Drug Channels News Roundup, October 2025: Vertical Integration Woes, AFPs Gone Wild, Part D’s Decline, 340Bloat, and Dr. G’s ACIP Haunting

Eeek! It’s time for the Drug Channels Halloween roundup of terrifying tales from the dark corners of the healthcare system. Gather your favorite demon hunters and help maintain the Honmoon. This month’s tricks and treats include:

• Vampiric! How vertically integrated insurers can drain the lifeblood from the U.S. healthcare system

• Boo! Chilling stories of the shady alternate funding programs that haunt patients

• Creepy! Why the Part D market is headed for an early grave

• Grotesque! The monstrous expansion of 340B

Plus: Dr. Glaucomflecken returns from the underworld to summon the ACIP séance.

P.S. Join the ever-growing zombie horde that lurches after me and enjoy haunting commentary from the restless spirits of the DCI community.

Express Scripts’ new “rebate-free pharmacy benefit” model materialized too late for this month’s roundup. But I ain’t afraid of no rebates, so I’ll be bustin’ it soon on Drug Channels.

How Insurers That Own Providers Can Game The Medical Loss Ratio Rules, Health Affairs

Uh oh. As this Health Affairs article explains, alternative payment models (APMs) and value-based arrangements can be structured so that insurers can exploit the medical loss ratio (MLR) loophole.

Here’s an example, which the article's authors illustrated in the chart below:

• Insurer A pays its affiliated clinic $500.

• The clinic’s actual cost is only $300.

• The $200 difference becomes internal profit, but is still counted as “medical spending” in the MLR calculation.

• Lump-sum APM payments (per capitation or per episode) hide price increases and profit transfers.

• Meanwhile, a non-integrated competitor paying the same clinic $300 records no internal profit.

[Click to Enlarge]

Massive consolidation and vertical integration are additional unintended consequences of the Affordable Care Act—as DCI’s infamous image illustrates.

P.S. Click here to read the lively debate on this topic among the Drug Channels community.

A new wave of middlemen offers 'alternative funding' for specialty drugs. Patients bear the risks, Fierce Healthcare

Anastassia Gliadkovskaya of Fierce Healthcare highlights the growing patient harm when self-funded employers carve out specialty drugs and pay alternate funding vendors to divert manufacturer assistance funds or source medicines overseas (in violation of FDA rules).

The result: delays, denials, confusion, and real risks for patients.

As employers chase “savings,” these opaque schemes expose the deep dysfunction in today’s drug channel.

FYI, here are some Drug Channels article on AFPs:

• Employers Expand Use of Alternative Funding Programs—But Sustainability in Doubt as Loopholes Close

• The Economics of Copay Accumulators, Maximizers, and Alternative Funding Programs (Video)

“Free” Is Never Free: Restoring Market Reality to Part D, Paragon Health Institute

Excellent analysis from Jackson Hammond of Paragon Health Institute on how the Inflation Reduction Act (IRA):

• Drove a massive spike in premiums for standalone Part D plans (PDPs)

• Pushed many plan sponsors to abandon the PDP market entirely

• Created a hidden, taxpayer-funded bailout never counted in the IRA’s official budget score

Last year, the Congressional Budget Office (CBO) conceded that it underestimated true costs of IRA by $10 to $20 billion.

Thanks, IRA! 🙃

Cui Bono? Misaligned Incentives in the 340B Program, Schaeffer Center White Paper Series

Check out this strong new explainer from the USC Schaeffer Institute on the out-of-control 340B Drug Pricing Program. The report highlights three structural flaws driving its explosive growth:

• Subsidies tied to spread (not patient need)

• Uninsured and low-income patients often miss the discounts

• A growing share of 340B dollars are captured by for-profit pharmacies and PBMs

The report has loads of data and links to excellent resources—including Drug Channels, of course)!

ICYMI, the American Hospital Association published a highly misleading "community benefit" report on 340B hospitals. Caveat reader.

ACIP Panel, Dr. Glaucomflecken

Dr. Glaucomflecken, the funniest physician on the internet, summarizes the recent Advisory Committee on Immunization Practices (ACIP) meeting. Satire or reality?