Oligopoly: a state of limited competition, in which a market is shared by a small number of producers or sellers.
SALT LAKE CITY — Why are prescription drugs so expensive? An advocate for open access, transparency and competitive markets in the pharmaceutical industry shares his mind-blowing insights into the prescription drug industry and how insiders, whose job it is to watch over consumers, rake in a fortune.
Welcome to the show
Money Making Sense host Heather Kelly talks to Antonio Ciaccia, president of 3 Axis Advisors, on pharmacy benefit managers and their role in controlling prescription drug costs.
“How do prescription drugs get to our pharmacies? asked Kelly.
In simple terms, Ciaccia explained the main pillars of the prescription drug supply chain:
- A drug manufacturer sells to a drug wholesaler, such as McKesson, Cardinal Health, or AmerisourceBergen.
- The wholesaler then sells the medicine to pharmacies, hospitals and medical practices.
- And with each step, the price of the drug increases for the end consumer.
PBMs administer prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers and other payers.
By negotiating with drug manufacturers and pharmacies to control drug spending, PBMs have a significant behind-the-scenes impact on determining total drug costs for insurers, shaping patient access to drugs, and determination of the amount paid to pharmacies, according to The Commonwealth Fund.
“Keep these discounts to themselves”
“They’re not doing a great job, especially for my mom,” Kelly said, explaining that her mom, who is on Medicare, pays $250 out of pocket every month for a drug she needs. “She still has to buy four or five more. So these PBMs don’t do a great job. I’m just telling you now.
“Unfortunately, the system was supposed to work much better,” Ciaccia said.
He added that PBMs were designed to counterbalance the drugmaker, wholesalers and pharmacies and negotiate greater discounts for consumers.
“The problem is that PBMs are really good at negotiating these discounts, but they are even better at keeping these discounts to themselves, often forcing the patient to pay the full list price when they negotiated a price themselves. far different and better for himself,” he said.
Ciaccia said PBMs were once just claims processors, but have since landed on the list of America’s biggest and richest companies.
Top 10 fortune 500 companies in the United States include:
- CVS Health, owner of CVS Pharmacy, a chain of retail pharmacies; CVS Caremark, a pharmaceutical benefits manager;
UnitedHealthGroup, which offers healthcare products and insurance services;
McKesson, which distributes pharmaceuticals and provides health information technology, medical supplies and care management tools; and
AmerisourceBergen, a wholesale drug company.
Who watches the watchdog?
“They’re bigger than the pharmaceutical companies and drugmakers they were hired to police in the first place,” Ciaccia said.
He said PBMs ended up making prescription drug pricing more complicated and expensive.
“The PBM uses all of us as individuals to negotiate deep discounts that they get at the end of the transaction. But they don’t pass them on to us as a patient,” Ciaccia said.
Heather said her blood was starting to boil “a little bit right now”.
No one knows the price of drugs
Ciaccia said if you walked into a grocery store and it cost $20 for a gallon of milk, you’d know right away you were being ripped off. You would take your money to another grocery store where the price of milk would match market expectations.
It’s “what ultimately holds quality and price accountable in your grocery store. Nobody knows what the prices of thousands of different drugs are or what they should be,” he said.
Ciaccia said that due to the “enormous” lack of transparency, the pharmaceutical market is ripe for exploitation.
“Let’s be clear, PBMs aren’t the only villains in the drug supply chain, but they’re the only ones whose existence is predicated on trying to save us money,” he said. declared.