A Position Auction Demonstration Project to Lower Reference + Biosimilar Drug Prices In Medicare Part B

Summary We outline below a proposal for a Center for Medicare and Medicaid Services (CMS)  demonstration project involving a position auction overlay to the existing reimbursement system for Medicare Part B. What is being auctioned off is a yearly “fail first” position in Medicare Part B.  The auction is limited in scope to therapeutic classes […]

Off-Target: The Pelosi Proposal to Lower Medicare Part D Drug Prices  

Summary The purpose of paper is to show that the binding arbitration proposal championed by Speaker of the House Nancy Pelosi to lower Medicare Part D drug prices is off-target. We believe that there three broad categories of drugs where binding arbitration based on some neutral party’s estimate of value is more appropriate than mano-e-mano […]

Quantifying a Pharmacy Benefit Manager (PBM) Fee-For-Service Business Model

Summary: Using CVS’s 2017 10-K reports to the SEC and its 2017 drug trend report, we convert its PBM segment (a.k.a. Caremark) reseller gross profits business model to a single transparent fee-for-service expressed in terms of dollars per member per year (PMPY).   The following table summarized our results: Our estimated FFS equivalent of $64 […]

CVS’s 2019 Formulary Removals – Negligent Handling Diabetes Test Strip Change

Summary Around the first week in August for the past four years, CVS has made an official announcement of its next year’s formulary changes. It posts these changes on its own websites. But that changed in 2018. During an August 8th 3Q2018 Earning Conference Call,  CVS said that 2019 formulary details would be available around […]

The Problem with CVS’s “Guaranteed Net Cost” PBM Business Model

Summary: Consider this meta:  CVS opaquely is substituting one opaque source of gross profits — guaranteed net cost markup — for another opaque source — retained rebates. The pharmacy benefit manager (PBM) CVS Caremark has offered its self-insured corporate clients an alternative business model called “Guaranteed Net Cost”.  The pricing scheme features 100% pass-through of […]

The Winner of Biosimilars vs Incumbents in 2017: Competition

Summary While 2017 has been bad for biosimilar entrants, it has been good for competition as prices for incumbent drugs such as Remicade have dropped significantly for the first time.  Rather than argue for more legal and legislative protection for biosimilars, we argue for a rethinking of competitive strategy on the part of the entrants. […]

Hepatitis C Formulary Choices for 2018: Will CVS Risk Looking Bad?

Summary: AbbVie’s aggressive list pricing for its new Hepatitis C Virus (HCV) drug Mavyret is disruptive to the current PBM business model.  It essentially asks PBMs to align with client interests by adding a cost-effective drug to their national formularies despite little to no possibility for retained rebates. On September 15, 2017 Express Scripts (ESRX) […]

Merck Data Discredits PBM-Sponsored Study of Brand Drug Price Inflation

Summary We present data supplied by the drug company Merck that discredits a study sponsored by the pharmacy benefit manager (PBM) trade association showing no correlation between PBM rebate rates and brand drug price inflation. Introduction The management of the prescription (Rx) drug benefit portion of health care plans has become the domain of contracted […]

Blame Pharmacy Benefit Managers (Not Pharma) For Driving Drug Price Inflation

Summary: We start with a review of the history of the opaque pharmacy benefit manager (PBM) reseller business model. We present our prior estimates of the distribution of PBM gross profits over the past decade showing that they have become dependent today on retained rebates from specialty drugs. Next, we present numbers showing how PBMs […]

Three Phases of the Pharmacy Benefit Manager Business Model

We present the case that there has been three distinct phases of the pharmacy benefit manager (PBM) business model over the past 15 years. Each phase has been demarcated by a major shift in the dominant source of gross profits. These radical shifts in the primary source of gross profits in such a short period […]