HEALTH

This is why prescription drugs cost so much

Jan 14, 2022, 5:56 PM | Updated: Feb 1, 2022, 12:36 pm
prescription drugs...

Oligopoly: a state of limited competition, in which a market is shared by a small number of producers or sellers.

SALT LAKE CITY — Why do prescription drugs cost so much? An advocate for open access, transparency, and competitive markets in the pharmaceutical industry shares his eye-popping insights into the business of prescription meds and how insiders, whose job it is to look out for consumers, are raking in a fortune.

Welcome to the show

Money Making Sense host Heather Kelly talks with Antonio Ciaccia, president of 3 Axis Advisors, about pharmacy benefit managers and their role in controlling the costs of prescriptions medications.

“How do prescription drugs get to our pharmacies?” Kelly asked.

In simple terms, Ciaccia explained the main pillars of the prescription-drug supply chain:

  • A drugmaker sells to a drug wholesaler, such as McKesson, Cardinal Health, or AmerisourceBergen.
  • The wholesaler then sells the drug to pharmacies, hospitals, and physician offices.
  • And at each step, the price of the drug rises for the end consumer.

PBMs manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers.

By negotiating with drug manufacturers and pharmacies to control drug spending, PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications and determining how much pharmacies are paid, according to The Commonwealth Fund.

‘Keeping those discounts for themselves’

“They’re not doing a great job, especially for my mother,” Kelly said, explaining her mother who is on Medicare pays $250 out of pocket every month for one drug she needs. “She still has to buy four or five more. So these PBMs aren’t doing a great job. I’m just telling you right now.”

“Unfortunately, the system was supposed to work a lot better,” Ciaccia said.

He added PBMs were designed to act as a counterbalance to the drugmaker, wholesaler and pharmacies and negotiate bigger discounts for consumers.

“The problem is the PBMs are really good at negotiating those discounts, but they’re even better at keeping those discounts for themselves, oftentimes making the patient pay the full list price when they themselves have negotiated some far different and better price for themselves,” he said.

Ciaccia said PBMs were once simple claim processors but  have since landed on the list of the biggest and richest American companies.

The Top 10 Fortune 500 companies in the US include:

  • CVS Health, owner of CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager;
    UnitedHealthGroup, offering health care products and insurance services;
    McKesson, distributing pharmaceuticals and providing health information technology, medical supplies and care management tools; and
    AmerisourceBergen, a drug wholesale company.

Who watches the watchdog?

“They are larger than the pharmacy companies and the drug manufacturer companies that they were hired to control in the first place,” said Ciaccia. 

He said PBMs have ended up making prescription drug pricing more complicated and more expensive.

“The PBM is using all of us as individuals to negotiate big discounts that they’re getting on the back end of the transaction. But they’re not passing them back through to us as the patient,” Ciaccia said.

Heather said her blood was beginning to boil “a little at the moment.”

Nobody knows the price for meds

Ciaccia said if you walked into a grocery store, and it cost $20 for a gallon of milk, you would know right away you were getting ripped off. You would take your money to another grocery store where the price of milk aligned with market expectations.

That is “what ultimately holds quality and price accountable within your grocery store. Nobody knows what the prices of thousands of different medications are or what they should be,” he said.

Ciaccia said due to the “tremendous” lack of transparency, the pharmaceutical marketplace is ripe for exploitation.

“Now be clear, PBMs are not the only villain in the drug supply chain, but they are the only ones whose existence is predicated on trying to save us all money,” he said.

Related:

PBMs, big pharma under attack in Utah Legislature  

 

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Today’s Top Stories

Health

A bill on transgender healthcare — banning transgender-related surgeries and puberty blockers for...
Eliza Pace, KSL TV and Aimee Cobabe, KSL NewsRadio

Utah Senate approves changes to transgender care bill, passes on to Gov. Cox

SB16 bans gender-confirming surgeries for minors and also places a moratorium on puberty blockers for minors.
3 days ago
Havasu Falls spills into the water pools below in Supai, Arizona, in October of 2016. Photo credit:...
Forrest Brown, CNN

Grand Canyon’s Havasu Falls to reopen to visitors after 3-year closure

 (CNN) — Havasu Falls, one of the most intriguing features of the Grand Canyon system, will be reopening to visitors after a three-year closure caused by the Covid-19 pandemic. But it’s with a catch. The reopening is scheduled for February 1; however, access will be limited initially to a certain, small group. People whose previous […]
3 days ago
White carnations representing each of the 1,746 unborn babies that were aborted in Utah in 2022 are...
Allessandra Harris and Simone Seikaly

Speeches, silence, during Pro-Life Utah memorial at the Capitol

About 100 people including Utah lawmakers and religious leaders attended the memorial on Wednesday, Jan. 25, 2023.
4 days ago
 A mental health clinic will reopen on Thursday after a carbon monoxide leak sent at least 17 peop...
Michael Locklear

Carbon monoxide poisoning at central Utah clinic hospitalizes 17 people

The Central Utah Counseling Center in Ephraim was evacuated a week ago after a problem with an old furnace was discovered.
5 days ago
a row of guns are pictured...
Mark Jones

KSL at Night: How do we solve gun violence?

KSL at Night hosts Taylor Morgan and Maura Carabello speak with Clark Aposhian, chairman of the Utah Shooting Sports Council about gun violence.
6 days ago
Prescription opioid...
Nathaniel Meyersohn, CNN

Amazon launches $5-a-month unlimited prescription plan

Some of the generic drugs included in the program include Bupropion, Cephalexin, Doxycycline, Estradiol and Sertaline.
6 days ago

Sponsored Articles

Banner with Cervical Cancer Awareness Realistic Ribbon...
Intermountain Health

Five Common Causes of Cervical Cancer – and What You Can Do to Lower Your Risk

January is National Cervical Cancer Awareness month and cancer experts at Intermountain Health are working to educate women about cervical cancer, the tests that can warn women about potential cancer, and the importance of vaccination.
Kid holding a cisco fish at winterfest...
Bear Lake Convention and Visitors Bureau

Get Ready for Fun at the 2023 Bear Lake Monster Winterfest

The Bear Lake Monster Winterfest is an annual weekend event jam-packed full of fun activities the whole family can enjoy. This year the event will be held from January 27-29 at the Utah Bear Lake State Park Marina and Sunrise Resort and Event Center in Garden City, Utah. 
happy friends with sparklers at christmas dinner...
Macey's

15 Easy Christmas Dinner Ideas

We’ve scoured the web for you and narrowed down a few of our favorite Christmas dinner ideas to make your planning easy. Choose from the dishes we’ve highlighted to plan your meal or start brainstorming your own meal plan a couple of weeks before to make sure you have time to shop and prepare.
Spicy Homemade Loaded Taters Tots...
Macey's

5 Game Day Snacks for the Whole Family (with recipes!)

Try these game day snacks to make watching football at home with your family feel like a special occasion. 
Happy joyful smiling casual satisfied woman learning and communicates in sign language online using...
Sorenson

The Best Tools for Deaf and Hard-of-Hearing Workplace Success

Here are some of the best resources to make your workplace work better for Deaf and hard-of-hearing employees.
Team supporters celebrating at a tailgate party...
Macey's

8 Delicious Tailgate Foods That Require Zero Prep Work

In a hurry? These 8 tailgate foods take zero prep work, so you can fuel up and get back to what matters most: getting hyped for your favorite
This is why prescription drugs cost so much