A Close Look at Inflated Pricing in Healthcare

Written By: Edward Smith

Date: February 28, 2017

I recently read “A Sick Calculation About Prescription Drugs“, an article by Peter J. Pitts. While this article is 100% true, it’s only the tip of the iceberg. Of all the inflated pricing in healthcare, none is more egregious than that driven by these large PBMs. With the notable exception of the few remaining local independent pharmacies, our country’s pharmaceutical industry is akin to “organized crime”, complete with congressional and regulatory capture (read: pay-off.)

 

I’m for free enterprise but this is no efficient market. CVS has been allowed to vertically integrate an entire industry. The US Gov’t (the largest purchaser in the world) is legally prohibited from negotiating drug prices. And why would the largest health insurance companies in the country, who purport to be a fiduciary for employers and patients, allow PBMs to drive drug prices 3, 5, sometimes 20 times higher than in other countries?

 


“Of all the inflated pricing in healthcare, none is more egregious than that driven by these large PBMs.”


 

Look closely at the ownership of the largest PBMs and you’ll discover why health insurance companies embed drug plans into their policies “for convenience”. If not direct ownership, it’s a significant revenue stream for the insurance carriers, and sometimes for other industry “advisors” as well.

 

My team at HT has devoted years to developing a truly transparent PBM contract for our self-insured clients. Only 3 smaller PBMs have agreed to it but, once installed, drug costs immediately and significantly drop for employers, and thus patients. Unfortunately, our clients with fully insured contracts are prohibited by their insurer from carving out their pharmacy plan to access our program.

 

If you have interest in learning more I’m glad to send you a few further slides of data. But you don’t have to take my word for it. Google the Fortune 100 list and look at how many companies are in the pharmaceuticals supply chain. You’ll be hard pressed to find another industry in our country doing any better. As seen below, CVS is top 10, Express Scripts is top 25.

 

 

Edward D. Smith
www.hutchinsontraylor.com
706.298.2161 Direct
706.302.9727 Mobile

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