Middlemen Responsible for Drug Price Increases, Says Executive

Middlemen Responsible for Drug Price Increases, Says Executive

Drug prices in the United States are rising and policymakers are trying to find out the cause for that and eventually find a solution. As this is happening, key players in the industry keep trying to shift the blame on the other actor in the sector.

As this plays out, it becomes obvious that the final price the patient pays has many components. Each business transaction adds another layer to the total cost of the drug.

Drugmakers are now saying that the role they play in the pricing of drugs is actually a lot smaller. They are defending their position by pointing the finger at middlemen. They say that it’s actually middlemen who determine the pricing of the drugs.

Drug Prices Have Many Components

Executives in the drug industry have been summoned to appear before lawmakers and give explanations. They have received negative comments on social media regarding their business practices. All over price increases on the products they manufacture. Price increases that were too sharp and sudden for the market to simply absorb. It looks like some of them are unhappy with what they see as unfair treatment.

Heather Bresch, the chief executive of Mylan, is one of the people who said there’s more to the problem than just drug manufacturing companies. Mylan makes the lifesaving EpiPen and its representatives had to testify before Congress last month regarding a price increase in their product. Ms. Bresch believes that it’s unfair for Mylan to be the target when the entire system is dysfunctional.

It does look easier to put the blame on the manufacturer and look at the price that drugmakers ask for their products. But on a closer look, the system is so complex and there are so many actors in the pharmaceuticals sector that simple answers to questions just don’t work. And if there is any chance of finding a solution, it should take into account all aspects of the pharmaceuticals market.

The System Is Dysfunctional

Heather Bresch feels that the system of paying for drugs is “broken” and that’s what led to the steep increases in pricing. The system encompasses wholesalers, the pharmacies and the pharmacy-benefit managers. Each actor in this complex system gets a cut out of each prescription. It all adds up and leads to higher prices.

Pharmacy-benefit managers oversee the drug-benefit plans on behalf of employers and health insurance companies. What they actually have to do is keep the cost of providing said benefits down. They do that by choosing which drugs to cover and which ones to not cover. That gives them a certain amount of leverage when negotiating with drug companies. Pharmacy-benefit managers usually use that leverage to get lower prices from drug companies in the form of rebates. Ideally, most of the savings should then go to their clients.

Pharmacy-benefit managers say that what they do does not lead to higher prices in drugs. They say that drug costs would be considerably higher if there weren’t any rebates. Troyen Brennan is chief medical officer for CVS Health Corp. He says that pharmacy-benefit managers “have every incentive to make costs as low as possible”.


Image source: here.