Blame Pharmacy Benefit Managers (Not Pharma) For Driving The Gross to Net Drug Price Bubble

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 …

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

Downloadable .pdf version: Quantifying a PBM FFS Business Model Summary: Using CVS’s 2018 10-K reports to the SEC and its 2018 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 …

Insulin Drug Price Inflation: Racketeering or Perverse Competition?

  Summary We contend that recent insulin drug price inflation is a case of perverse competition rather than a case of illegal racketeering in violation of the RICO Act.   We will present the case that a now consolidated racketeering RICO lawsuit initiated by the law firm Hagens Berman has inverted the hierarchy of the …

Biosimilars & Exclusive Dealing Antitrust Law: Pfizer (Inflectra) v J&J (Remicade)

Summary Following the generally accepted theories of the legal scholar Robert Bork and his Chicago School colleagues, vertical restraints such as exclusive dealing contracts are presumptively procompetitive and welfare-enhancing because it would be irrational for a buyer to exclude the lowest cost supplier.   On September 20, 2017, the drug manufacturer Pfizer filed a lawsuit …

Was CVS’s Formulary Exclusion of Mavyret a Violation of Antitrust Laws?

Summary In October 2017, CVS Caremark (CVS) finally decided to exclude from its 2018 drug formulary the new-to-market Hepatitis C Virus (HCV) drug Mavyret despite it being list priced aggressively by its manufacturer AbbVie at an estimated 72% below the list price of Gilead Sciences’ incumbent HCV drug Harvoni. We estimate that Gilead Sciences had …

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) …

AbbVie’s Mavyret Drug Pricing: Disruptive to the Pharmacy Benefit Manager Business Model

Summary: AbbVie’s pricing for its new Hepatitis C Virus (HCV) drug Mavyret is disruptive to the current PBM business model because it forces the Big 3 PBMs to consider a drug for inclusion in their national formularies that is aligned with their clients interests — more cost-effective than Harvoni — but not aligned with their …

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