A World Without Rebates: Predictions for How the Channel Will Evolve and Why Drug Prices Will Go Down

Two years ago on Drug Channels, I wrote about a shift from rebates to discounts as a black swan event—a massively important yet unexpected break from current practice. Given recent developments, I believe that we are moving ever closer to a world without rebates. Yet there are many unanswered questions were such a radical shift to occur. As I see it, a world without rebates would force manufacturers to use net price as a competitive weapon. If PBMs and payers behave logically, then drug prices would drop as manufacturers are forced to compete more aggressively for prescriptions. These conclusions are … Continue reading A World Without Rebates: Predictions for How the Channel Will Evolve and Why Drug Prices Will Go Down

Employers Are Absorbing Even More Manufacturer Rebates from Their PBMs

The likelihood of a radical restructuring of the U.S. drug channel has never been greater. A serious effort exists to remove or decrease the role of rebates. Today, we shed light on one crucial aspect of the current rebate system: how employer-sponsored health plans access the billions of dollars in manufacturer rebates that are negotiated by their pharmacy benefit managers (PBMs). For this analysis, we rely on the Pharmacy Benefit Management Institute’s (PBMI) excellent new reports. As you will see, employers are receiving an increasing share of the rebate money collected by pharmacy benefit managers. However, employers’ rebate agreements with … Continue reading Employers Are Absorbing Even More Manufacturer Rebates from Their PBMs

How Health Plans Profit—and Patients Lose—From Highly-Rebated Brand-Name Drugs

My Wall Street Journal op-ed (Don’t Blame Drug Prices on ‘Big Pharma’) has received a lot of attention. Especially notable was a letter to the editor from American Health Insurance Plans (AHIP). It claims that “the savings that insurance providers negotiate are returned directly to consumers through lower premiums and out-of-pocket costs.” Don’t believe this misleading half-truth. It distorts the primary argument of my WSJ op-ed: Patients often pay full price for drugs that are sold to insurers at deep discounts. Below, to show you why, I follow the dollar for an expensive, highly rebated brand-name drug used by a consumer … Continue reading How Health Plans Profit—and Patients Lose—From Highly-Rebated Brand-Name Drugs

Express Scripts Confirms It (Again): Minimal Growth in Drug Spending and Prescription Costs

Last week, Express Scripts released its 2018 Drug Trend Report. (Free download.) As you will see below, drug spending is not “skyrocketing” or “soaring.” All payer types experienced extremely low growth in pharmacy benefit spending. Average net (post-rebate) drug costs declined. These data also shed light on specialty drug spending. Greater use of specialty medications—not cost increases—was the most significant driver of spending. The latest Express Scripts data confirm the cost and spending slowdown that I have highlighted in previous Drug Channels articles. I’ll ask again: Can someone please alert the media and our elected officials? Meanwhile, the report dodges … Continue reading Express Scripts Confirms It (Again): Minimal Growth in Drug Spending and Prescription Costs

My Wall Street Journal Op-Ed: Don’t Blame Drug Prices on ‘Big Pharma’

Yesterday, The Wall Street Journal published my op-ed: Don’t Blame Drug Prices on ‘Big Pharma’. The article text is pasted below for those who don’t subscribe. I wrote this piece for a general business audience, though my arguments about rebates and patient out-of-pocket costs will be familiar to regular readers of Drug Channels. Alas, I had to omit such insider terms as gross-to-net bubble, direct and indirect remuneration, and SpongeBob SquarePants. A personal note: I have been reading the WSJ daily since I was 18 years old. It’s a genuine thrill to see my byline on an op-ed in this … Continue reading My Wall Street Journal Op-Ed: Don’t Blame Drug Prices on ‘Big Pharma’

New Disclosures Show CVS and Express Scripts Can Survive in a World Without Rebates. Are Plan Sponsors Now the Real Barrier to Disruption? (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from August 2018. This rerun explains how and why PBMs are shifting responsibility and blame toward third-party payers. In 2019, we’ll hear much more about how payers’ use of rebates affect patients’ out-of-pocket costs and distort the drug channel. Addressing the problems will require a major rethink of commercial and Medicare Part D pharmacy benefit designs. For my related $0.02 on the politics of “drug prices,” see also Drug Prices After the Midterms: Five Crucial Implications of Pharmacy Benefit Design. P.S. … Continue reading New Disclosures Show CVS and Express Scripts Can Survive in a World Without Rebates. Are Plan Sponsors Now the Real Barrier to Disruption? (rerun)

Copay Accumulator Update: Widespread Adoption As Manufacturers and Maximizers Limit Patient Impact (rerun)

This week, I’m rerunning some popular posts before the holidays. Click here to see the original post and comments from September 2018. BTW, my personal Independence Blue Cross “platinum” health plan just added copay accumulator adjustment! Click here to see the evidence. In January, I alerted you to an important new benefit design trend in Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. It is by far the most widely read article ever published on Drug Channels. New data from Zitter Health insights (ZHI) suggest that these programs are widely used. Nearly one-third of commercially-insured lives are enrolled in … Continue reading Copay Accumulator Update: Widespread Adoption As Manufacturers and Maximizers Limit Patient Impact (rerun)

Express Scripts Launches a New Formulary for a World Without Rebates. Will Plan Sponsors and Drug Makers Play Along?

Express Scripts has just announced its National Preferred Flex Formulary, a new option that favors drugs with lower list prices over the high-list/high-rebate versions of these products. Click here to read the press release. This new formulary signals that Express Scripts is trying to prepare its plan sponsor clients for a world without rebates. The formulary also provides a way for Express Scripts to prepare itself for such a world. As I explain below, many plan sponsors embrace the warped incentives of the gross-to-net bubble—the ever-growing pile of money between a manufacturer’s list price for a drug and the net price … Continue reading Express Scripts Launches a New Formulary for a World Without Rebates. Will Plan Sponsors and Drug Makers Play Along?

Drug Prices After the Midterms: Five Crucial Implications of Pharmacy Benefit Design

After Tuesday’s election, House minority leader Nancy Pelosi pointed to “reducing the cost of prescription drugs” as a legislative priority. But addressing patient affordability issues will require more than decrying “high drug prices.” Today, I highlight five implications of these benefit designs on patient affordability, out-of-pocket costs, and perceptions of prescriptions prices. My observations are based on Employer Pharmacy Benefits in 2018: More Tiers, Greater Coinsurance, and Lots of High-Deductible Plans, in which I summarized companies’ 2018 prescription drug coverage for their employees. As I explain below, many aspects of employers’ plans are unfriendly to patients with serious medical conditions … Continue reading Drug Prices After the Midterms: Five Crucial Implications of Pharmacy Benefit Design

Employer Pharmacy Benefits in 2018: More Tiers, Greater Coinsurance, and Lots of High-Deductible Plans

It’s time for a deep dive into the 2018 Kaiser Family Foundation Employer Health Benefits Survey, which you can read online for free. The survey provides valuable national benchmarking for employer-sponsored health coverage in 2018. If you’d rather not to wade through the entire report, please enjoy my highlights on prescription coverage below. I summarize employers’ 2018 pharmacy benefits by examining (1) cost sharing tier structures, (2) prevalence of copayment vs. coinsurance, and (3) average copayments and coinsurance rates, by formulary tier. I breakdown the 2018 results for plans with and without high deductibles. For 2018, employers continue to increase … Continue reading Employer Pharmacy Benefits in 2018: More Tiers, Greater Coinsurance, and Lots of High-Deductible Plans