I can vividly recall the angst in our industry, among those paying attention, watching companies like Valeant Pharmaceuticals raising the cost of older, expired patent-protected drugs by massive margins. Dispensing pharmacies were now saddled with significant below-cost reimbursements and patient anger at the “counter” over how and why this could be happening. Simultaneously they faced a largely disinterested group of regulators who just shrugged. As the last line in the distribution chain, the pharmacies’ hue and cry was not misplaced.

 

Then, finally, the “light” went on, when Martin Shkreli, CEO little two little known pharmaceutical manufacturers, raised the price of Daraprim, a rare prescription for specialty patients, from $13.50 per pill to over $750 per pill. Well that’s certainly one way to get everyone’s attention! Regulators as well as state and federal elected officials were rightly appalled and began tripping over themselves to get involved in the long, drawn out saga to “fix” this problem.

 

Now in response to this new “enlightenment” and pharmaceutical pricing inquiries, the Pharmacy Benefit Managers (PBM’s) are finally being asked the questions we all would like answered. These unregulated managers “touch” virtually every prescription dispensed today. Their curated industry generates billions of dollars in revenue and someone, and you can guess who, has to pay those dollars.

 

PBM’s tout the negotiating, formulary management and claims processing efficiencies that they have created save employers and health plans millions. Pharmaceutical manufacturers say that they now have to build “rebates” into their pricing policies, paid to the PBM’s, to guarantee placement on their formularies. In an industry that will reach spending of $400 BILLION DOLLARS by 2020, even a small percentage “rebate”, or technically a “kick back,” is significant. It’s almost entertaining to watch the two 800 pound gorillas pointing fingers at each other. Except, while their pointing, we’re paying!

 

At the end of the day, Martin Shkreli, Pharmaceutical Manufacturers, and PBM’s are simply people and companies that have looked at the rules and have found a way to profit. Although, seemingly immoral, they have done nothing illegal. What remains most frustrating is that red flags were raised inside the industry well before the “public rage” appeared. However at the time, no one was listening and now, unwinding the mess will be prolonged and expensive.

 

There’s a saying that goes “you don’t have to know how to slaughter the cow just to enjoy the steak,” but sometimes, I believe it is best to listen to those who are aware of the inner workings so that we can all be truly informed about the end product. Stay tuned to this issue. I think you’re going to be hearing a lot more about it.

 

-KO