A Deeper Dive into Medicare Part D Drug Costs Will Help Everyone

A Deeper Dive into Medicare Part D Drug Costs

Who really makes money on brand-name drugs?

As the discussion about the Medicare Part D drug costs gets more heated, the real story behind the problem is becoming clear.

These are the two issues and how they affect you:

  1. Money made by drug middlemen (who negotiate drug prices). This keeps the price of many critical drugs very high.
  2. Big Pharma’s monopoly on brand drugs and opposition to lower-priced generics. This gives you no alternative to paying high prices for certain drugs.

Medicare is at the mercy of the drug middlemen – pharmacy benefit managers (PBMs) – when it comes the drug prices. Medicare is prevented by law from negotiating directly with the drug manufacturers. There was some hope when President Trump promised during his campaign that he would remedy that law. Medicare would negotiate prices and the PBMs would not. However, the latest legislation has the PBMs still in charge. Why does the fox in the henhouse come to mind?

Profitable PBMs

Kaiser Health News has a video that shows clearly how the PBMs make their money.

It is clear that the middleman, who is control of negotiating prices for Medicare, is well compensated for the process through rebates and reimbursements.

Brand monopolies

If you were a drug manufacturer and had a brand-name drug that was bringing in a large percentage of your profits, you would not want a generic to kill your cash cow. However, when you are providing life-saving medicine to millions of Americans, there is an ethical question involved. Shouldn’t ethics trump excessive profits?

In a monopoly, a company can pretty much charge what it wants for the product. In the case of many drugs, companies have increased prices steadily since 2012. At the same time, they have refused to sell samples to manufacturers of generic drugs so they can design equal, lower-priced substitutes. If these drugs are priced out of the reach of many who need them, is this ethical?

Ethics aside, the practice is costing Medicare and Medicaid billions of dollars in reimbursements for higher-priced Part D drugs.

There is a bill in Congress called Creating and Restoring Equal Access to Equivalent Samples (CREATE) that would hopefully lead to the creation of more generic drugs. Until then, the drug companies – and the PBMs – are enjoying the profits on high-priced Part D meds. Profits that come out of your – and Medicare’s – pockets.


Get Your Free Medicare Quote


Have more questions?