- Did the FTC’s compelling interim report prove its case?
- GoodRx joins the Humira biosimilar price war with Boehringer Ingelheim
- Averon revealed to be a new buying group for biosimilars for CVS Health and Cardinal Health
- Why the IRA will be bad news for 340B hospitals
P.S. Join my more than 57,000 LinkedIn followers for daily links to neat stuff along with thoughtful and provocative commentary from the DCI community.
Have you requested an invite to the inaugural Drug Channels Leadership Forum? Attendance will be highly limited, so apply now. Full agenda coming in early September!
Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies, Federal Trade Commission
The Federal Trade Commission (FTC) released an interim report on its study of pharmacy benefit managers. Alas, there’s less here than meets the eye.
The report provides a useful roundup of the PBM industry’s history, market structure, channel functions, controversies, and warped incentives. As you may have noticed from the footnotes, the FTC relied heavily on DCI's 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers—although the FTC added much more pejorative spin compared with our reports.
The case studies in the report’s section III.B. document huge PBM markups for two specialty generic drugs, providing powerful anecdotes of apparent market inefficiencies. Consider Figure 12, which succinctly demonstrates the rationale for the Mark Cuban Cost Plus Drug Company.
These anecdotes should not surprise anyone who has been following Antonio Ciaccia at 46Brooklyn or has read Sections 4.3.1., 5.4.1., and 12.3.3. of DCI’s 2024 pharmacy/PBM report.
But per Raymond Wolfinger’s brilliant aphorism: The plural of anecdote is data.
And in my opinion, the FTC didn't pile up enough anecdotes to generate sufficient data.
What’s more, the FTC devoted almost no analytical time to addressing the key question that I posed way back in 2017: If Employers Are So Unhappy with Their PBMs, Why Can’t They Change the Model? (See also 2023’s Surprising Data on Employer-PBM Rebate Pass-Through Arrangements in 2023.)
For example, perhaps plan sponsors don't mind inconveniencing beneficiaries with narrow pharmacy networks (a.k.a. "steering") and are happy to take rebate money from sick people? If plans wanted a transparent and presumably more satisfying PBM relationship, why not work with one of the many smaller, more transparent PBMs that would surely welcome the business opportunity? These omissions should be noticeable to anyone with some economics training.
If the FTC ever publishes a final report, I hope it includes a more comprehensive, data-based economic analysis of the PBM market’s inefficiencies, how these inefficiencies impact both patients and the PBMs’ plan sponsor customers, why plan sponsors allow the situation to persist, and what (if any) remedies are even possible at this stage.
The report provides a useful roundup of the PBM industry’s history, market structure, channel functions, controversies, and warped incentives. As you may have noticed from the footnotes, the FTC relied heavily on DCI's 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers—although the FTC added much more pejorative spin compared with our reports.
The case studies in the report’s section III.B. document huge PBM markups for two specialty generic drugs, providing powerful anecdotes of apparent market inefficiencies. Consider Figure 12, which succinctly demonstrates the rationale for the Mark Cuban Cost Plus Drug Company.
[Click to Enlarge]
These anecdotes should not surprise anyone who has been following Antonio Ciaccia at 46Brooklyn or has read Sections 4.3.1., 5.4.1., and 12.3.3. of DCI’s 2024 pharmacy/PBM report.
But per Raymond Wolfinger’s brilliant aphorism: The plural of anecdote is data.
And in my opinion, the FTC didn't pile up enough anecdotes to generate sufficient data.
What’s more, the FTC devoted almost no analytical time to addressing the key question that I posed way back in 2017: If Employers Are So Unhappy with Their PBMs, Why Can’t They Change the Model? (See also 2023’s Surprising Data on Employer-PBM Rebate Pass-Through Arrangements in 2023.)
For example, perhaps plan sponsors don't mind inconveniencing beneficiaries with narrow pharmacy networks (a.k.a. "steering") and are happy to take rebate money from sick people? If plans wanted a transparent and presumably more satisfying PBM relationship, why not work with one of the many smaller, more transparent PBMs that would surely welcome the business opportunity? These omissions should be noticeable to anyone with some economics training.
If the FTC ever publishes a final report, I hope it includes a more comprehensive, data-based economic analysis of the PBM market’s inefficiencies, how these inefficiencies impact both patients and the PBMs’ plan sponsor customers, why plan sponsors allow the situation to persist, and what (if any) remedies are even possible at this stage.
Boehringer Ingelheim and GoodRx announce exclusive patient affordability initiative for Adalimumab-adbm injection, Boehringer's biosimilar to Humira®, PR Newswire
GoodRx has joined the Humira biosimilar price war. The company will be offering Boehringer Ingelheim’s (BI) interchangeable unbranded biosimilar (adalimumab-adbm) for a $550 cash price. That’s more than 90% below the list price of AbbVie’s branded Humira.
It’s a bold move, but will it work? Uninsured patients will still struggle to afford the products—if they can even find the low-cost BI product stocked in a retail pharmacy. Recall that at least 90% of Humira is dispensed by mail pharmacies, which don’t accept GoodRx.
Unfortunately, the data show that many plan sponsors and PBMs still seem reluctant to give up high-list/high-rebate products that are inflating the gross-to-net bubble. CVS Health’s success with its Cordavis-branded Hyrimoz biosimilar has been a notable exception.
It’s a bold move, but will it work? Uninsured patients will still struggle to afford the products—if they can even find the low-cost BI product stocked in a retail pharmacy. Recall that at least 90% of Humira is dispensed by mail pharmacies, which don’t accept GoodRx.
Unfortunately, the data show that many plan sponsors and PBMs still seem reluctant to give up high-list/high-rebate products that are inflating the gross-to-net bubble. CVS Health’s success with its Cordavis-branded Hyrimoz biosimilar has been a notable exception.
Averon LLC, LinkedIn
In our December 2023 news roundup, we told you about Averon. At the time, it appeared to be CVS Health’s latest group purchasing organization.
With little fanfare, Averon’s LinkedIn company description recently revealed it to be a joint venture between CVS Health and Cardinal Health, one of the three largest pharmaceutical wholesalers. The business has a “vision of transforming the landscape of biosimilars and simplifying the channel for specialty products.”
Ed Devaney, president of the Employer Division at CVS Caremark, added further context in his LinkedIn comment to my July 10 social media post:
With little fanfare, Averon’s LinkedIn company description recently revealed it to be a joint venture between CVS Health and Cardinal Health, one of the three largest pharmaceutical wholesalers. The business has a “vision of transforming the landscape of biosimilars and simplifying the channel for specialty products.”
Ed Devaney, president of the Employer Division at CVS Caremark, added further context in his LinkedIn comment to my July 10 social media post:
“Biosimilars are a $10B market today, will grow to $100B before 2030. This is Employers and Health Plans biggest opportunity to save on healthcare costs. Our Red Oak GPO focused on generics which have been deflationary since 2014, Averon is same approach with focus on biosimilars. Members and Employers will reap the financial benefits by driving competition and ensuring a robust biosimilar market.”Stay tuned for more details.
IRA Could ‘Crush the 340B Margin,’ Force Transparency into Program, Says Adam Fein of Drug Channels, 340B Report
In June, many of you tuned in to my The 340B Drug Pricing Program: Trends, Controversies, and Outlook video webinar.
A key observation: The Inflation Reduction Act (IRA) will dramatically reduce covered entities’ 340B margins from the Medicare Part B program. That’s because the funds from "negotiated" drugs will be captured by the federal government. I walked through the math in my June webinar. The article linked above reviews some of my commentary.
If you missed my live event, you can purchase a replay to see the entire 90 minute webinar.
P.S. The article above has no paywall thanks to the good folks at 340B Report. Use discount code DRCH25 for 25% off a new subscription. While I don’t always agree with 340B Report’s editorial slant on the issues, I do find it to be a valuable resource for staying current on all things 340B.
Chart of the day…or century?, Mark Perry
Here’s the June 2024 update to my all-time favorite chart from Mark Perry of the American Enterprise Institute. As you can see, inflation has been much higher for domestic services that rely heavily on government funding. Hospitals and colleges remain in the lead. Baumol's cost disease?
P.S. Sorry, DPFEs. Prescription drugs are only 11% of the Medical Care index.
[Click to Enlarge]
P.S. Sorry, DPFEs. Prescription drugs are only 11% of the Medical Care index.
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