The death of the healthcare market
“.. the drug pricing system, .. is incredibly complex and has resulted in a lot of confusion around what patients pay for medicines….”
“As the manufacturer, we do set the “list price” … However, after we set the list price, we negotiate with the companies that actually pay for the medicines, which we call payers. This is necessary in order for our medicines to stay on their preferred drug list or formulary. The price or profit we receive after rebates, fees and other price concessions we provide to the payer is the “net price.”… “
Notice also the graph. If you think it’s been getting a lot worse in a short time, you’re right.
Right out in the open, and clear as a bell:
…those price increases were our response to changes in the healthcare system, including a greater focus on cost savings, and trying to keep up with inflation. PBMs and payers have been asking for greater savings – as they should. However, as the rebates, discounts and price concessions got steeper, we were losing considerable revenue… So, we would continue to increase the list in an attempt to offset the increased rebates, discounts and price concessions to maintain a profitable and sustainable business. …
Right. We all can’t negotiate a better deal than average. We soon run out of other people’s money. (The state of California just discovered that too — trying to make PG&E “pay for” wildfire damages, it discovered that in the end all the money comes from customers in the end.)
As Sauer distills it
Let’s assume you have a new product you want to sell. You were planning on selling it for $10, but the government is going to force you to discount the product 50 percent. Do you go ahead and sell it for $10, or do you charge $20?
Of course, you charge $20, and if you had to think about that, you probably shouldn’t sell a product yourself.This is the state of the pharmaceutical industry
Novartis writes clearly on the death of the cash market, and its effects:
For patients, the reality is that many of the insured may benefit from the net prices payers negotiate (on average, insured patients pay a co-pay for Novo Nordisk insulins between $1 – $1.40 per day) while others may not. Uninsured patients or those in certain insurance plans may be subject to list price.And in particular,
For instance, there are a growing number of people enrolling in high-deductible health plans that are facing higher costs at the pharmacy counter. In our view, high-deductible health plans are becoming a greater part of the affordability issue requiring attention.But just what kind of attention? Here, the otherwise crystal clear prose slips in to waffling.
We currently offer several options for eligible patients including a Patient Assistance Program and co-pay cards to defray costs.Our own system of price discrimination via insane complexity.
As a leader in diabetes care, we recognize patients need more… We need a partnership approach involving PBMs, insurance companies, employers, patient organizations and policy makers – to help find sustainable solutions.Isn’t a “partnership approach” exactly what got us in to this immense mess?
we also need to work together to improve the system and create more transparency.Well, that would surely be nice! Sauer has a better idea:
Check out the market for candy bars. There is a markup above the manufacturer, but the end user bears 100 percent of the cost; and therefore the candy bar market is very lean. Healthcare markets can work in a similar fashion.