The Pharmaceutical Generic Game – Profits or Fair Healthcare, Pick One

I am sure you have never wondered why large corporations employ large cadres of in-house and outside lawyers. LOL To put it mildly, it’s not to improve the lot for consumers, to provide transparency or ensure that the company pays its fair share of taxes. It might be for senior management to generate a CYA opinion on a decision that makes them squirm a bit, but generally, this legal horde is there to maximize profits, minimize transparency, side-step regulation and deal with the world when litigation or claims rear their ugly head. The use of holding companies, multiple corporate structures on and offshore, often allows big companies to pretend that they are dealing with third parties (“hey, what can we do about that?”) that are charging what appear to be outrageous prices… when in fact, these entities operate under a single ownership umbrella…

As has been a common theme in my blogs, Americans pay the highest prices for healthcare than any other country on earth. Our prices for prescription drugs are often vast multiples of prices for the same prescriptions in most of the rest of the world. We are the only developed nation without universal healthcare, often referred to by the radical right as “creeping socialism” in an effort to turn hardworking Americans against their own best interests by horribly misusing the word “socialism” – which really means government ownership has replaced virtually every significant form of private ownership and has nothing to do with social programs that every country has.

I am trying to picture a German millionaire driving a German Porsche or Mercedes or a Swiss banker wearing a Swiss Rolex thinking they are living in a socialist country. But these nations have universal healthcare, considered to be among the best on earth, and spend less per capita on healthcare than we do… by a substantial margin. Still, with no real restriction on campaign contributions (Citizens United v. FEC, 2010 Supreme Court decision, made that really clear) and backed by those cadres of lawyers noted above, the pharmaceutical industry plays fact and loose with pricing structures. Indeed, just to get the 2010 Affordable Care Act passed, the Obama administration was forced to cave to Big Pharma’s demand to let them set whatever prices they wanted for their drugs. When they claim they need that money for “research,” ask yourself why they pay so much to advertise their prescription drugs.

And notwithstanding a recent Biden-administration mini-victory, getting Medicare to be able to negotiate freely with the big pharmas over the 10 most expensive but universally prescribed drugs for seniors, the pharmas have your wallet in their sights. When patents expire, generally within 20 years, the underlying prescription drug generally falls into a statutorily unprotected category allowing “generic” versions of the drug to be manufactured without fear of patent infringement. Clearly, this was intended to open the markets to free competition and save consumers tons on those expensive prescriptions. Well… that’ s what was what was supposed to happen, but as Joseph Walker, writing for the September 11th Wall Street Journal, reality for consumers is quite different:

“Pharmacy-benefit managers [PBMs] frequently steer patients to use their in-house pharmacies to fill prescriptions for specialty drugs like generic Gleevec… The cancer drug Gleevec went generic in 2016 and can be bought today for as little as $55 a month. But many patients’ insurance plans are paying more than 100 times that… CVS Health and Cigna can charge $6,600 a month or more for Gleevec prescriptions, a Wall Street Journal analysis of pricing data found. They are able to do that because they set the prices with pharmacies, which they sometimes own.

“Once the patent on an expensive medicine runs out, lower-priced copies go on sale, promising significant savings. But certain generic drugs—for cancer, multiple sclerosis and other complicated diseases—are still costing thousands of dollars monthly... Across a selection of these so-called specialty generic drugs, Cigna and CVS’s prices were at least 24 times higher on average than roughly what the medicines’ manufacturers charge, the Journal found.”

The political party that is desperately trying to cut any federal budgetary allocations to fight greenhouse gasses and attempt to moderate global warming, that has fought tooth and nail against any notion of universal healthcare or cost-cutting on prescription drugs – despite a 2016 campaign pledged to do reduce those prices, there was nary a bill introduced that would do so – and has effectively culled Medicaid and subsidized health insurance at every turn… loves repeating that false “creeping socialism” mantra as if that is sufficient justification for their “creeping socialism” for millionaires and billionaires. Walker continues:

“Cigna, CVS and UnitedHealth said that the prices they charge for drugs varies by pharmacy and location, and that most patients end up paying less out-of-pocket through their insurance than they would buying the drugs at lower cash prices offered by low-cost pharmacies. .. The companies own the three largest pharmacy-benefit managers in the U.S. PBMs manage drug spending for employers as well as government programs. .. In the name of keeping down drug costs, PBMs decide which medicines a patient’s health plan will pay for and how much the patient will have to contribute to the cost, in the form of out-of-pocket expenses like deductibles and coinsurance… PBMs also often direct patients to take lower-priced, generic versions of expensive brand-name medicines to limit the spending.

“Generics are a cornerstone of American efforts to tackle high drug costs. Once patents on the branded drugs expire, generic manufacturers can jump in. The competition usually causes prices to plummet… Yet the prices don’t always fall when PBMs own their own pharmacies. And for specialty drugs like generic Gleevec, the PBMs frequently steer patients to use their in-house pharmacies to fill prescriptions.

“PBMs try to pay as little as possible for drugs distributed through independent retail pharmacies. But when their own pharmacies dispense prescriptions, PBMs profit from the higher prices… ‘The incentive is there for the PBMs and the specialty pharmacies to keep prices as high as possible,’ said Shannon Ambrose, co-founder and chief operating officer at Archimedes, a company that competes with PBMs to manage specialty drug spending... Even when their health insurance picks up most of the cost of a drug, patients can face a larger expense from higher priced generics if they have an out-of-pocket contribution like a deductible or coinsurance pegged to the price.” It seems that while our elections really are not rigged, except for the voter restrictions and gerrymandering, our healthcare pricing system most certainly is.

I’m Peter Dekom, and as an average American doing their best to make a living and live a normal life, it has to be galling that so many powerful and wealthy sources at the top want to make sure that doesn’t happen anymore.