Wednesday, September 27, 2023

Drug Channels News Roundup, September 2023: PBM Profits, Specialty Rx Markups, CVS Spending Trends, Pharmacy Pricing Secrets, and Deductibles 101

Autumn is here! Curl up with your favorite pumpkin-spiced blog and savor these stories harvested from the great Drug Channels patch:
  • A must-read report on hidden sources of PBMs’ profits
  • How generic drugs drive specialty pharmacy profits
  • CVS Health’s unadvertised 2022 drug trend report
  • A shocking look at how PBMs set prescription prices
Plus, Dr. Glaucomflecken teaches us about our insurance benefits.

P.S. Join my more than 45,000 LinkedIn followers for daily links to neat stuff. You can also find my daily posts at @DrugChannels on Twitter/X, where I have more than 16,900 followers. (I recommend that you follow me on LinkedIn, because the quality of comments and engagement is much higher than they are on Twitter. I’m not posting to Threads yet.)

Trends in Profitability and Compensation of PBMs & PBM Contracting Entities, Nephron Research

Eric Percher at Nephron Research has made a crucial contribution to helping us understand the hidden sources of PBMs’ profits. In this outstanding report, Eric and his colleagues quantify how PBMs’ profits have evolved over time. The report is free with registration.

One notable finding: PBMs’ fee revenues from various sources—administrative, data, data portal, price protection, GPOs, etc.—have grown dramatically, from $3.8 billion in 2018 to $7.6 billion in 2022. (See Figure 16 in the report.) The chart below summarizes PBMs' evolution.

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Nephron’s conclusions are broadly consistent with DCI’s observations and analysis in our 2023 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. However, Nephron has gone further with detailed computations on the profit sources. Highly recommended!

Generic Drugs Should Be Cheap, but Insurers Are Charging Thousands of Dollars for Them, The Wall Street Journal

There is a bull market in articles comparing prescription prices in commercial and Medicare Part D insurance plans with cash-pay options at the Mark Cuban Cost Plus Drug Company.

With help from 46Brooklyn, The Wall Street Journal joins the fun with a look at generic drug prescription costs in Part D plans offered by Cigna, CVS Health, and UnitedHealthcare.

Guess what? PBMs are adding unconscionable markups to low-cost, non-biological specialty drugs. That’s one reason why specialty pharmacy has become a hidden profit driver for the large PBMs, as I discuss in Do Plan Sponsors Understand How Their PBMs Make Money?.

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For more context on the growth of specialty generic drugs, see Section 12.2.3. of our 2023 pharmacy/PBM report. Meanwhile, please feel free to remain outraged and disgusted.

The 2022 Drug Trend Report, CVS Health

Surprise! With little fanfare, CVS Heath quietly released its 2022 drug trend report. Thanks to a loyal Drug Channels reader for directing me to this unadvertised webpage.

The report is skimpy but still provides useful information on changes in drug spending at CVS Health’s plan sponsor clients.

For example, the majority of specialty drug spending growth can be attributed to utilization—growth in the number of people being treated and the number of prescriptions being dispensed. As you can see below, net prices grew slowly or declined in three top spend categories.

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I suspect that the specialty cost trend reflects growing competition in major specialty categories, the launch of generic versions of nonbiological specialty drugs, and copay maximizers. Imagine the savings if CVS Health’s PBM had priced its specialty generics like Mark Cuban Cost Plus Drug Company!

Unfortunately, CVS declined to answer any questions about the report. Meanwhile, Express Scripts has stopped publishing its formerly-excellent drug trend reports. Gotta love all of that “transparency!”

Unravelling the Drug Pricing Blame Game, 3 Axis Advisors

Here's another must-read report. Antonio Ciaccia at 3 Axis Advisors/46 Brooklyn uncovers how PBMs manipulate prescription reimbursement to retail pharmacies. As the report reveals, PBMs establish brand-name and generic prescription prices in unpredictable ways that don't appear related to acquisition costs. For example, the analysis revealed that the same PBM set five different prices for the same drug, at the same pharmacy, on the same day. The reimbursement on this day ranged from $9.30 per prescription to $96 per prescription.

Fair warning: This is a dense and challenging report. However, its conclusions and data demonstrate significant problems in the retail drug channel.

Deductibles, Dr. Glaucomflecken

Dr. Glaucomflecken, the funniest physician on the internet, explains deductibles. This video is part of Dr. G’s deeply cynical “30 Days of US Healthcare” series, which will make you laugh before you cry.

If you love UnitedHealthcare, then you should under no circumstances watch How to Ace your UHC Interview. You have been warned!

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