Opinion: Intermediaries, not drug companies, are driving up insulin prices and Congress has no proper plan to fight back
To create outrage over drug prices, it’s hard to beat the insulin example. This life-saving drug is 100 years old, but the list price of insulin products doubled between 2012 and 2019 and continues to rise. Diabetics are facing an affordability crisis, and some have died trying to stretch their supply.
Policymakers and the public often focus on drug manufacturers as the source of the problem. However, our research shows that between 2014 and 2018, the net price received by producers fell by 31%. For every $100 spent on insulin in 2014, manufacturers receive $70 and supply chain middlemen $30. By 2018, the manufacturer’s market share had dropped to $47 and the middleman’s market share had grown to $53.
Why people who are dispensing insulin, such as pharmacy benefit managers (PBMs), pharmacies and wholesalers, have to get more than half of what consumers spend when they have very little or play no role in the new line of drug discovery?
One Senate Finance Committee investigation found that PBM was complicit in the effort to raise and lower prices, noting that “PBM incentivizes drug manufacturers to increase list prices to secure major catalog positions and higher discounts and fees.” Big profit the flow from those discounts and fees. From 2013 to 2018, the average return on investment, with less capital costs, for the middle man was 5.9% compared with the 4.2% average for all S&P 500 companies.
SPX,
If R&D is considered an expense, the comparative figure is 5.9% versus 3.6%.
To protect 34 million Americans For people with diabetes, Democrats have proposed a copay of up to $35 per 30-day supply of insulin for Medicare beneficiaries in plans that participate as part of a safety net. Social Security and their $1.85 trillion climate change bill. But while that would give patients some financial relief, it doesn’t solve the problem of rising insulin costs and could actually put more pressure on premiums.
Three important steps
Instead, Congress should take advantage of the current political climate and begin to control intermediaries in the drug distribution system. It’s an area where drug companies and pharmaceutical industry innovators, who are often in trouble, should be able to agree, and should also receive a bipartisan consensus.
First, more transparency is needed in PBM negotiations. A proposal in the $1.85 trillion bus bill would require PBMs to report discounts to employers and health plans. That is a step in the right direction. In spite of Several states have tried to add sunlight to drug pricing, with disproportionate results. All in all, it is clear that intermediaries such as PBM are taking a larger share of insulin spending, yet the trade secrets and other protections imposed by the intermediaries themselves mask the profits from insulin. specific medications, including insulin products.
Second, the Federal Trade Commission should investigate highly concentrated segments of the distribution system, in order to eliminate anticompetitive practices.
Two new companies, one led by Mark Cuban, are trying to enter the PBM market, but they face major difficulties. Currently, three big companies dominate the PBM landscape: Express Scripts (owned by insurance company Cigna
CI,
), CVS Caremark (part of CVS Health
CVS,
the company also owns the health insurer Aetna) and OptumRx (a subsidiary of UnitedHealth Group
UNH,
other insurance companies).
Recent mergers between PBMs, health plans, and major pharmacy chains have significantly increased vertical integration in drug distribution, allowing the expansion of market power in a segment above entire supply chain.
Ultimately, the insulin example should be enough to spur a more fundamental reform: PBMs must have a fiduciary responsibility to health plans and their enrollees.
One way to do this is to regulate them under the federal Employee Retirement Income Security Act of 1974. ERISA sets minimum standards for most self-established health and retirement plans. volunteer in the private industry to provide protection to individuals in such plans. In essence, federal regulators will require PBMs to act in the best interests of the beneficiaries.
Allowing ERISA regulators to monitor PBMs would change much of the insulin supply chain flaws and rescue diabetics from a system that pushes prices dramatically higher to collect money. profit for the middleman.
Karen Van Nuys is executive director of the Life Sciences Value Innovation Project and an assistant professor of research at USC’s Schaeffer Center for Health Economics & Policy. Neeraj Sood is a senior fellow at the Schaeffer Center and a professor at the USC Price School of Public Policy.. He has served as a consultant to a number of companies in the supply chain including manufacturers, wholesalers and health plans.
https://www.marketwatch.com/story/middlemen-not-drug-companies-are-pushing-up-insulin-prices-and-congress-doesnt-have-the-right-plan-to-fight-back-11637332583?rss=1&siteid=rss Opinion: Intermediaries, not drug companies, are driving up insulin prices and Congress has no proper plan to fight back
