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Pharma Cap on Price Increases Benefit Insurers Not Consumers

February 28, 2017 | Robert Goldberg
WSJ reporters Jonathan Rockoff and Peter Loftus suggest how PBMs and health plans pocket rebates while charging patients list price even as pharma limits price increases ("Facing Criticism, Drug Makers Keep Lid On Price Increases" 2/16/2017) At the same time, the American Cancer Society Cancer Action Network warns that under the ACA “most plans place many, or even all, covered cancer drugs on the highest cost-sharing tier.”

Specifically, Rockoff and Loftus report:  most of the increases in list prices are not paid by insurers.  PBMs and insurers have their drug costs reduced by rebates and discounts, while consumers (patients) pay the full price.   Here's the chart that demonstrates this fact.
 

Source IMS Health

In addition to pocketing rebates, PBMs and insurers make money by charging consumers of the newest drugs up to 50 percent of the list – not rebated price of the drug.  Indeed, Rockoff and Loftus try to skate past this ripoff by blandly noting: "regardless of discounts to middlemen, patients who have high-deductible health plans may have to pay close to full price for at least part of the year.   Indeed, patients who have high deductible plans are not paying anywhere near full price for any other medical service except prescription drugs. 
 
The article notes: "The discounts mean that manufacturers must share the increased revenue with others, but they can still leave buyers such as insurers paying the higher price, or most of it. And regardless of discounts to middlemen, patients who have high-deductible health plans may have to pay close to full price for at least part of the year."

As if on cue the American Cancer Society Cancer Action Network released its most recent review of drug cost sharing for cancer patients on Obamacare plans and concluded:

 "Unfortunately, most plans place many, or even all, covered cancer drugs on the highest cost-sharing tier. Among the formularies we studied, even generic cancer drugs appeared on the most expensive tier with regularity (41 percent of the time in the case of Etopside, and 61 percent for Imatinib Mesylate). Most of the time, the highest cost-sharing tier requires coinsurance rather than a flat copayment; but it is very difficult for consumers to manually estimate their coinsurance costs because the negotiated drug price on which coinsurance is based is not shown.”

So if drug companies are keeping the lid on drug prices, why aren't cancer patients seeing any difference at the pharmacy?