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| DATE | 2017-06-11 |
| FROM | Ruben Safir
|
| SUBJECT | Re: [Hangout - NYLXS] PBMs and Rebates... lets not just blame Abbott
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https://www.forbes.com/sites/matthewherper/2012/05/10/why-astrazeneca-gives-insurers-60-discounts-on-nexiums-list-price/#427cccc82b25
Inside The Secret World Of Drug Company Rebates
Matthew Herper ,
Forbes Staff
I cover science and medicine, and believe this is biology's century.
The free market is alive and well when it comes to drug prices – if
you're an insurance company or a government program. But not if you're a
consumer.
Top-selling pharmaceuticals, protected by patents, often seem priced in
a manner that has little to do with the laws of supply and demand. Want
that new cholesterol medicine ($2,000 per year), that cancer treatment
($60,000 per year) , or the medicine for your child's rare disease
($300,000 per year)? No negotiation. It's your money or your life.
But in fact drug companies are constantly negotiating, not with
individuals but with payers – Medicare, Medicaid, insurers such as
United Health Care and Aetna AET +0.32% and pharmacy benefit plans such
as Express Scripts ESRX +1.75%. They don't reduce the price of their
medicines. Instead, the drug firms pay rebates after the fact. For
Medicaid, the price decreases are mandated by law, but everywhere else,
free market forces are very much in effect. Me too drugs and those
facing patent expiration have to deal with bigger rebates. Drug firms
annual price increases are partly a way to deal with all this rebating.
Of course, if you're a person without health insurance buying medicines
at the counter of Walgreen WAG +%'s, you're stuck with the list price.
Rebates cut about $40 billion out of the drug industry's sales every
year, says Pratap Khedkar, a principal at pharma marketing consultancy
ZS Associates. We know that because the drug industry reports both its
gross sales (before the rebates) and net sales (after the rebates are
taken out). The size of the rebate average about 30% of a medicines
sales, Khedkar says, and can be as low as single digits or as higher
than 50% of gross sales.
"These may not be visible to the consumer," says Khedkar. "But between
the insurance company and the pharma company, it is a very efficient
free market."
What Drug Companies Give Back
Drug IMS estimated U.S. sales ($Bil) Company reported U.S. Sales
($Bil) Estimated rebates (%)
Lipitor $7.7 $5.0 35%
Plavix $6.8 $6.6 3%
Nexium $6.2 $2.4 61%
Abilify $5.2 $4.0 24%
Advair $4.6 $4.0 13%
Seroquel $4.6 $3.3 27%
Singulair $4.6 $3.5 23%
Crestor $4.4 $3.1 30%
Cymbalta $3.7 $3.2 14%
Humira $3.5 $3.4 2%
Sources: IMS Health, company statements, analyst reports
No company reports how much of the gross sales of an individual drug are
being given back to the payers. But there is a way to peer into the
hidden world of pharma rebates. Every year, IMS Health, the prescription
data tracking service, publishes its own lists of the most prescribed
and the top-selling medicines in the country. But IMS' data capture
gross sales at pharmacies, before the rebates happen. By comparing the
gross sales reported by IMS to the sales the companies report to the
Securities and Exchange Commission, it's possible to get an idea of how
much of a medicine's gross sales are being given back in the form of
rebates.
Caveats: there are other factors that could be affecting the difference,
including if drug wholesalers are buying up extra inventory of a
medicine, temporarily boosting sales. But generally speaking, I think we
can assume that the bulk of these differences are from the rebates.
In the table in this story, I've calculated the difference between the
IMS numbers and the numbers reported to the S.E.C. If U.S. sales were
not immediately available, I took them from reports from sell-side
analysts. The resulting figures show how greatly the numbers vary and
give some hints as to why.
In the face of sudden generic discounts, Pfizer PFE +3.21% seems to have
given a lot of rebates to keep Lipitor on insurance company formularies,
giving up 35% of gross sales, up from 26% last year. (This matches up
with reporting I did here; promotion of Lipitor is finally grinding to a
halt.) By contrast, Bristol-Myers Squibb and Sanofi-Aventis, the makers
of Plavix, only gave 2.6% of sales in rebates; Plavix was until now the
only medicine of its kind, and competitors from Eli Lilly and
AstraZeneca have been unable to unseat it.
The most stunning discount is for Nexium, the purple pill for heartburn
sold by AstraZeneca and derided by many as the perfect example of a
me-too drug. Astra is giving back 60% of gross sales, most likely in the
form of rebates. IMS lists Nexium as the third-best-selling drug in the
country based on gross sales of $6.2 billion. But AstraZeneca reports
U.S. Nexium sales of just $2.4 billion, putting it more on a par with
Eli Lilly's cancer drug Alimta than behemoths like Lipitor and Plavix.
Why? As much as people rail against me-too drugs, being a me-too med is
actually bad for the company, too. Insurers may be using the fact that
they could direct consumers to generic Protonix or over-the-counter
Prilosec or Prevacid as a bargaining stick, forcing Astra to cede ground.
Medicines in the same category seem to have the same level of discount.
Astra's Crestor, a cholesterol drug that competes with Lipitor, seems to
be giving 30% in rebates. The antipsychotics Seroquel (sold by
AstraZeneca) and Abilify (from Otsuka & Bristol) give rebates of 27% and
24%, respectively.
AstraZeneca spokeswoman Stephanie Andrzejewski wrote via email that the
company would not "discuss or disclose specifics around rebates" for
Nexium. She added: "What I can tell you is that AstraZeneca is committed
to helping people get the medicines they need and we understand our
medicines won’t do patients any good if they can’t access them." She
said it would be "inaccurate" to say AstraZeneca gave a 60% discount
"across the board" – which is true. That appears to be the average discount.
The good news here is that, in the world of health insurers and drug
giants, the free market is having an effect on drug prices. The bad news
is that you have to be participating in this market by being insured in
order to get those reduced rates. People who walk in off the street pay
full price.
--
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://www2.mrbrklyn.com/resources - Unpublished Archive
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http://www.brooklyn-living.com
Being so tracked is for FARM ANIMALS and and extermination camps,
but incompatible with living as a free human being. -RI Safir 2013
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