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Don’t blame poor little Big Pharma

Big Pharma is in the mood to share! A new report commissioned by the Pharmaceutical Researchers and Manufacturers of America (PhRMA), the trade association representing the world’s largest global pharmaceutical companies, seems to assert that the blame for high drug prices should be shared with pharmacy benefit managers, retail pharmacies, wholesalers, and, I think, even hospitals – and more. It appears that PhRMA’s main target is the pharmaceutical benefit managers.

Noting that President Donald Trump recently said drug companies are “getting away with murder” – I view this report as pharma’s attempt to communicate, “hey, prez, we’re not alone here in being greedy.” The report has merit, which I’ll explain below when looking at the dollar numbers. But as far as the American consumer is concerned: murder is murder. Hey, I’m just using the president’s words. Due to the killing made by pharma and friends (because they’re all friends), 10s of millions of Americans are leaving their scripts unfilled because the prices, one way or the other, are out of reach.

The report is called “The Pharmaceutical Supply Chain: Gross Drug Expenditures Realized by Stakeholders.” You can find a summary of it here but this is my take on it. PhRMA wants you to remember that pharmaceutical manufacturer list prices, which are scrutinized as unfair, price gouging, unaffordable do not fairly describe the actual money the drug companies end up making because they provide discounts, rebates, and charity and PBMs, pharmacies, and wholesalers are middlemen taking a massive cut. The report estimates that of the $465 billion in net expenditures on prescription drugs in 2015 (which is higher than other estimates I’ve seen), brand manufactures’ cut was only $219 billion. Generic manufacturers walked away with a paltry $107 billion.

PhRMA’s big point in this paper, which, admittedly I’m struggling to see how the numbers makes sense (so I quote), is that “the share of gross drug expenditures realized by brand manufacturers has declined (from 41 percent in 2013 to 39 percent in 2015), while the share realized by non-manufacturer entities has increased.” In other words, President Trump should be pointing the finger more so at “non-manufacturer entities” (pharmacies, PBMs, healthcare providers) and less at innovative, innocent and altruistic drug companies.

A different set of numbers was clearer to me. In the U.S., brand name drug companies reaped $218.6 billion in 2015, up from $177.5 billion in 2013. However, their share of the pie, $218.6 billion out of $349.1 billion, which is 62.6%, is lower than the in 2013, when the share was $177.5 out of $264.9 billion or 67%.  The biggest blame seems to fall on health plans/PBMs. Their take went from $33.2 billion to 55.7 billion.

We know there is blame to go around and it’s fair for the brand drug companies to call this out but it does not negate their own incessant cost increases, which do not happen so egregiously in other countries! The report’s aggregate cost figures might impress a recipient of campaign contributions or a pharma-funded think tank, but are meaningless to a consumer who walks into a pharmacy and realizes he or she cannot walk out with the medication they need. They have seen double digit percentage brand name drug prices increases for four straight years – 15.5% in 2015 and, while they can share the blame, just remember that the supply chain starts with the prices of brand name drug companies.

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