three years ago, I explained these issues to a general business audience in a Wall Street Journal article, Don’t Blame Drug Prices on ‘Big Pharma’. Unfortunately, little has changed.
This article analyzes a highly rebated brand-name insulin as used by a consumer with a high-deductible health plan. As you can see from its chart below, the patient pays more than twice the true discounted net price of the drug. Meanwhile, the health plan pockets a large rebate.
[Click to Enlarge]
Insulin exemplifies the warped economics of the U.S. drug channel, as I noted a few weeks ago in Why PBMs and Payers Are Embracing Insulin Biosimilars with Higher Prices—And What That Means for Humira .
Nearly three years ago, I explained these issues to a general business audience in a Wall Street Journal article, Don’t Blame Drug Prices on ‘Big Pharma’. Unfortunately, little has changed.
Estimation of the Share of Net Expenditures on Insulin Captured by US Manufacturers, Wholesalers, Pharmacy Benefit Managers, Pharmacies, and Health Plans From 2014 to 2018, JAMA Health Forum
To complement the 46brooklyn analysis, I highly recommend this fantastic article from researchers at USC’s Schaeffer Center. They examined the gross-to-net bubble for insulin.
While insulin products’ list prices rose, the net prices received by manufacturers dropped. Meanwhile, the drug channel—pharmacies, PBMs, and wholesalers—enjoyed skyrocketing funds. The authors compute that the channel’s share of gross-to-net grew, from 13% of funds in 2014 to 43% in 2018.
I appreciate that the authors cited Drug Channels Institute’s research. For some reason, however, they neglected to mention SpongeBob SquarePants, our honorary mascot of the gross-to-net bubble.
While insulin products’ list prices rose, the net prices received by manufacturers dropped. Meanwhile, the drug channel—pharmacies, PBMs, and wholesalers—enjoyed skyrocketing funds. The authors compute that the channel’s share of gross-to-net grew, from 13% of funds in 2014 to 43% in 2018.
I appreciate that the authors cited Drug Channels Institute’s research. For some reason, however, they neglected to mention SpongeBob SquarePants, our honorary mascot of the gross-to-net bubble.
CVS Health (CVS) Q3 2021 Earnings Call Transcript, CVS Health
Kudos to Nephron Research’s Eric Percher. He finally got CVS Health to acknowledge that the 340B program is driving its PBM profit per script. Here’s the key interaction from CVS Health’s most recent earnings call:
Here’s my deconstruction of this quote:
For a full analysis of 340B’s role in the pharmacy and PBM industries, see section 11.5. of our 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
[Click to Enlarge]
Here’s my deconstruction of this quote:
- ”Third-party administrative services to covered entities” refers to administration fees from Wellpartner, a provider of 340B contract pharmacy services. CVS acquired the business in 2017.
- ”Dispensing margin” refers to the 340B profits that CVS Specialty earns from specialty pharmacy dispensing. See my follow-the-dollar math in How Hospitals and PBMs Profit—and Patients Lose—From 340B Contract Pharmacies.
Note that “fixed fee” is an ambiguous term that say nothing about how it is computed. The superior profitability of a 340B prescription lets hospitals offer—and large pharmacy chains demand—overly generous fees. Consequently, a contract specialty pharmacy earns profits that are three to four times larger than a specialty pharmacy’s typical gross profit from a commercial insurer or Medicare Part D plan.
For a full analysis of 340B’s role in the pharmacy and PBM industries, see section 11.5. of our 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
A disrupting force, or ‘just another mail order pharmacy’? How Amazon Pharmacy stacks up a year after launching, STAT
Guess what! Amazon has not yet disrupted the entire U.S. healthcare system. This STAT article provides an updated reality check on Amazon’s pharmacy and PBM ambitions.
Key quote: “[I]t remains unclear how Amazon will carve out its corner in an increasingly crowded market.”
This news won’t surprise long-time Drug Channels readers, especially those who remember this article, this article, this article, and even this one.
I still won’t underestimate Amazon. But for now, it seems content to join the drug channel, not fundamentally change it.
Key quote: “[I]t remains unclear how Amazon will carve out its corner in an increasingly crowded market.”
This news won’t surprise long-time Drug Channels readers, especially those who remember this article, this article, this article, and even this one.
I still won’t underestimate Amazon. But for now, it seems content to join the drug channel, not fundamentally change it.
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