By Dr. Robert Popovian, Erin Delaney, and Dr. Michael Mandel
We may be on the verge of a titanic shift in how drug prices are set. It’s been led by a dramatic decline in insulin prices, but it’s spreading to other brand drugs as well. This new paradigm is the unintended but welcome result of legislative, regulatory, and market pressures exerted on the biopharmaceutical industry.
The big change: the three major insulin manufacturers decided to sell their medicines at a set low out-of-pocket price for all patients. The previous list prices offered for insulin were bloated by all manners of rebates, discounts, and fees necessary for the byzantine rebate contracting model promoted by the pharmacy benefit managers (PBM) and state Medicaid programs. The new list prices are stripped of all the extraneous baggage and now closely reflect the actual net payments received by manufacturers. In other words, with a straightforward move, pharmaceutical companies Lilly, Sanofi, and Novo Nordisk cut out the middlemen, the PBMs, and others who benefit handsomely by keeping some or all of the rebates, discounts, and fees provided by those companies.
But that’s not all: another brand manufacturer has started selling its brand-name diabetes medicine directly to patients at a significant discount through an innovative retail pharmacy outfit. The reduced price is 50% of the drug’s average retail price. This move helps patients saddled with substantial deductibles and co-insurance since those out-of-pocket costs are calculated based on the inflated retail prices when they utilize their insurance benefit — not the significantly lower prices negotiated by the PBMs that never reach the pocketbook of patients who are consuming those medicines. Furthermore, patients can continue to benefit from patient assistance programs offered by biopharmaceutical manufacturers.
