This bit feels like it should have been given more detail:
> In his written testimony, Jørgensen said Novo Nordisk’s insulin product Levemir was previously available to 90% of U.S. patients through formularies. But insurers began to drop coverage of the insulin after Novo Nordisk cut its list price, leading to only 36% of patients having access.
> That eventually drove the company to discontinue the insulin
So insurers are refusing to buy cheaper drugs? What's the story there?
It's the American PBMs that make their money on the difference between the list price and the price they sell it for. Higher list price means more profit
This was repeated over and over in the hearing. And apparently the regulation of PBMs (changed about a year ago) hasn't resulted in PBMs taking up cheaper drugs
An interesting article on this found thanks to your help with search keywords:
https://www.americanprogress.org/article/5-things-to-know-ab...
This article is almost unbelievable. This whole thing seems like an incredibly complex racket comparable to cryptocurrency securities fraud.
You mean the difference between wholesale price of the manufacturer and the negotiated discount by the PBM right? Your use of pronouns obfuscates who you're talking about.
Do American insurance companies have any incentives to minimize their spending?
As in not paying out money yes. As in keeping costs low no...
Thats not correct. It is actually the exact opposite.
The ACA places profit controls on for insurance companies how much they can make as a percent of what they pay out (aka the 80/20 rule).
They must pay out 80% in coverage with profit and operation expenses coming from the other 20%.
Therefore, the best way to increase profit is to ensure the total price of healthcare they cover goes as high as possible. It is better to make 20% of a $1,000 drug than a $10 one.
A $ is a $.
20% of 2 dollars is better than 20% of 1 dollar.
If a drug has low profitability, this is what happens. It's harming low cost but critical drugs
But don't all other companies do the same? Also ones in the US itself? So far any price on any prescription drug I have seen on reddit by US people and companies is far cheaper here. For instance; omeprazole prescription seems to be $90 and otc $32 for almost a month: I pay less than 3 euros here (got them yesterday). Not sure who is doing it, but every US price I have seen is at least 10x higher than it is here in the EU.
The story goes that the US subsidizes all the drug prices around the world. Without the insane US margins, drug companies wouldn't ever do the needed R&D... so they say.
If the free market has decided it's more efficient to let Americans suffer horribly and then die, who are we to argue.
Americans like suffering, stop trying to take this from them.
The “insane US margins” don’t go to the pharma companies, they go to the PBM middlemen who take home the majority of the list price, and therefore have interest in higher list prices, which also increases copay. That’s why it’s consistent across the USA market, and why they drop products that lower prices.
Wasn't if part of US law that medicine prices cannot be negotiated?
Medicare + Medicaid has been prohibited from assisting negotiation of drug price between pharmacy + drug company for a few decades. That is set to change in the future id my understanding.
I have private health care insurance so my insurance company would try negotiate the price down.
I agree with other commenters saying basically, drug companies all around the world do R&D, are happy to sell drugs at cost in England or Somalia, but will aim to make money in US selling drugs with a healthy profit margin here.
> Medicare + Medicaid has been prohibited from assisting negotiation of drug price between pharmacy + drug company for a few decades. That is set to change in the future id my understanding
It’s already started [1].
[1] https://www.cnn.com/2023/08/29/politics/medicare-drug-price-...
Slowstarted
> so my insurance company would try negotiate the price down.
Do they have any incentives to do that though? If their profits are fixed at a specific % wouldn’t they be incentivized to spend as much as possible so that they could increase premiums (as long as all other companies play along)?
If premiums are too high, employers will switch the insurance company they offer employees.
To whom? Everyone will do the same because everyone's incentives are the same.
You’re talking about something theoretical. I’m telling you what actually happens.
Insurance companies lose business when their premiums are unnecessarily high. In the long run, all their prices go up, but those who manage rising costs better (and provide better service and all that other stuff), grow their businesses.
I think you're being theoretical. Insurers can only increase profits by inflating medical costs.
"Insurers are supposed to spend 80% of every dollar on care and only 20% on administrative costs. However, instead of lowering premiums, the insurance companies have been incentivized to increase costs so that they can make more money."
https://penncapital-star.com/uncategorized/americans-suffer-...
I am not sure what else to tell you. Companies switch insurance providers for cost all the time. I've benefitted from it several times and seen first-hand how competitive the selection/sales process can be. If an insurer thought they could coast on high prices, losing accounts would change their behavior quickly, like in any company.
As an industry, insurers all benefit from aggregate rising medical costs because of the percentage rule you mentioned, but that's not the same as what an individual insurer will do.
If you're arguing as a proxy for wanting public health to be allowed to enter the industry as a price negotiator, I'm in complete agreement.
There's nothing theoretical about price competition. Large self-insured employers and other group buyers are very price sensitive. If a company offered Aetna health plans to their employees this year they would happily switch to Humana next year to save a few dollars. There are sophisticated analytics tools available now which let those customers predict future costs under various options.
> To whom?
Themselves. Plenty of companies hold the risk and outsource administration.
In the article the drug maker suggestss that rather than negotiate the price down, US insurers stop buying the drug if he cuts the price too low.
That seems like a wild claim to make, but since it's just reported as if that was normal rather than a shocking scandal, I guess it's probably true.
It's part of the grift. Expensive drugs means all sorts of middle men negotiate concessions to make themselves get better performance reviews.
I've read that big pharma are primarily patent companies: most of the actual research is done by universities, then most of the production is outsourced.
That simply isnt true and is a political fiction.
Pharma companies spend 10x what universities and the NIH do.
The only grain of truth in it is if you compare a tiny subset of what pharma companies do, and look only are extremely early drug exploration, and ignore all of the subsequent development like drug screening, testing, formulation, and clinical trials.
U can get it dirt cheap from India (indian pharma grade from sunpharma)
> In a release, the Senate Health Committee said it would cost the U.S. $411 billion per year if half of all Americans took weight loss drugs from Novo Nordisk and Eli Lilly. That’s $5 billion more than what Americans spent on all prescription drugs in 2022.
If these drugs are effective as they seem to be they might still be worth it at this price. Giving most Americans Ozempic would probably improve people's health more per $ than the current medical system is.
> A recent report released by the Milken Institute shows that the annual cost and the economic impact of obesity in the United States exceeds $1.4 trillion.[1]
A 3.17x return on investment is a steal!
1. https://obesitymedicine.org/blog/health-economic-impact-of-o...
There are three problems: the capital cost of scaling production, PBMs and the absurd margins Novo Nordisk is milking.
PBMs are a separate issue. But the grand bargain in the first and last is the U.S. giving Novo Nordisk a loan in exchange for domestic production and a fixed price for the term of the loan, e.g. $50 per month, $9 cheaper than what they charge in Germany [1].
[1] https://www.help.senate.gov/chair/newsroom/press/prepared-re...
Maybe the reason that drug prices in the US are higher across the board has more to do with insurers than the drugmakers? Sure seems like it.
Lost all respect for Bernie on this. He’s just blatantly saying that he’s colluding with PBMs. And imagine the absurdity of what he’s saying at the trial.
He’s saying he’s had pre talks with PBMs and they are going “we are actually willing to accept lower prices, we promise not to stop buying if you lower prices” Why would you even be in this situation in a normal market? The willingness to accept lower prices on a product should be automatic and the threat of not buying should be driving prices down not up. If the market was sane, the PBMs would be going: “Lower prices or we stop buying”
But the scam is, PBMs are eating up 70%+ of the “list price” Americans aren’t buying drugs from Pharma companies, they are buying them from their Insurance/PBM/Pharmacy collusion, who dictate both which products you are allowed to buy under insurance and what the “pretend” list price is, so they push it up to maximize their own profits and maximize your copay, which is calculated based on a hypothetical list price they have inflated 4x times while in reality only paying 25% of it themselves.
Jørgensen pointed out how drugs were only 10% of medical costs and that the real issue was obesity and the many diseases that accompany it making the drugs required in the first place.
No one seemed interested in the truth.
Most of the drugs that I've been offered have weight-gain as a prominent and common side effect. Some parents even got irate about gynecomastia, which is typically not seen isolated from obesity.
How many drugs on the market have "loss of appetite/weight" as a side effect? Probably none, outside of the ones currently labeled for it. And methamphetamine. Well, there was also AZT, Fen-Phen... Didn't heroin help a few folks slim down a bit?
I'm not obese and still have a prescription. Same with my wife, except she has 3. What now?
Your wife has 3 prescriptions for Ozempic? We aren't talking about random prescriptions here...
It is easier to take a drug than to eat better and work out.
maybe the american government should start negotiating drug prices more effetively like the australia does with the pharmaceutical benefits scheme
'Start paying us off like the US pharmaceutical companies do': Senate grills Novo Nordisk CEO on Ozempic drug pricing /s
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Oh, oh! Now do US pharma companies... and and, landlords. Yeah, that'll be great. And then private equity. Those are just plain bastards. Is this the end of free market capitalism?