Simple Pharma/PBM "Fee" Scheme Math
Mechanics of the Pharma/Health Insurer “Fee” Scheme
- National “percent of sticker price” “pharma fee” contracts.
- For U.S. brand drugs.
- Paid by pharma to dominant health insurer/PBMs.
- United Health, CVS/Aetna, Cigna/Express Scripts, Humana
- Highly secretive and centralized.
Execution of the Scheme
- Pharma massively raises U.S. brand drug price 5-to-10-fold, often while use of the drug is sharply declining.
- Pharma secretly pays"fees" to the health insurer/PBM by contract as a “percent” of each and every "sticker" price increase.
- The typical health insurer/PBM "fee" rate is 5-10% of the "sticker" price.
- The typical health insurer/PBM "fee" rate is 5-10% of the "sticker" price.
- The health insurer/PBM typically keeps ALL "pharma fees", with minimal disclosure.
- Small or modest "manufacturer rebates/discounts" are largely passed on to health insurer/PBM clients and patients.
- Pharma gets most of the greatly increasing profits driven by massive 5-to10-fold price increases for selling FAR LESS prescriptions.
- The health insurer/PBM gets A LOT MORE "fee" revenues/profits for supporting far fewer prescriptions and patients. For most of the Whistleblower case brand drugs, the PBM is commonly getting about five-fold more "pharma fees" now compared to a decade ago for supporting half or less as many patients.
- The increased drug costs from the massive price increases are paid by patients, families, businesses and taxpayers.
Since Medicare Part D:
- “Pharma fees” tied to "'sticker" prices now secretly account for MOST AND OFTEN ALL health insurer/PBM brand drug profits.
- "Pharma rebates" now account for little health insurer/PBM profits.
Examples: High Cost “Specialty” Drugs
- Novartis’ Gleevec (Leukemia/Cancer)
2005 2015
Reported U.S. Sales: $524 million $2.5 billion
U.S. “List” Price/Pt/Yr. $30,000 $150,000
PBM “Pharma Fees”/Pt (8%) $2,400 $12,000
FIVE-FOLD increase in PBM “pharma fees”/patient, driven only by price increases
Gleevec U.S. prescriptions DOWN about -6% between 2005 and 2015 due to increased competition
- Biogen’s Avonex (Multiple Sclerosis)
2005 2017
Reported U.S. Sales: $939 million $1.9 billion
“List” Price/Pt/Yr. $15,000 $100,000
PBM “Pharma Fees”/Pt (8%) $1,200 $8,000
SEVEN-FOLD increase in PBM “pharma fees”/patient
- U.S. prescriptions for Avonex DOWN about -70% between 2005 to 2017 due to severe competition