Will Rx drug costs fall if U.S. puts squeeze on middlemen and curbs rebates?

The Trump Administration has put out its latest prescription to try to slash out-of-control prescription drug prices: Officials want to call medication “rebates” what they say they’ve really become — “kickbacks” — and crack down on the crazy rise of profit-reaping middlemen in the drug business.

Alex Azar, secretary of the Health and Human Services Department, announced that Uncle Sam, via the giant Medicare and Medicaid plans, hopes to fix big flaws in the drug industry by barring prescription medication discounting to PBMs (prescription benefit managers). The discounts still would be available to patient-consumers. But eliminating them for PBMs could be a major step in cutting drug costs, not the least because this step could give parties in this medical “supply chain” more transparency on what products cost.

Azar says the PBM moves, which still are subject to comment and change before they take effect, maybe in a year or so, could result in $29 billion in savings for Medicare and Medicaid and the patients they serve.

In recent years, insurers and major employers banded together to see if they could wring better deals on drugs from Big Pharma by working with experts in the field (see above, a Kaiser Health News explanatory video). This experiment blew up on everyone concerned, however, as the negotiating skills and capacities of the middlemen became so sought after and lucrative that they became their own significant players in drug markets.

PBMs, with insurers, created lists of “preferred” drugs or formularies, approved registers of products for which insurers would cover costs for patients. PBMs also negotiated what they said were price reductions, offering these — or so they claimed — back to patient-customers in a complex and convoluted system of “rebates” and coupons.

The PBMs, however, claimed they possessed proprietary data and they said they conducted negotiations they declined to share, especially with doctors, hospitals, patients, and insurers as to “concessions” they bargained out of Big Pharma. Instead, the middlemen not only extracted growing sums for their work — including an increasing percentage of purported but unexplained cost savings — but the markets also saw drug prices keep heading skyward.

Critics asked if the PBM system had become a sham, allowing insurers and employers to pocket some savings, while fattening profits of middlemen — and adding complexity that permits Big Pharma to keep jacking up prices, while claiming it is working with a lot of others to keep costs down. The spread of discounts and rebates also blurred pricing decisions for patients — and doctors and hospitals, too — discouraging use and wider uptake of lower cost generic drugs.

The drug middlemen defend their work and say it has benefited patients and helped to hold and reduce costs. Commentators on social media have noted that Wall Street has yawned at the administration’s latest drug proposals, with Big Pharma and prescription benefit management companies’ share prices staying high and steady.

In my practice, I see not only the harms that patients suffer, but also their struggles to access and afford safe, efficient, and excellent medical care. This is especially so, as medical costs skyrocket, driven in huge part by nose-bleed costs of prescription medications, too many of which turn out to be damaging, dangerous drugs.

Although the administration hasn’t set the world ablaze with steps to help Americans with prescription drug prices — and Trump officials may be moving with alacrity as the new Congress launches into its own investigations of this issue — this stab at the doings of PBMs will be worth watching, though any policy changes as significant as this one likely will produce winners and losers. Should the administration do yet more, including allowing the federal government to negotiate directly with Big Pharma over Medicare and Medicaid drug prices? Probably, but ….

Americans may have gotten both cynical and skeptical about prices, discounts, and rebates in almost every commercial area these days, from grocery coupons to supposed bargains on trucks and cars. But we really don’t need nonsensical practices and profit-making meddlers who have made them reign with prescription drugs. We take the meds because our lives depend on them. We gulp them down when we’re hurt and sick. We don’t need their costs to be sickening, nor do we want to have to hold advanced science or business credentials to know what the products’ fair price should be.

Shame, as always, on Big Pharma but also PBMs, doctors, hospitals, insurers, and, yes, our employers for not only ensuring that life changing and saving prescription drugs both are affordable and allow makers a reasonable return. Pharmacists, a too neglected party in this drug supply chain, may need to be consulted more and to step up to help doctors and patients with good care. We have lots of work to do, so we can stay focused on issues like how drugs work and whether they are safe and effective — not how they’re stabbing us in the pocket with exploitative and wasteful costs.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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