Life Science Compliance Update

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December 15, 2017

PhRMA Releases Report on Financial Flow in Pharmaceutical Industry


In late November, the Pharmaceutical Research and Manufacturers Association (PhRMA) released a new report examining how money flows through the supply chain and how that impacts what patients pay at the pharmacy. According to the report, this system often creates incentives for pharmacy benefit managers (PBMs) to opt for medicines with higher list prices and higher rebates.

The report provides illustrative examples for three patients to not only provide answers, but also to highlight the fact that there is no one price for medicine. This is because prices paid by wholesalers, pharmacies, pharmacy benefit managers (PBMs), and health plan sponsors all vary and are determined by negotiations between stakeholders.

Many manufacturers are offering larger rebates on medicines every year. However, patients - facing larger deductibles and higher coinsurances than ever before - are increasingly facing cost-sharing that is based on the full undiscounted price. As the examples in the report show, patients often do not benefit from discounts and rebates negotiated between manufacturers and payers and may end up paying more than their insurer for their medicine. Such an arrangement leads to the insurer making money off of the patient’s prescriptions.

The report also notes that as the market moves in the direction of a system that better aligns the price of prescription medicines with their value, biopharmaceutical companies are working with private health insurers to implement new payment arrangements for a variety of diseases. In addition, biopharmaceutical companies and health plans are considering new ways to pay for treatment when a patient needs multiple high-priced, innovative medicines and experimenting with money-back guarantees if a medicine does not work as intended. These new types of arrangements offer the potential to increase the choice of therapy, ensure that patients have affordable access to the newest medicines, and enable our health care system to achieve better outcomes at even more affordable prices

By reading and understanding this report, patients and policymakers alike may find answers to their questions and concerns about the affordability of, and access to, medicines. While many things today are politicized and your opinion depends on your political affiliation, one thing most Americans can agree on is that patients should benefit more from negotiated rates in the form of lower out-of-pocket costs at the pharmacy, just like they do for other types of health care services.

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