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Idealism Vs Reality Potential Issues Impacting President’s Plan To Lower Drug Prices | Life Science Leader

In looking at the President’s plan for lowering drug prices, especially as they impact many health plans — particularly those in their infancy — a significant chasm exists between idealism and reality. While it will be important to take all factors into consideration, some key potential issues merit close attention.

Are The President’s Recommendations Realistic?

Let’s start with those that might be considered the “easy” items. As outlined in the report, Trump promised to end the system’s “double dealing” that allows middlemen such as pharmacy benefit managers (PBM) to pocket rebates and discounts.

It should be evident that there are many “pricing games” that are played in the pharmaceutical industry, including discounts provided to PBMs. That said, much of the discounts (i.e., rebates) provided to the PBMs are in fact “shared” with the PBM’s customers. In fact, it could be argued that, because some portion of the rebate is passed on to the PBM’s customers (e.g., payers, employer groups, etc.), the rebate holds down overall drug costs and enables patients to access products at a better cost (i.e., lower copay) than what might happen if no rebates were provided.

How Much Of The Rebates Are Shared?

If the rebate is kept by the PBM and not shared with the payer, it could be argued that a conflict of interest occurs that may in fact drive up market prices. On the other hand, if the PBM is sharing the discounts with the plan and thereby enabling lower overall costs, one could argue that there is an alignment of incentives. The conflict is tied to the rebates driving the profits of the PBM vs. the drug discount enjoyed by the payer. This would force the manufacturer to provide a high list price with a potential deep rebate to the PBM, rather than a lower list price that might be directly provided to the payer.

Is Price Transparency A Way For Pharma To Take Control From Third Parties?

Arguable price transparency that provides to the market information related to how manufacturers price to the PBM, may inure to the benefit of both the payer and the manufacturer. For the payer, they can see exactly the discount provided to the PBM, and therefore determine how they might best participate in that discount. For the manufacturer, their relationship, or perceived value from the payer, may be enhanced if the payer understands the relative discount of the manufacturer.

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Idealism Vs Reality Potential Issues Impacting President’s Plan To Lower Drug Prices.