Seeing is Believing: Transparency Needed to Improve Drug Costs in the U.S.

While the distance between the drug manufacturer and the consumer is small, the number of middlemen (wholesalers, PBMs, retailers) in the stream is large.  These middlemen are a key contributor to drug prices in the U.S. being over $1,100 per individual. Alarmingly, that’s at least 40% higher than any other developed country.

These middlemen are entrenched, and as major publicly traded companies do, have earnings requirements that make change quite the obstacle for executive teams.  These companies have been holding on tightly to their antiquated pricing methodologies, back-channel payment arrangements, and obsolete technologies as a means of survival.  These middlemen have a reputation for being secretive and elusive while not sharing information – even with their largest clients.  Candidly, it’s a questionable business and we all know it.  Everyone ranging from consumers, advocacy groups, drug manufacturers, health plans, to both state and federal governments are fed up and real change needs to happen. 

Consumers are working directly with manufacturers to achieve affordable drugs through coupons and advocacy groups are demanding that PBM rebates be adjudicated at the point of sale.  Drug Manufacturers are beginning to resist the Average Wholesale Price (AWP) inflation game that drives up the list price and benefits PBMs as they retain higher rebates and deeper pharmacy discounts. 

Carl Icahn, American billionaire and one of Wall Street’s most successful investors, wrote an open letter to Cigna shareholders regarding the Express Scripts (ESI) acquisition that was spot-on.  This acquisition may be good for ESI shareholders, but it will not be good for Cigna shareholders once the industry shifts and unsustainable margins erode.  He is one of the smartest investors out there and he knows change is on the horizon.  

The President informed the public that this is a high priority on his domestic agenda when he outlined his plan publicly on May 11th during his address from the Rose Garden.  Medicare has already begun to act allowing Medicare Advantage health plans to directly negotiate prices with drug manufacturers.  This is just the beginning for changes in the Medicare space.  Check out our prior article on this topic.

Health plans, who have lost trust in these companies to act in their best interest, are building direct relationships with manufacturers to capture the full value of rebates and to build value-based agreements – ultimately removing their PBM from these conversations.  Health plans of significant size are buying or even starting a PBM in order to gain transparency. Industry headlines have been talking about the following combinations: Cigna/ESI, UnitedHealthcare/OptumRx, Aetna/CVS Caremark, Anthem/IngenioRx.  Unfortunately, this is leaving a lot of health plans without a viable solution for transparency and honesty.

At Pulse8, we have a proven track record of eliminating waste from the healthcare system, bringing financial transparency and accuracy to opaque processes, and acting as a trusted and unbiased source of truth for our customers, including the same health plans and at-risk providers that are struggling with their PBMs.  It is the basis on which our company was founded and is why we created our new product – Formul8.  We launched Formul8 with the goal to serve as the solution that empowers health plans to take back control of their pharmacy management programs away from their PBMs. This new game-changing solution:

  • Provides transparency into your pharmacy spend and identifies drug cost and utilization opportunities across your full pharmacy spend using industry standard benchmarks
  • Supports your member, prescriber, and pharmacy interventions through advanced analytics and engagement registries
  • Includes value-based agreements incorporating unit cost, quality, and clinical outcome guarantees
  • Puts you in control of your pharmacy program data as well as reporting and analytics in order to reduce PBM transition costs and increase negotiating leverage                        

To learn more about Formul8 and how it can help your health plan gain the transparency and clarity that are imperative to optimizing your financial performance, you can visit us at www.pulse8.com or contact us to set up a live demo.

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For all general and sales inquiries, please contact us at 410.928.4218 or email us at info@pulse8.com
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