Latest news with #drugpricing
Yahoo
3 days ago
- Business
- Yahoo
Dr. Oz on the future of Medicaid, Trump's Megabill and AI-avatar health care
Dr. Mehmet Oz, former TV host and Pennsylvania Senate candidate, is one of America's most famous physicians. Now he's running the Centers for Medicare and Medicaid Services, which means he's in charge of programs that provide health care for about half of all Americans. He sits down with White House Bureau Chief Dasha Burns to discuss potential Medicaid cuts, his big plans to lower drug pricing, why he's fielding early morning phone calls from President Donald Trump, and his advice to patients to 'be curious' about their health. Plus, Burns is joined by senior political columnist and politics bureau chief Jonathan Martin to discuss his juicy column about the Ohio governor's race featuring Elon Musk, Vivek Ramaswamy and former Ohio State football coach Jim Tressel. And senior legal affairs reporter Kyle Cheney joins to discuss the showdown between Trump and the courts over his 'Liberation Day' tariffs. Listen and subscribe to The Conversation with Dasha Burns on YouTube, Apple Podcasts, Spotify or wherever you get your podcasts.
Yahoo
3 days ago
- Business
- Yahoo
How Democrats can pull off a win under a GOP trifecta: Dismantle the "legal" drug cartel
Just before President Trump pushed her out at the behest of his corporate donors, former Federal Trade Commission chairwoman Lina Khan released a damning report about the most rapacious and anti-competitive actors in the entire healthcare system: pharmacy benefit managers. These middlemen in the drug supply chain don't discover new medicines. They don't manufacture them. They don't even physically dispense most prescriptions. Yet they rake in tens of billions of dollars each year by driving up costs for everyone else — especially patients battling cancer, HIV, heart disease, and autoimmune conditions. In their report, FTC investigators documented how the PBM industry — which is dominated by just three firms, CVS Caremark, Express Scripts, and OptumRx, that collectively oversee roughly 80% of all prescriptions dispensed nationwide — imposed eye-popping markups on generic drugs used to treat deadly diseases. The PBMs' affiliated pharmacies charged hundreds — even thousands — of percent more than they paid to acquire drugs like the cancer treatment Gleevec and multiple sclerosis medication Ampyra. This isn't just a case of corporations being greedy. It's the result of a rigged market structure. In theory, pharmacy benefit managers could play a valuable role by negotiating with drug manufacturers for lower prices. Since they haggle on behalf of health plans that collectively enroll hundreds of millions of Americans, these PBMs have considerable leverage, and should theoretically drive a hard bargain and win enormous discounts. And in fact, they do. The problem is that those savings rarely flow to patients at the pharmacy. Instead, PBMs have made the supply chain so convoluted that almost nobody on the outside — whether the patient filling the prescription, the pharmacist dispensing it, the doctor writing it, or even the employer sponsoring the health plan — can easily tell how much a drug will cost after discounts, rebates, and various fees and clawbacks are applied. This opacity isn't an accident. It's by design. The lack of transparency enables PBMs to overcharge patients and health plans. Congressional investigations have revealed numerous instances in which PBMs steered patients towards more expensive drugs — which come with bigger discounts and rebates for the PBM — "even when there are lower-cost and equally safe and effective competing options" available. Some of the largest PBMs have even created offshore shell corporations to help pocket negotiated rebates — instead of passing them off to patients. Patients don't even realize when they're being ripped off. PBMs almost never disclose the total discounts they negotiate on specific drugs. So patients' cost-sharing obligations are calculated based on a drug's unnegotiated, inflated "list price," rather than its true discounted price. As a result, patients spend billions more out-of-pocket than they otherwise would if the discounts were publicized. These inflated costs are a key reason that 21% of American adults have skipped filling a prescription in the past year due to affordability concerns, while 12% have skipped doses or cut pills in half. The FTC also found clear patterns of self-dealing, where PBMs steered the most profitable prescriptions to their own affiliated pharmacies while boxing out independent community pharmacies. Thousands of independent pharmacies have closed in recent years, leaving entire counties without a single brick-and-mortar store where patients can fill a prescription. Finally, PBMs use their consolidated power to keep drugs off of health plan formularies — unless manufacturers pay exorbitant fees. This is a policy failure. But it's also a political opportunity. Congress has previously considered two bipartisan bills that would rein in PBMs' worst abuses. If reintroduced and passed, one bill would eliminate the perverse incentive for PBMs to favor expensive drugs by delinking PBMs' compensation from list prices. Another would require that negotiated discounts be passed directly to patients at the pharmacy. And just last month, FTC Chair Andrew Ferguson reignited an FTC lawsuit against pharmacy benefit managers (PBMs) that accuses them of anticompetitive behavior. Democrats have a chance to lead — and win — on this issue. Taking on PBMs doesn't just lower drug costs. It shows voters that we're willing to fight the entrenched interests hurting their families and their finances. It shows that we're the party that puts patients ahead of profiteers. We don't need to wait for the next election. We just need the political will to act.
Forbes
24-05-2025
- Business
- Forbes
What Is The Right Price To Pay For Drugs? Part III
Today's drug-pricing policies create perverse incentives. In the previous two columns, we saw how a free health care market would arrive at prices for brand drugs. In this column I will briefly discuss what the federal government is now doing, why political decision-making faces perverse incentives, why private insurers also face perverse incentives and how we can move in the direction of free market reforms. Medicare negotiated prices: offers that can't be refused Some time ago, the Congressional Budget Office (CBO) investigated whether the federal government could save significant money by negotiating with drug manufacturers over the price of drugs covered by Medicare. The CBO concluded that the government would be unlikely to do much better than private negotiators as long as Medicare covers every drug. In other words, without the ability to walk away from the bargaining table and refuse to buy the drug at all, there is only so much that negotiation can accomplish. With the passage of the Inflation Reduction Act (IRA), the word 'negotiation' becomes little more than a euphemism for price controls. The "negotiated" prices under the IRA are not the result of typical free-market negotiations. The federal government—through the Department of Health and Human Services (HHS)—sets a 'maximum fair price' for selected drugs. Any company that refuses to comply with the negotiation process will be hit with an excise tax that starts at 65% of a product's sales in the U.S. and increases by 10% every quarter, to a maximum of 95%. As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from coverage under Medicare and Medicaid. (This would be like giving up from 40% to 45% of all the manufacturer's sales.) Also, drug manufacturers are required to pay rebates to Medicare if they increase prices for certain drugs faster than the rate of inflation. Bad as all this is from the industry's point of view, the picture could be worse. Under Canada's compulsory licensing law, the Canadian government asserts the right to produce patented drugs without the permission of the patent holder—and selling the same drug at a lower price. Although this isn't done very often, the threat must surely be in the back of the minds of industry representatives when price negotiations take place. The politics of medicine: perverse incentives In all government-run health care systems all over the world, politicians face perverse incentives to favor the healthy over the reason: In any given year, in any health insurance pool, about 5 percent of the enrollees will account for about half of the spending. Yet in a democracy it is hard to expect public officials to spend half the health care budget on 5 percent of the voters. In our analysis of foreign health care systems, my colleagues and I found that in country after country a persistent pattern emerged: over-provision to the healthy and under-provision to the sick. You can see the same pattern in our Medicare system. From its beginning in 1965, Medicare paid for small expenses that relatively healthy people could easily pay from their own resources, while leaving those with serious medical problems exposed for thousands of dollars of out-of-pocket expenses. This pattern was also repeated in Medicare Part D (drug coverage), which started in 2003. Seniorshad first-dollar coverage for inexpensive drugs, while being exposed to catastrophic expenses if they incurred serious medical problems. In 2022 the IRA law did provide extra protection for the sickest enrollees. But in deciding which drugs to include in the initial price 'negotiations,' the government chose those drugs that were costing Medicare the most money, not the drugs that placed the greatest financial burden on the enrollees. Private insurance: perverse incentives Because of unwise regulations, private insurers also face perverse incentives. With one exception described below, no insurer in our health care system wants to enroll a sick person. No employer. No commercial insurer in the marketplace. No Medicaid managed-care plan. And no safety net institution. Every time someone with an expensive medical problem enters one of these plans, the organization loses money. If the patient leaves the plan (for whatever reason), the plan makes money. If the plan develops a reputation for being really good at handling serious medical problems, it will attract more sick people and incur more losses. Given the horrible economic incentives that government regulation has created, the surprise is not that some patients experience mistreatment. The surprise is how few there are. One notable exception to these observations is the Medicare Advantage program. More than half of Medicare enrollees are now in private health insurance plans. Like everyone else in the country, they pay community-rated premiums that are independent of their health status. But unlike everyone else, their premiums are topped up by Medicare based on individual risk assessments. As a result, the total premium that the plans receive makes the healthy and the sick equally attractive from a financial point of view. Free market reforms As noted in Part II, in a free market for health insurance, companies would use objective data to determine whether a drug was cost-effective. They would publish the standard they use to make these determinations (how much to spend per year of life saved, e.g.). People who are more risk- averse than average could purchase 'top up' insurance that pays for drugs not covered by their health plan. Also, different plans could have different cost-benefit standards, provided that these are fully disclosed. We could do this right now with the Medicare Advantage (MA) program. As suggested in Part II, we could also consider setting aside the antitrust law and allowing the MA insurers to bargain collectively with drug companies as a group. That would allow monopsony on the buyer side to bargain with monopoly on the seller side. What about traditional Medicare? In addition to the perverse political incentives discussed above, there is another problem: Medicare's drug coverage and its medical coverage are the responsibility of different insurers with conflicting interests. If a chronic patient doesn't take his medications, the company insuring the drug gains financially, because it avoids the medication costs. But if the patient shows up in an emergency room because he hasn't taken the medications, that cost is covered by the insurer of medical care. This problem doesn't arise in the Medicare Advantage program because a single insurer is covering all costs. That is why some MA plans make maintenance drugs available to chronic enrollees free of charge. The plans believe that the cost of the drugs is lower than the cost of ER visits and hospital admissions that might occur with noncompliant patients. One answer to the dysfunctional arrangement in traditional Medicare is to encourage MA enrollment by (1) deregulating and making these plans more attractive, and (2) making MA enrollment the default choice for new Medicare enrollees. Since the MA program has lower costs and higher quality than traditional Medicare, these would be good things to do in any event. A final step is to let traditional Medicare pay the drug prices that are negotiated by the MA plans instead of government negotiation and government-imposed price controls. Then, we could reform the individual market (where people not on Medicare buy their own insurance) along the lines of Medicare Advantage— a reform Prof. Lawrence Kotlikoff and I suggested several years ago. Something similar could be done with Medicaid managed care. That leaves the employer market. Space does not permit a lengthy discussion of how to reform it, but Stanford economist John Cochrane has shown how the market for private insurance could function in a way so that insurers do not have perverse incentives to attract the healthy and avoid the sick. In fact, without unwise government interference, that type of insurance would have evolved naturally through free market competition.
Yahoo
24-05-2025
- Business
- Yahoo
Cigna Announced a New Agreement for Copay Caps on Eli Lilly and Novo Nordisk Weight Loss Drugs
The Cigna Group (NYSE:CI)'s Evernorth division has announced a new deal with Novo Nordisk and Eli Lilly that will limit insured customers' monthly out-of-pocket expenses for weight-loss drugs Zepbound and Wegovy to $200. A healthcare team discussing strategies for patient advocacy programs. Beginning in the second half of 2025, the program targets businesses that do not already cover these drugs because of their high price tag. Harold Carter, senior vice president at Evernorth, stated the agreement guarantees uniform pricing for pharmacies and Evernorth's home delivery while streamlining pre-authorization. The GLP-1 drugs are currently only covered by half of The Cigna Group (NYSE:CI)'s clients. Customers who now provide coverage could save as much as 20%. The agreement comes after Lilly's Zepbound was essentially sidelined when CVS Caremark said in April that Wegovy was its preferred weight-loss medication. According to analysts, net discounts for employers on list prices range from 30% to 50%. Zepbound lists at $1,100 with a $725 net price; Wegovy lists at $1,350/month but averaged $616 net in March. When compared to cash expenditures made out of pocket, the new caps offer savings of over 50%. Evernorth's action is in advance of the Inflation Reduction Act's 2027 Medicare drug pricing reductions, which will benefit Novo's products. Eli Lilly states that it remains committed to expanding industry collaboration to improve access to Zepbound. While we acknowledge the potential of CI to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than CI and that has 100x upside potential, check out our report about this READ NEXT: and . Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
22-05-2025
- Business
- Forbes
Regulatory Reform And AI Could Help Lower Drug Prices
A recent presidential executive order seeks to reduce high prescription pharmaceutical prices charged to Americans by raising artificially low prices paid by foreigners for those drugs. A price realignment to benefit American consumer drug purchasers by ending 'foreign freeloading' appears attractive, but it raises various legal and practical challenges. Any new U.S. Government intervention in the pharma market ideally should be done in a manner that preserves the profit-based incentive that drives costly new drug development. This is a tough task. A parallel administration focus on regulatory reform to lower the costs of pharmaceutical R&D – and thereby help drugmakers' bottom line – would be welcome. Developments in artificial intelligence may also prove helpful in promoting faster and lower cost new drug development, which eventually could translate into lower drug prices. The Drug Pricing Executive Order On May 12, 2025, President Trump released a new executive order on 'Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients.' The Order's fact sheet sets forth the concerns underlying the Drug Pricing Order: The Order establishes a plan of action to address these concerns: American Drug Makers' Dilemma The peculiar global drug pricing system has been shaped by government policies that American drug makers must confront. U.S. pharma companies typically confront a single government buyer in foreign countries that uses its clout to demand low drug prices. Pharma firms then depend on high-priced American sales to support the bulk of their profits. U.S. drug makers stress that they need high profits on the drugs they sell in America to offset very high R&D costs and delays stemming from Food and Drug Administration regulatory reviews, which focus on both drug safety and efficacy. What's worse, most candidate drugs never make it to market, as a 2021 Congressional Budget Office report explained: 'Developing new drugs is a costly and uncertain process, and many potential drugs never make it to market. Only about 12 percent of drugs entering clinical trials are ultimately approved for introduction by the FDA. In recent studies, estimates of the average R&D cost per new drug range from less than $1 billion to more than $2 billion per drug. Those estimates include the costs of both laboratory research and clinical trials of successful new drugs as well as expenditures on drugs that do not make it past the laboratory-development stage, that enter clinical trials but fail in those trials or are withdrawn by the drugmaker for business reasons, or that are not approved by the FDA. Those estimates also include the company's capital costs—the value of other forgone investments—incurred during the R&D process. Such costs can make up a substantial share of the average total cost of developing a new drug. The development process often takes a decade or more, and during that time the company does not receive a financial return on its investment in developing that drug.' Practical and Legal Challenges for the Order In implementing the Drug Pricing Order, the Trump Administration will need to confront various practical and legal challenges: What is the negotiating strategy for getting foreign governments to pay more and at the same time establishing MFN prices that are well below current U.S. drug prices? What is the Administration's legal authority for requiring direct MFN sales to U.S. consumers? What is the authority for HHS MFN rulemakings? What other 'aggressive measures' could lower U.S. drug prices? Could that include allowing imports of cheaper prescription drugs, weakening patent protection, or intensifying antitrust prosecutions? Could such actions disinicentivize new drug innovation? What is the legal authority to communicate target prices to drug makers? How can you avoid making the Drug Order an exercise in government price fixing that will harm pharma markets by creating shortages and disincentivizing new drug development? Fortunately, implementing regulatory reform and supporting drug makers' application of artificial intelligence could promote the Order's goals through other means. Regulatory Reform to the Rescue Regulatory cost savings could be one feasible means to help facilitate lower drug prices domestically without undermining drug makers' to develop and market new drugs. The Trump Administration's April 2025 executive order on eliminating anticompetitive regulations provides an impetus for FDA to reduce new drug review burdens. Efforts could perhaps center on streamlining the overall regulatory process, utilizing electronic health records and mobile technologies, simplifying clinical trial protocols, and improving firm interactions with the FDA, among other initiatives. Faster drug approvals through more efficient processes could significantly lower drug development costs. They might also make it easier for firms to eliminate unfruitful development initiatives at an earlier stage. The end result would be higher drug maker profits, which could somewhat offset the disincentive effect of U.S. market price reductions. The Role of Artificial Intelligence The application of AI tools could assist pharma firms directly in reducing their drug development costs and lowering prices. A 2024 National Institutes of Health study concludes: 'The long-term implications of AI in pharmaceuticals could be transformative for global healthcare. Enhanced drug development processes will likely lead to a faster introduction of novel therapies, addressing unmet medical needs more effectively. As AI optimizes resource allocation and improves operational efficiencies, it may also contribute to lowering drug prices, thereby enhancing accessibility for patients worldwide.' The Trump Administration may be expected to support the application of AI by American drug makers, given its commitment to the reduction of barriers to the private sector's use of AI. Moving Forward The Drug Pricing Order reflects a commendable Trump Administration dedication to help financially hard-pressed American consumers. This may involve careful development of an international negotiating strategy to rebalance the global drug pricing system, through the application of MFN. It also could feature a cost-reducing strategy based on regulatory reform and AI-driven innovation. In moving forward, however, the Administration may wish to do its best to avoid price fixing or price caps that could disincentivize new drug development and harm American consumers over time.
