Who wins from rising insulin drug prices? – Healthcare economist


Perhaps surprisingly, the answer is PBM, not drug manufacturers.This is one of the conclusions discussed in the recent review Goode and Hernandez (2021)They tried to find the source of the problem, writing:

Most explanations for the increase in drug costs begin with pharmaceutical companies, but in fact they are easy targets. U.S. manufacturers are allowed to set their own prices for new products, and then protect these products from competition through patent exclusivity… The price of brand-name drugs has increased at an average annual rate of 9.1% from 2007 to 2018…
However, the ever-increasing discounts have partially adjusted the increase in drug prices.Therefore, drug manufacturers point out the net price of the drug (the cost of the drug after all discounts are applied) instead of the list price as a more accurate drug cost figure… The previous analysis showed that the discount of branded products accounted for 60% of the drug cost from 2007 to 2018 Increase

More experience details are provided in the paper Van Nuys et al. (2021). Use a method similar to that used to track the flow of funds in the entire drug distribution system (Su De et al. 2017), they found:

Between 2014 and 2018, the average list price of 32 insulin products increased by 40.1% (from US$19.60 to US$27.45), while the average net price received by manufacturers fell by 30.8% (from US$10.53 to US$7.29). Net expenditures per 100 units of insulin increased by 3.2% (from US$15.11 to US$15.59), while the manufacturer’s hypothetical US$100 insulin expenditure share fell by 33.0% (from US$69.71 to US$46.73), and the share of health plans fell by 24.7 % (From 13.82 USD to 10.40 USD). The share of insulin expenditure retained by pharmacy welfare managers increased by 154.6% (from $5.64 to $14.36), the share retained by pharmacies increased by 228.8% (from $6.21 to $20.42), and the share retained by wholesalers increased by 74.7% (from 4.63) USD) 8.09 USD).

In short, relative to drug manufacturers, intermediaries (PBM, pharmacies) are taking an increasing share of insulin prices.The graphic below is courtesy American Medical Association. Read the entire paper here.




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