MESSAGE
| DATE | 2025-12-15 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] The reality of 5 thousand dollar drugss is the
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This article by the wsj largely points out correctly the corruption in
the healthcare system that is driving up prices and bankrupts our local
medical establishment.
It must be addressed
https://www.msn.com/en-us/money/companies/why-a-budding-drug-price-revolution-isn-t-quite-what-it-seems/ar-AA1Sd6RI
Why a budding drug-price revolution isn’t quite what it seems
Story by David Wainer
• 2d •
Imagine walking into a travel agency in the pre-internet days. You ask
for a beachfront hotel on a Greek island. Two similar options fit: One
is $250 a night, the other $350. But only the pricier one pays the agent
a commission. Which one do you think they will steer you toward?
Thankfully, travel stopped working that way. Transparent online pricing
exposed those incentives, forcing real competition.
Drug pricing, though, still resembles that old travel-agent model—only
far more complex and opaque. The middleman here, the pharmacy-benefit
manager, still earns money in ways that don’t always align with what
patients or employers want. And while transparency is finally creeping
into the drug world, it is arriving slowly and with no guarantee it will
meaningfully lower costs.
The core distortion is that pharmaceutical companies pay PBMs for
access. Drugmakers pay hefty rebates—effectively kickbacks—to PBMs like
CVS Health’s Caremark and Cigna’s Express Scripts. These help the drug
companies secure preferred placement on insurance formularies, the list
of covered drugs. That means the drug with the higher list price can be
more attractive to a PBM if it delivers a bigger rebate.
Patients with deductibles or coinsurance then get hit with out-of-pocket
costs tied to that inflated list price, while the rebate money flows
back to insurers or employers to lower premiums for the broader pool.
This system effectively punishes the sickest people
That model is now under strain. Policymakers and the media have dragged
PBMs into the spotlight. New federal rules in the Medicare and Medicaid
programs removed pharma’s incentives to increase list prices on some
drugs. Discount cards and Mark Cuban’s Cost Plus Drugs routinely sell
the same medications for a fraction of what insurance charges. And a
wave of more transparent PBMs is pulling away some corporate clients.
As Adam Fein of Drug Channels Institute puts it, these forces are
finally puncturing the “gross-to-net bubble”—the vast gap, worth over
$300 billion annually, between a drug’s inflated list price and the real
price that actually changes hands.
The most dramatic cracks are appearing in the weight-loss drug market.
Because insurance coverage remains patchy, a growing cash-pay channel
opened up there almost by accident. Eli Lilly and Novo Nordisk are now
selling GLP-1 drugs directly to patients for a few hundred dollars a
month. These same medicines once carried prices over $1,000 a month
before PBM rebates.
The pressure is forcing the middlemen to respond in ways that look, at
first glance, transformational. In October, Cigna said it would roll out
a “rebate-free” pharmacy model for part of its business. The new
approach will cut out the post-purchase rebate process by making the
discounted price of the drug available upfront. That is good news for
many patients, who will see lower out-of-pocket costs.
Cigna, which owns its own PBM, will automatically make this change for
all the customers it fully insures in 2027. But companies that only use
Cigna’s PBM will be able to adopt it later on an optional basis, and
many employers—who value rebates for helping offset premiums—might be
slow to switch.
To some extent, UnitedHealth Group and CVS Health’s PBM units have
offered similar plans. But Adam Kautzner, president of Cigna’s Evernorth
Care Management and Express Scripts, says Cigna’s model goes further.
Under the traditional point-of-sale-rebate model offered by competitors,
“legacy rebates still exist and are applied as an estimate at the
counter,” he notes. Under Cigna’s new plan, people “instantly get
discounts at the pharmacy counter, while drug companies get assurance
upfront that their discounts are going straight to the patient.”
The move is far from symbolic and won’t be easy. Cigna’s stock plunged
after executives warned that the new model would require heavy
investments that will squeeze margins in the near term.
***Yet some of the incentives won’t exactly change. That is because
Cigna’s PBM will continue to collect payments from drugmakers, just
through different channels. **** The company has said nothing about
changing the manufacturer fees that flow through Ascent, a
Switzerland-based group-purchasing entity closely affiliated with its
PBM. Those payments have quietly overtaken traditional rebates as the
main driver of PBM profitability. They remain intact and largely
invisible to employers.
Think of the shift this way: The travel agent stops taking a commission
on the room rate but instead earns a “marketing fee” from the hotel. “In
either model, pharma is still paying for preferential treatment in the
formulary,” notes Charles Rhyee, an analyst at TD Cowen.
Kautzner says “any retained fees will no longer be tied to the price of
the medications to ensure our compensation is fully delinked from list
prices set by drug companies.” These fees are fully transparent to
clients, he adds. Rhyee argues that the move is strategically smart:
PBMs have become the political villain in the drug-pricing debate, often
in ways he considers exaggerated given their margins tend to hover
around 4%. Cigna is essentially betting it can stay ahead of regulators
and competitors.
But PBMs will continue to face scrutiny, not simply because of how much
money they make, but because of their opacity, which means employers and
regulators can’t easily tell whether they are getting good deals. AJ
Loiacono, chief executive of Capital Rx—a fast-growing PBM with five
million members—says that it is easier to find the cost of sending a
satellite into orbit than the true price of a cholesterol drug. When the
ultimate buyer can see what a drug really costs, efficiency follows, he
says.
The big PBMs are now trying to pre-empt change before it is forced upon
them. The question is whether incremental tweaks will be enough to
preserve their market share and their bottom lines over the long term.
Write to David Wainer at david.wainer-at-wsj.com
--
So many immigrant groups have swept through our town
that Brooklyn, like Atlantis, reaches mythological
proportions in the mind of the world - RI Safir 1998
http://www.mrbrklyn.com
DRM is THEFT - We are the STAKEHOLDERS - RI Safir 2002
http://www.nylxs.com - Leadership Development in Free Software
http://www.brooklyn-living.com
Being so tracked is for FARM ANIMALS and extermination camps,
but incompatible with living as a free human being. -RI Safir 2013
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