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The mystery of pricing in the US pharmaceutical industry: let middlemen make big difference

via:雷锋网     time:2018/9/15 7:02:16     readed:241

Note: PBM, the pharmaceutical welfare management, is a professional third-party service in the medical service market between drug payers (commercial insurance institutions and employers) and drug suppliers (pharmaceutical companies, pharmacies and hospitals, etc.). In order to improve the quality of medical services, it will affect the prescription behavior of doctors or pharmacists, and achieve the purpose of controlling the increase of drug costs, so as to improve the efficiency of medical expenditure.

CVS, the largest retail pharmacy and health management company in the United States, has the largest pharmaceutical welfare management company (PBM) in the United States. By the end of 2016, CVS had 9,750 retail pharmacies and more than 1,100 appointment-free “minute clinics”. PBM plans to have close to 90 million members and annual revenues of nearly $177.5 billion.

The following is the body content, Lei Feng network compiled on the basis of not changing the original intention:

Although not everyone read the legal notice sent by Ottumwa Express, in January, Mark Frahm, a pharmacist in Iowa, noticed the strangeness in the announcement.

For a long time, Frahm's South Side pharmacy usually buys medicines from distributors and distributes them to Wapello County Prison. After that, the pharmacy will get reimbursement from CVS HealthCorp. Because CVS manages the county's pharmacy benefits program.

But when he compared the newspaper announcement to his own record, Frahm saw a bottle of generic antipsychotics, CVS charged Wapello $198.22, and South Side pharmacy was only reimbursed $5.73.

So why does CVS charge up to $200 for a bottle of medicine and tell the pharmacy that it is worth less than $6? What did the company do for the remaining $192.49?

What Frahm found was the so-called spread pricing, and companies like CVS would significantly increase the price difference between the amount of drugs they reimburse at their drugstores and the fees they charge customers.

This is how drug benefit managers (PBMs) like CVS create some profit. But Frahm said he doesn't think the spread can be as many as tens of times.

“Intermediaries have to make some money, but we didn’t expect to make that much,” said Frahm, who said his pharmacy lost money in his prison account last year because CVS’s reimbursement was too small. “I thought everyone was playing fair.”

Spread pricing principle

Suppose a pharmacy costs $6 to buy a bottle of medicine.

When someone uses an employer to pay for insurance to dispense prescription drugs, their drug benefit manager (PBM) pays for the drug store – in this case $8 and the pharmacy earns $2.

The drug benefit manager will charge the employer $16.

The difference between the amount PBM pays to the pharmacy and the fee charged to the employer is the spread, which is earned by PBM.

The spread will change frequently with the price.

Bloomberg analyzed the price increase of pharmacies and middlemen in the National Medicaid Program, and found that there are dozens of drugs with large spreads, and there is evidence that the spread is still expanding.

CVS is run by Woonsocket on Rhode Island and is known for tens of thousands of pharmacies across the United States, but more than 40% of the company's revenue comes from other businesses – managing prescription drug benefits for businesses and governments, until recently to Wapello County. Local prison.

Spread pricing is a common practice in the generics industry, and 90% of prescription generics distributed in the US use this pricing method. Generics usually cost a few cents compared to brand-name drugs, and the promotion of generics has been the key to controlling drug costs in the US—especially in the case of health care programs like Medicaid, which can be millions of low-income people. Provide medical services.

However, critics believe that because intermediaries transfer fees and markups to themselves, they cut subsidies that should be provided to generic drugs, so the price difference pricing may actually cover costs.

CVS and other PBMs say that people like Frahm are picking up with antipsychotic bottles because they want more money.

CVS Senior Director Richard Ponesse told Iowa legislators at a hearing in April that spread pricing is "not a secret to our customers." Many people choose it because it is more predictable than pharmacy pricing.

"At the end of the day, in this model, we will make money on some drugs and lose money on other drugs," CVS spokesperson Christine Cramer said in response to questions about this practice.

To investigate the income of middlemen, Bloomberg surveyed the prices of 90 best-selling generics in the Medicaid Management Medical Plan. In 2016, these drugs accounted for most of the generic drug subsidies.

Bloomberg found that the price increases of these commonly used prescription generic drugs are growing, and there are even huge increases in some well-known drugs. For the 90 drugs used for analysis, they contain more than 500 doses and formulations. Also, PBMs and pharmacies earned $1.3 billion in 2017 from $4.2 billion in Medicaid.

Although the pricing data for welfare managers and their corporate clients, as well as some governments, is hidden, the state's Medicaid program regularly publishes comprehensive expenditure and price data, which provides observations that middlemen and pharmacies earned on price increases. How much is the window.

The biggest price increases often come from the latest generics. In 2017, the imitation of Novartis's leukemia pill Gleevec in several states allowed the state government Medicaid to pay up to $3,000 per prescription.

Note: The drug price statistics cycle is 30 days; the number may not be accurate due to rounding.

Aripiprazole, a generic antipsychotic drug, is one of the most expensive drugs in the 2016 Medicaid program and has risen sharply in many states. According to the data, although the market price of Aripiprazole quickly dropped to around $20 a month in 2017, many state Medicaid programs, including Ohio, New York, Arizona, and Texas, still have the drug every month. Pay more than $140.

Note: The drug price statistics cycle is 30 days; the number may not be accurate due to rounding.

The general discussion does not distinguish how much of the price increase has arrived in the hands of pharmacies and PBMs, but independent pharmacists interviewed by Bloomberg said that most of the money was not in their hands.

State Medicaid programs are increasingly turning to managed care programs to control costs. Bloomberg analyzed 31 states and the District of Columbia, with drug data from 2015 to 2017 being available.

In the sampled generics, the average increase in pharmacies and supply chain intermediaries in 2017 was close to 32%, up from 24% in 2015. Bloomberg found that this is still lower than the increase in traditional Medicaid services charges, although the gap is narrowing.

Medical plans have been trying to hide the secret of the spread

In Ohio, CVS manages drug benefits in four-fifths Medicaid-Managed Care plans, which are managed by private insurers and cover approximately 90% of the state's 2.8 million Medicaid beneficiaries.

In July, CVS sued the state to prevent a report on how much it had earned from Medicaid. A summary report released in June found that the 8.8% spread of CVS and other PBMs across all branded and generic drugs reached $5.70 per prescription.

An analysis supported by the Ohio government shows that if you switch to a fee model, you can get the same service for just $1.90 or less per prescription. According to the relevant consultants, the hidden costs paid by Ohio in 12 months amounted to $223.7 million.

CVS said that disclosure pricing details would make it impossible to get the best price, and the company's money on the spread would support other services offered by the company. CVS said its profit margin on the PBM business last year was only 3.5%, and the entire privatized Medicaid program saved a lot of money for Ohio.

After the report was released, Ohio ordered the state's managed medical program to terminate its 2019 spread pricing contract.

"We intend to completely open the black box," Tom Betti, a spokesperson for Ohio Medicaid, said the Ohio report appears to be the first detailed study of price differentials in a country. He said: "Although manufacturers are doing their utmost to keep prices confidential."

In an independent study conducted by the Ohio auditor in August, PBMs received $6.14 on each generic drug prescription in a Medicaid-managed Medicaid program in the 12 months from March.

This is consistent with Bloomberg's findings. Bloomberg's findings indicate that the combined pharmacy and PBM price increases in Ohio are below $8 per prescription in 2017 and early 2018.

All in all, this suggests that PBMs, not pharmacies, have already earned the price increase for most generics in Ohio.

According to Bloomberg's findings, although the price of generic drugs in Ohio is above average, these prices are negligible compared to neighboring Indiana. The generic drug fare increase in the state's four private Medicaid programs averaged more than $13 per prescription in 2017, higher than the other states that Bloomberg has investigated for managing medical plans.

At the end of 2017, Indiana's private Medicaid program cost more than $800 to purchase Entecavir, a hepatitis B tablet that costs less than $140 for a 30-day supply. The state government plans to pay more than $100 per prescription for the generic drug Nexium for heartburn, while the pharmacy costs less than $25.

Note: The drug price statistics cycle is 30 days; the number may not be accurate due to rounding.

Indiana pharmacists said they made a small profit from the price increase.

Josh Anderson, co-owner of Crowder's Pharmacy, an independent pharmacy in Bedford, Indiana, said: "We haven't seen anything except the drop in profits."

Jim Gavin, a spokesperson for the Indiana Family and Social Services Authority, said that in Indiana, "We are very aware of the voices and concerns of people across the country regarding the transparency of PBM under the health care system." "We are paying close attention to this issue."

PBMs say that customers—governments and employers—can choose whether to use spread pricing or direct pricing.

Brian Henry, spokesperson for Express Scripts Holding Co., said the spread pricing "still remains the preferred method for customers to get pharmacy benefits." Express Scripts Holding Co. and CVS are among the largest PBMs in the United States. “This increases the predictability of potential sponsors” and they don’t have to worry about the different prices between pharmacies.

In Iowa, Jerry Parker, the county magistrate of Wapello County, said that after discovering that Frahm's pharmacy had paid C$4 or more per month for CVS in a few months, they now buy prison drugs directly from Frahm's pharmacy, CVS. A payment shop of about $1,500 is also being paid.

They are also investigating whether they can save more money by excluding CVS from a larger county employee drug program.

“We don’t have any ideas,” Parker said, comparing the maze-like drug welfare system with the day-to-day work of the county government. “This is more complicated than building a road.”

The lobbying group in the PBM industry said that criticism of what PBM did was driven by the pharmacist's desire for more money.

“Our job is not to enrich pharmacies, but to save money for health plans,” said Mark Merritt, president of the Pharmaceutical Care Management Association. He said that some customers prefer spread pricing because it encourages PBMs to promote generics by making money at the lowest price. Merritt said they also lowered the price that some pharmacies pushed up in traditional Medicaid programs.

PBMs pricing practices have also received litigation

According to a lawsuit filed by the Pennsylvania Federal Court in 2017, 400 independent pharmacies accused UnitedHealth Group's PBM, OptumRx, manipulating its generic price list "making money for itself at the expense of independent pharmacies."

According to the content of the lawsuit, the company separately listed the price list for the pharmacy and the customer, and sometimes paid the drug for the pharmacy at a very low discount price, but then issued a much higher-priced bill to the customer.

The UnitedHealth Group says it offers a variety of fee arrangements to help reduce costs. The company said the lawsuit "has no legal basis" and claims that it and other claims "sacrifice consumers only to increase the income of pharmacists."

In July last year, West Virginia removed PBMs including Express Scripts and CVS from its Medicaid-managed care program. A spokeswoman for the state said that by running the program, eliminating spreads and reducing administrative costs, it is expected to save $30 million a year, or about 4% of the state's Medicaid spending.

In June of this year, the Pennsylvania Auditor-General began reviewing the PBM in the state's Medicaid program, which said it lacked regulation of how PBM determines prices.

Despite the resistance, industry insiders do not believe that spread pricing will stop.

Stephen Schondelmeyer, professor of pharmacoeconomics at the University of Minnesota, said: "PBMs have found that they can do it while they are doing it." "But for current price differential pricing, generics are not always saving money."

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