I cannot overstate the remarkable simplicity of the scheme behind systemic massive U.S. brand drug price increases across this nation over the past 15 years.
The vast patient and public harm has been caused by a simple, but seismic change in the way that pharmaceutical companies pay the handful of dominant health insurer/PBMs (UnitedHealth, CVS/Aetna, Cigna/Express Scripts and Humana) that control 80-90% of drug benefits in this country.
Before Part D: Virtually ALL health insurer/PBM brand drug profits came by secretly keeping most of the rebates (i.e., discounts) negotiated with pharma companies that they were supposed to pass on to clients and patients.
After Part D: The dominant health insurer/PBMs now secretly make virtually ALL their brand drug profits from “fee” payments from their pharma partners. These secret “fees” have been standardly paid as a “percentage” of massive drug prices and drug price increases in national contracts.
You can read about the secret shift from rebates to fees with Part D at Medco, the largest PBM when Part D began (now part of Cigna/Express Scripts) at this link to the Drug Price Truth website: https://drugpricetruth.org/dark-secret/
And why did these massive brand drug price increases and the secret “fee” scheme suddenly start in the U.S (and nowhere else) with Part D?
The reasons behind that are also remarkably simple:
- MASSIVE SYSTEMIC BRAND DRUG PRICE INCREASES WOULD HAVE BEEN IMPOSSIBLE BEFORE MEDICARE PART D: In 2006, Part D provided much needed outpatient drug coverage to U.S senior citizens for the first time. Senior citizens account for about half of prescription drug use in this country, especially for chronic conditions that drive most use and pharma sales. Prior to Part D, routine massive 5-10-fold or more U.S. price increases would have rightfully caused riots in the streets because virtually no disabled Americans or senior citizens that depend on Part D can afford a $100,000 multiple sclerosis, a $80,000 rheumatoid arthritis, a $200-300,000 cancer or a $500,000+ rare disease drug. This price inflation scheme could never have happened prior to Part D, when taxpayers started footing most of the bill.
- WHEN PART D STARTED, BOTH PHARMA AND HEALTH INSURER/PBMs FACED PLUMMETING REVENUES/PROFITS DUE TO WIDESPREAD U.S. BRAND DRUG PATENT LOSSES: When Part D began, brand drugs accounted for about 50% of U.S. prescriptions. Now brand drugs are less than 10% of U.S. prescriptions each year.
With limited drug pipelines, pharma’s only way to avoid plummeting revenues/profits (and stock prices) was to massively increase the prices on the few remaining U.S. brands.
Plummeting U.S. brand sales due to patient losses also meant plummeting rebates, the main secret source of profits for health insurer/PBMs. There are no rebates on generic drugs. Part D also required transparency regarding rebates for the first time.
Enter the “fee” loophole in Medicare Part D – the only other way for pharma to secretly pay health insurer/PBMs large amounts of money regarding brand drugs. Tie the secret payments directly to massive price increases and pharma/health insurer/PBM profits exploded, with the American public paying for it.
THE CATACLYSMIC MOMENT OF TRUTH FOR INDUSTRY EXECUTIVES: PATIENTS/CITIZENS VERSUS PROFITS?
Faced with this patent cliff and plummeting revenues/profits more than a decade ago now, the senior executives at pharma and health insurer/PBMs faced a moment of truth when Part D arrived?
Would they accept their lot in a situation of their own making?
Would they accept their sharply eroding profits (and stock prices) as pharma brand sales and PBM rebate opportunities legitimately plummeted as many U.S. patents expired?
Would pharma accept that their meager drug pipelines could not make up for these massive U.S. brand patent losses?
Would the health insurer/PBMs honor the trust that had been place in their hands when given control of the new Medicare Part D program?
Would the health insurer/PBMs legitimately negotiate with pharma on behalf of the disabled and senior citizens dependent on Part D and on behalf of taxpayers paying for most of it?
And most importantly, would the pharma and health insurer/PBM senior executives put the health and well-being of the American public (especially its most vulnerable citizens) ahead of their own personal financial interests?
UNFORTUNATELY FOR US ALL, THE PHARMA AND HEALTH INSURER/PBM SENIOR EXECUTIVES CHOSE A DIFFERENT PATH
These pharma and health insurer/PBM executives chose together to use the “fee” loophole in Medicare Part D in a simple secretive partnership to massively increase U.S. drug prices on the few remaining U.S brand drugs left – leading to severe patient and financial harm that never should have occurred.
The scheme included 5-10-fold U.S price increases on a wide array of life-saving drugs, especially in the diabetes, multiple sclerosis cancer and rheumatoid arthritis markets. The massive price increases in these drug categories is not a mere coincidence – they were the largest categories by far left after the wave of U.S. patent losses and were the main growth drivers of both the pharma and health insurer/PBM industries.
Unfortunately, the price increases needed to drive revenue/profit growth for many old blockbusters have been most extreme because many of the brands were plummeting in use due to severe competition. Obvious and severe anti-competitive activity. Legitimate health insurer/PBM negotiations would have prevented these price increases and likely led to price declines.
Of course, the pricing abuse has gotten far worse since I uncovered and verified the fee scheme in mid/late 2013. In the U.S., the price of many major brands has doubling again over the past 6-7 years.
And the massive prices on the old blockbuster brands was the starting point for even greater prices on new brand drugs reaching the U.S. market. After more than a decade of this collusive scheme, we are now in a full-blown drug price national crisis that continues to worsen every day.
From the moment in mid-2013 when I uncovered this simple secretive scheme causing devastating harm across the nation, I have struggled to understand how it could ever have happened.
Then I remind myself that 99% of the hardworking people in the pharmaceutical and health insurer/PBM industries have no part in this highly centralized and secretive scheme. They have also been kept in the dark and harmed as well by a small group of senior executives.
The dedicated pharma industry researchers developing new therapies for cancer and other severe illnesses know nothing about secret dealings with health insurer/PBMs. The hardworking pharmacists at CVS that I know spend half their day apologizing to patients about rising drug costs and insurance coverage problems.
And, as to how the senior pharma/health insurer/PBM executives at the center of this now decade-plus scheme justify it?
It is not something I could ever understand. For me and most Americans, the thought of harming even one diabetic, cancer or other severely ill person would stop us dead in our tracks. Orchestrating a widespread deceitful scheme harming millions of vulnerable people and the entire nation, while reaping vast personal financial gains, is unfathomable.
Keep in mind, the information in this blog post and on the website is all public. It is discussed in detail in the whistleblower Court documents found on the website. I stand by its accuracy and am not aware that any substantive information has been factually refuted.
I would greatly appreciate your sharing this blog post and the website. Thanks for your interest.
I would be glad to speak with any interested party. I can be easily reached by email at firstname.lastname@example.org.
John R. Borzilleri, M.D.