Who's Getting Rich in Healthcare?

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Do you recall what President Trump tweeted right after Merck’s Kenneth Frazier resigned from his American Manufacturing Council? “Now [Frazier] will have more time to lower ripoff drug prices!”

I’m not talking politics. I’m just pointing out that President Trump, like most of the country, evidently believes that pharma is getting rich by charging exorbitant prices for drugs and that we’re the only ones who can lower them.

He certainly doesn’t think drug prices can be rolled back by legislation. To my knowledge, none of the “repeal and replace” bills that circulated through Congress this past summer contained provisions to lower drug costs. I guess they all think it’s up to pharma.

See also: AI Drug Design Could Save Lives

But if pharma is ripping off the system, where’s all the money going?

Look at the Fortune 500 companies and see if you can name which ones are making the really big bucks from our healthcare system. In the top 10 ranked by annual revenue, there’s McKesson (5), United HealthGroup (6), and CVS Health (7). No mention of Pfizer, Merck, or any of the usual “ripoff” suspects.

Let’s look a little further. At the 11, 15, 17, 22, and 29 spots, we find AmerisourceBergen, Cardinal Health, Walgreens, Express Scripts, and Anthem. Still no pharma.

Not until we reach 35 and 36 do drug manufacturers appear with Johnson & Johnson and Procter & Gamble. They’re quickly followed by MetLife (42) and Aetna (43).

In other words, the really big money in our nation’s healthcare system isn’t in developing and manufacturing new lifesaving pharmaceuticals — it’s in the PBMs, in wholesaling these drugs, and in managing their delivery.

According to an article in The Wall Street Journal from August, the three biggest wholesalers (who control a whopping 80% of all generics in the U.S.) are squeezing pharma manufacturers to lower their prices. This has put a major hurt on a lot of generic companies. Making generics isn’t cheap (no matter what our critics claim), and the FDA hasn’t been processing generic applications as fast as they used to. If this has caused a price war, consumers haven’t benefited yet.

For example, you can’t buy generic Viagra (sildenafil) in the U.S., even though it was off patent years ago. However, you can buy sildenafil as a generic in 20 mg capsules (and probably with a reasonable copay) if you are taking it for pulmonary hypertension. In fact, radio ads are now advertising generic sildenafil for mail order sale in the U.S. Why the hassle?

Here’s another case. An August article in The New York Times states that if you are prescribed Adderall XR, your insurance company may cover the brand name, but not an FDA-approved generic.

Yet the insurer charges patients a $90 copay because it’s a top-tier drug. As we all know, generic copays typically cost $5 to $10.

Of course, it makes no sense. Why should an insurer not want its patients to take a less expensive version of a given drug? You already know the answer. Because the insurance company has squeezed the manufacturer to supply the brand name at a bargain price.

Do patients with other carriers face the same problem? Who knows? Thanks to our fragmented multipayer system, the cost of drugs has become totally capricious.

President Trump, Congress, and, most important, the public need to know that one of the major reasons for high prescription drug prices is directly due to the immense power wielded by insurers, payers, and wholesalers.

Think you’re paying too much for your prescriptions? Don’t blame pharma. It isn’t entirely our fault.

Sander Flaum is a principal at Flaum Navigators.