Last Friday, the U.S. Department of Health & Human Services (HHS) released American Patients First, a report billed as “The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.” This administration’s blueprint offers a thoughtful diagnosis of U.S. drug pricing along with the unintended consequences and warped incentives of our drug channel system. The report also proposes a very long list of more than 50 regulatory and legislative fixes. It therefore doesn’t translate to quick action or simple sound bites. Many people are discounting the plan as no big deal and therefore underestimating how radically the system could … Continue reading The Trump Drug Pricing Plan: Short Term Reprieve, Long Term Disruption
The 340B Drug Pricing Program continues to expand at double-digit rates. Our research reveals that these discounted sales hit a record $19.3 billion in 2017. What’s more, we found that since 2014, purchases under the program have grown at an average rate of 29% per year. By comparison, manufacturers’ net drug sales grew at an average rate of less than 5% over the same period. Consequently, the 340B program has grown to account for at least 6% of the total U.S. drug market. Here’s another uncomfortable fact: Nearly all of the billions in 340B discounts have accrued to hospitals. Yet … Continue reading EXCLUSIVE: The 340B Program Reached $19.3 Billion in 2017—As Hospitals’ Charity Care Has Dropped
An unanticipated combination of government policy changes has led to a truly bizarre circumstance: The Medicare program and individual Medicare patients are paying more for lower-cost biosimilars. Further, hospitals are earning windfall profits from these lower-cost biosimilars, though physician offices can’t access the same financial benefits. Sound bonkers? You bet. To understand this strange turn of events, I delve into the vagaries of Medicare Part B reimbursement and the recently implemented outpatient prospective payment system (OPPS) rule for drugs acquired under the 340B Drug Pricing Program. As I explain below, the Centers for Medicare & Medicaid Services (CMS) recently made … Continue reading The Mysteries of Pass-Through Status: Why Medicare and Seniors Are Now Paying More for Lower-Cost Biosimilars at Hospitals
Did I just hear the gross-to-net bubble deflate a little bit? This week, UnitedHealthcare announced that it would provide point-of-sale (POS) rebates to 7 million people enrolled in its fully insured commercial group benefit plans. Click here to read the press release. UnitedHealthcare’s action is a big win for patients, though not (yet) a black swan event for pharmacies and pharmacy benefit managers (PBMs). As I explain below, it’s a small but significant move that will trigger new questions about drug prices, patients’ out-of-pocket costs, and channel economics. I’m sure that SpongeBob SquarePants, honorary mascot of the gross-to-net bubble, is … Continue reading UnitedHealthcare’s Point-of-Sale Rebate Announcement: What’s Next?
Hope you enjoyed the Thanksgiving holiday! I remain ever-thankful for your support and readership. Now that you’ve stretched your stomach, stretch your mind with some food for thought. In this issue: ICYMI: Actually, Amazon will not distribute drugs (for now) Premier tries to preempt worries about Amazon and GPOs Have you heard? Diplomat bought two PBMs Plus, I share some thoughts on Alex Azar, nominee to head the Department of Health and Human Services. P.S. Follow my daily musings and links to neat stuff at @DrugChannels on Twitter. Read more » Copyright © 2006-2017 Pembroke Consulting, Inc. and Copyright © … Continue reading Drug Channels News Roundup, November 2017: Amazon’s Updated Plans, Premier’s Push-Back, Diplomat’s PBMs, and My $0.02 on Alex Azar
Last week, the Centers for Medicare & Medicaid Services (CMS) released its 713-page proposed policy changes and updates for the Medicare program. See the links below. Buried in this document is a radical concept: Part D plans would be required to recognize the value of manufacturer rebates and pharmacy payments in retail prescription prices. These amounts are two key components of Direct and Indirect Remuneration (DIR) that are currently paid to plans. CMS is asking for feedback for future rulemaking but did not propose any specific changes. Any program modifications would not occur until at least 2020 or later. However, … Continue reading Will CMS Pop the Gross-to-Net Bubble in Medicare Part D With Point-of-Sale Rebates?
The National Pharmaceutical Council (NPC) recently released Toward Better Value, a fascinating survey of employers’ views about their pharmacy benefit managers (PBMs). (free download) According to the results, employers are unhappy with PBMs’ performance on crucial services. (The PBMs were not identified by the survey.) Employers apparently also want to reform the rebate system at the heart of our complex distribution and reimbursement system. These results imply a significant but as-yet-unexplained market failure—one that that somehow prevents employers from negotiating better deals and writing more effective contracts. Below, I review the NPC results and speculate on what they mean for … Continue reading If Employers Are So Unhappy with Their PBMs, Why Can’t They Change the Model?
Eeek! Time for my Halloween roundup of Drug Channels news stories. In this issue: Spooktakular! An FTC competition workshop will include a terrifying panel on pharmacy benefit managers (PBMs) Scary! The pros and cons of frightful high-deductible health plans Creepy! JPMorgan Chase conjures up surprising new data on consumer out-pocket costs Spooky! Ghastly hospital markups on outpatient drugs Plus, the FDA treats us to a new educational campaign on biosimilar drugs—complete with groovy shareable GIFs for millennials. P.S. For a daily haunting, join the zombie horde who shamble after me here: @DrugChannels on Twitter. (ICYMI: Over the past week, I have sent multiple tweets … Continue reading Drug Channels News Roundup, October 2017: FTC Workshop on PBMs, HDHPs, OOP Spending, Hospital Profits, and FDA Biosimilar Cartoons
California governor Jerry Brown has just signed SB-17 – Drug Price Transparency into state law. Click here for the official summary. This law is truly nutty. It won’t accomplish much of what it purports to do. Below, I focus on the provision that requires manufacturers to provide 60 days’ advance notice of increases in a prescription drug’s Wholesale Acquisition Cost (WAC) list price. As I explain, this requirement ignores crucial drug channel and supply chain economics. Consequently, mandating advance notice of price increases will benefit pharmacies and hospitals, not third-party payers. The new law also ignores what we’ve learned from … Continue reading Thanks, California! SB17 Will Trigger Massive Speculative Buying, Windfall Pharmacy Profits, and Supply Chain Disruption
Deflation in generic drug prices dragged down second quarter earnings for drug wholesalers and generic manufacturers. Here’s a useful summary from The Wall Street Journal, which captures the grim marketplace realities in Falling U.S. Generic Drug Prices Hurt Manufacturers, Wholesalers. Yesterday, Mylan’s earning release noted “high-single-digit erosion expected in North America.” Below, I review the state of the generic drug market. As you will see, the overall market for mature generic drugs is deflating by about 10% per year. Many generic drugs have dropped significantly in price over the past four years. Surprisingly, the prices for about one in five … Continue reading Generic Deflation Roils the Channel—And Will Get Worse