Wegovy and Ozempic are weight loss drugs that can change the treatment of obesity, heart disease and other chronic diseases that harass millions of Americans. But everyone agrees that this drug is likely to change life, but no one agrees how to pay them.
Wegovy is a List price – or price before discount- $ 1,349 a month in the United States. In Canada, the same drug list for $ 265 and less than half of these dramatic differences show a bigger problem. The list price of US patented drugs is as follows. Much higher Than other wealthy countries.
The US Senate Bernie Sanders said Many Americans When he says that the high cost of US drugs is “not only economic matters,” Profound moral problem. ”
Moral anger finds the villain. Joe Kernan, a business show host of CNBCSquat box“He asked.” Who is ruining us? PBMS? Pharmaceutical? ”
A Health economist Who writes Innovation in the health sectorI have spent a lot of time thinking about this question for the last five years. What I learned is that the high list price of the drug does not tell us much who is who is ruined who is who is who is ruined. To truly understand the US drug price problem, you need to start with difficult economics. PBM or Pharmacy Benefits Manager.
What is the pharmacy benefit manager?
The pharmacy benefit manager has popped up Late 1960s As a claim processing and management service provider for health insurers. Over time, they have become essential brokers between many insurers, employers and government agencies who purchase drugs on behalf of pharmaceutical producers, members, constituencies and beneficiaries.
The merger between PBMS has led to a market dominated by a few large players. 2023 OptumRX, Express Scripts and CVS CAREMARK -Management 79% of US prescription claims We provided services to about 270 million customers.
The main role of the company is to negotiate an access to prices, economics and prescription drugs. They do this Official operation and designThis is a list of drugs that insurance companies cover.
Joe Buglewicz/the Washington Post
Forms also assign drugs Different layer It determines that the patient must pay in the pocket to approach the drug. Generic medicines are generally placed in the lowest cost of the copayment. The patented drugs preferred by the insurer are placed on a higher -cost class, and the preventive drug is in the layer where the patient must pay more. Some drugs can be completely excluded from the formula. In other words, insurance will not deal with this.
Tier Placement determines how cheap the drug is to consumers and the effective drug price paid by the insurer. Pharmaceutical companies are competing with each other to provide PBM to place the desired formula. Significant discount At their list price. The price of PBM’s drugs is net price. The list price is subtracting the discount of the pharmaceutical producer.
If the pharmaceutical producer increases the rebate, the net price will fall even if the list price is still high. Therefore, there may be a reason for focusing on the list price to determine the drug cost.
Is the price right?
Although the list price of medicines is public knowledge, the discount on the PBM is I kept the secret. As a result, it is difficult to know exactly how much insurance companies pay for most prescription drugs.
This secret raises challenging questions. Does PBM use size and negotiations to lower the net price of pharmaceutical companies? Or do PBM uses the dominant market location and opaque business practices to sacrifice customers and other societies abundantly?
The answer to these two questions is surprisingly so. If the official batch competition works as scheduled, the competition is forced to provide a significant discount from the listed list price. As a result, insurance companies and consumers benefit from the net price cut of the drug. But official competition can be damaged in various ways.
For example, in the 2024 report, the US Federal Trade Commission is a patented insulin manufacturer. We provided higher rebates If the competing insulin is placed on or completely excluded on the less favorable layer of the formula, to the PBM. This arrangement reduces consumer choice. If a cheap regular equivalent is excluded, the layout prefers more expensive drugs that raise the cost of patient. Using these exclusion rebates can interfere with new generics and reduce competition.
Introduction to biosimilar drugs Specially manufactured for PBMS Replacing expensive biological formulations manufactured elsewhere can weaken official competition. When PBMS prefers in -house products as a formula, this reduces incentives for other pharmaceutical producers to introduce competitive products. The results are less competitive and higher prices.
When the pharmacist posts, the official competition can be distorted. Very high list price. This artificially expands the rebate of the PBM without lowering the net price of insurance companies and other parties. The expansion of the expansion also increases the cost of the drugs of some patient groups, especially those who lack health insurance or deductible plans.
Market competition
Fair competition can fall in the PBM service market, just as it can collapse within the official PBM.
The current regulatory environment of the United States tolerate excessive PBMs involved in anti -competition practices to accumulate excessive profits. Without a strong competitor, the dominant PBM can claim high fees for customers and maintain more parts of drugmaker rebates.
Theoretically, this problem must be self -modification. High profits must attract new competitors to the industry. Competition with this participant should lower the fee and reduce the part of the company’s rebate. But the largest PBM Merged with the largest health insurance company. CVS merged with AETNA. Express Scripts and OptumRX are merged with CIGNA and UnitedHealthcare, respectively. This combination reduces the number of potential customers of the new PBM and prevents new competitors from entering the market.
Charles Krupa/AP Photo
Scrap new companies that can shake their current status are unfavorable for their general contract practices. For example, a large PBM is often “The most preferred country ”contract To do this, it is necessary to meet or win the price provided by the pharmaceutical to other buyers. This contract eliminates the competitive advantage that the new PBM can be gained by getting better prices than the current company.
The dominant PBM is using a formula to control a profitable “professional prescription”, raising concerns about pharmacies in which they are contracting. Participating with the three largest PBMs, pharmacies have expanded their market share. 55% ~ 67% Between 2016 and 2023. Due to concerns about such anti -competition practices Both laws Forcing PBM to sell sleeves or mail order pharmacies.
Who is the villain?
So is PBMS ruining us? If we do not have PBM, we must invent PBM to get a reasonable price for patented drugs. But the concentration of market force among some companies threatens to destroy their values.
As competition in the PBM market increases, more small PBMs will be required, and large -scale insurance companies may have to sell PBM devices.
Unlike the existing wisdom, small PBMs will be able to negotiate a lower net price for WEGOVY and other patented medicines with larger PBMs. In addition to the specific minimum size, competition for official placement, not PBM, is important. The more competitive and transparent market for PBM services helps to keep the contest fair and transparent. The benefits of customers and society.
In that sense, PBM is not a villain. The problem is that there is too much power in the market with too little hand, which can be fixed by more competition, wise regulations and vocal consumers.
