Today's Mylan Moment: Drug Prices Are Rigged By PBMs and Insurers

  • by: Robert Goldberg |
  • 08/29/2016
From  Drugchannels:  “Ronny Gal, Ph.D., a senior analyst at the investment bank Sanford C. Bernstein & Co., just published a great client note on the Mylan EpiPen pricing brouhaha.”  
Gal’s note should be read and memorized by every reporter, editorialist, talking head so that it is seared into their frontal cortex when writing about drug prices.  I have helpfully italicized and placed the critical indights in bold.  And I have given these important observations their very own paragraphs.
Thus spake Gal:
“We received multiple questions from investors about Mylan rolling back price increases.
The problem is that this would not necessarily help consumers much.

 The price charged to consumers is set by payors.  

(NB  Repeat silently to yourself: The price charged to consumers is set by payors.  The price charged to consumers is set by payors.  The price charged to consumers is set by payors. )
Thus, to reduce consumer prices, Mylan would have to renegotiate increases, discounts and rebates to the payors; this will take some time and we suspect payors are not too unhappy seeing Mylan swinging in the wind a bit. Further, they will demand some steep discounts to help Mylan off the hook."
(NB: Note that in order to reduce prices to consumers, Mylan would have to also pay PBMs and insurers a discount, just because)
My next post will explain why Mylan’s authorized generic strategy, while risky, is also inspired and could launch a movement of companies who will refuse to payoff PBMs, insurers, hospitals and government agencies and use the money to cover drugs at point of care.  

But for now, I hope everyone takes Ronny Gal's insights to heart and applies them when writing, talking or debate about drug prices.  

Failing to do so is tantamount to lying. 

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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