Comment by refurb | Hacker News Reader

Comment by refurb | Hacker News Reader

It's interesting how the villains of drug pricing have gone from the drug companies to the PBMs.

At any rate, I don't agree that PBMs cause drug costs to increase. PBMs are simply purchasing groups for insurance companies. They take advantage of bulk purchasing and offer that service to insurers. They also handle the all the complexities in setting a formulary which includes evaluating new drugs, negotiating with drug companies and adjudicating claims. That has real value.

The best example of how PBMs have controlled drug pricing is in HCV. Express Script directly attacked the pricing of Harvoni and Sovaldi. However there was nothing they could do since they were the only HCV drugs available. However, when Viekira Pak became available, Express Script did an exclusive deal with Abbvie which caused Gilead to scramble to price match. The cost of HCV drugs came down by almost 40% overnight. It saved the health care system a lot of money.

Now, I do agree that PBMs pull a fast one on some insurance companies. They are intentionally opaque when it comes to how much you pay for their services. The smart insurance companies ask for "pass through" pricing and then pay the PBM a fee for their services. The not-so-smart insurance companies don't ask for those numbers and get put over a barrel.

Actually the PBMs are a big villain here. They pocket the difference between the retail price of a drug and the discounts they negotiate with the drug makers. They choose the drugs on their formulary based on this spread.

This one of the reasons why you will see prices for drugs like Insulin going up with each manufacturer raising price in lock-step. The drug makers are not competing to sell the consumer insulin, they are competing to get on the formulary of the PBM.

But that's their job! They are supposed to negotiate lower prices. They, in turn, can market their formulary to insurance companies by saying "If you use us, we can offer a lower cost pharmacy benefit."

And if you're a smart insurance company, you do your due diligence and don't negotiate a contract where you have no transparency into the PBMs costs.

What "job" is that? There is no reason for these companies to exist. Incentivizing drug companies to raise prices in lockstep... to keep the middlemen happy? That is a very perverse incentive

>There is no reason for these companies to exist.

It is clear you don't know much about PBMs. Maybe try to rephrase your comment as a question.

Well yeah that's the problem. They dont pass the discount on to me. I pay full retail price, and they keep the discount. This is why Express Scripts is a $100 BILLION company. And that's for managing Formularies you say?

Express Scripts Holding Company is the largest pharmacy benefit management (PBM) organization in the United States,[20] with 2013 revenues of $104.62 billion.[21] In 2012 Express Scripts' $29.1 billion acquisition of rival Medco Health Solutions (once the nation's largest PBM) created "a powerhouse in managing prescription drug benefits."

Well yeah that's the problem. They dont pass the discount on to me. I pay full retail price, and they keep the discount. This is why Express Scripts is a $100 BILLION company. And that's for managing Formularies you say?

The discounts are passed through via lower insurance premiums. You don't really see that since your employer pays the premiums.

And yes, ESI is a $100B per year company with $3.4B in net income.[1] A stunning 3.4%. Not that different than a grocery store.

[1]http://financials.morningstar.com/ratios/r.html?t=ESRX

Well no. I pay for it all out of pocket. My deductible is high enough that I pay for all that medication. It's about $6000/year. My insurance premiums are $1400 per month by the way. So no, there's no magical cost saving being passed back to me.

In this case I think there are several tiers of villains.

There is hardly a single villain in the existing system. Everyone is making a profit that is ultimately at the expense of the citizens.

And even despots do some good. It doesn't mean they are any less a villain.

Interesting and rather specific and niche perspective. Would you agree that the biggest problems in our healthcare system are transparency, i.e., no way of telling how much something is going to cost in spite of all the data existing to provide just that, and the crushing administrative costs of a system that seems to incentivize massive administrative burdens?

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