Just because patients don’t understand the opaque layers/players behind the drug procurement affordability crisis, doesn’t mean that lawmakers do, say experts--which is part of the problem.
The bigger problem, though, is that “Big Pharma” (increasingly “BioPharma”) is a silent funder of two thirds of Congress members, 57 percent of US doctors, hospitals, medical schools and medical practices and notably almost all news outlets thanks to “ask your doctor” ads. (See: “Chronic” diseases requiring large molecule biologic$.) No wonder some call drugmakers the fourth branch of government.
The government/medical/news capture is why many don’t know about prescription drug alternative funding programs that work directly with employer-sponsored health plans outside traditional channels to bring down costs.
One example is Mark Cuban’s Cost Plus Drugs, an online pharmacy that adds only a three dollar pharmacy fee, shipping costs and a flat 15 precent markup to true drug costs.
Recently, we spoke with Paul Pruitt, who co-founded SHARx, a supply-chain management company designed to offer employers and their employees more affordable medications.
A former employee benefits broker, Pruitt was inspired by the astronomical cost of prescription medications two of his own children needed.
Rosenberg: Can you explain, or is that decipher, the current drug supply chain and how it gives the illusion of “value”?
Pruitt: When I go to the pharmacy and they run my insurance, they say, “Hey, you pay $10.” Okay, that was neat. [But] when you start going upstream with medication pricing, you’re dealing with vertical integration: The PBM (pharmacy benefits manager) owns the pharmacy, so they’re making money at every area. Forty percent of their revenue is for specialty drugs so they have an incentive to have a lot of them, fill them quickly, get them out the door [and] make as much as they can.
So, there is a drug product, the maker provides it to wholesalers who mark up to the pharmacies who again mark up. The pharmacies mark up some percentage to sell it to the consumers, and then the PBMs extract a bribe or rebate from the manufacturers for formulary placement.
Rosenberg: Pretty opaque...
Pruitt: The entire pharmacy supply chain is broken. I’m the PBM--I control. I have a GPO [Group Purchasing Organizations maximize purchasing volume] and that’s the “rebate aggregation.” I own everything in the equation.
There’s no transparency about where the money goes and the revenue that’s created and it’s often sold as a free service to the employer. Well, there’s nothing more expensive than “free.” Where’s the “value” when you’re striking deals with yourself?
One of the biggest problems that I see is rebates. In any other industry we call those bribes, “Am I on it? Am I preferred; is my competitor excluded?” All those are worth more dollars. If we just got rid of that, the market would change overnight.
Rosenberg: Rebates are presented as cost saving,,,
Pruitt: You know, every year, if you look at contracts with employers, rebates have to go up by contract. Well, then that means the price has to go up, right? So, the same PBM that’s saying, I’m gonna save you money, is also making pricing go up because they need more extraction of the system. PBMs create the illusion of value but they don’t add value, they extract value.
Having insurance doesn’t make things affordable or accessible, because we’re not really dealing with the underlying price. What things cost and what I have to pay in a copay are rarely connected in that model. If you can only access a drug because you have insurance for it, that whole idea is weird and broken. There is no connection between the value of a medication, its efficacy, and when it costs.
Rosenberg: Let’s talk about taxpayer/NIH (National Institutes of Health) funded research.
Pruitt: NIH can’t take a drug to market without a biotech company so a biotech company takes it to market; they promise they won’t charge a lot of money [but] once it launched, they say “Just kidding. We’re going to charge 50,000 a month.” Why should the NIH fund the research and then have to pay the bills through Medicare later on? Like that’s nonsensical to me.
Rosenberg: Pharma and especially BioPharma claim their high prices reflect R and D [research and development].
Pruitt: We put so much research into it, right. It’s not about R and D it’s about ROI [return on investment] but you can’t say that in front of Congress.
Rosenberg: Can you give an example of how SHARx has helped an employer with drug prices?
Pruitt: We partner with employers who say, “We can’t offer benefits and stay in business and take care of our people [because of drug prices]. If we don’t solve this problem that’s out of control. we’re going to have to no longer cover certain medications in our health plan.”
There’s a company in Kansas City that reached out to us, I think in 2019 and their CFO was like, “I don’t sleep; I can’t sleep. I’m not sure how we’re gonna stay in business.”
They had members of their health plan who had really high costs--one of their higher cost members had multiple sclerosis, and one of the medications for that was $120,000 a year-- and they had several other [similar] people.
They said to us, “We’ve been changing our insurance, changing our PBM, changing the deductibles and the CO insurances and out of pockets. And nothing’s working. We can’t wait. This is an emergency.”
At SHARx, we love the opportunity to be able to educate and share the right message. After partnering with us, the CFO said working with SHARx was the “best decision I’ve ever made.”
Rosenberg: Thanks for your out-of-the-box thinking and good luck to you.
Editorial note: The charge that alternative drug funding programs provide non-FDA approved drugs is misleading. NP Thyroid, phenobarbital, prenatal vitamins and many dietary supplements are all FDA-unapproved according to a recently interviewed pharmacy specialist.
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