Share of Insulin Revenues Going to Middlemen Pharmacy Benefit Managers (PBMs) Increased by 155%

(p. B12) Pharmacy-benefit managers, or PBMs, have captured a growing slice of America’s world-leading drug spending during the past decade. The spotlight could soon shift to them.

. . .

While the three largest manufacturers of insulin—Eli Lilly, Novo Nordisk and Sanofi—charge more for their products in the U.S. than they do elsewhere, their take of overall spending has been decreasing in recent years as the relative power of middlemen has grown. PBMs have steadily gained negotiating clout by consolidating and merging with large insurance companies. The three largest PBMs are owned by CVS Health Corp. (which owns insurer Aetna), UnitedHealth Group Inc. and Cigna Corp.

. . .

. . . increases in recent years have mostly been passed on to PBMs in the form of heavy discounts that are hidden from public view.

A recent study by University of Southern California scholars showed that, between 2014 and 2018, the share of a hypothetical $100 insulin expenditure accruing to manufacturers decreased by 33%. During that same period, total U.S. spending on insulin hasn’t budged, but the share of insulin expenditures retained by PBMs has increased by 155%.

. . .

“What’s happening in this market is that the middlemen are making more and more money,” said University of Southern California professor Neeraj Sood, one of the authors of the study who has previously done consulting work for drug companies.

Yet the drug-pricing provisions in the recently passed Inflation Reduction Act singularly focused on what manufacturers charge while ignoring other players that take a slice of profits farther down the chain.

For the full commentary, see:

David Wainer. “HEARD ON THE STREET; Sanders, Musk Miss the Mark on Insulin.” The Wall Street Journal (Tuesday, November 22, 2022): B12.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 21, 2022, and has the title “HEARD ON THE STREET; Elon Musk, Bernie Sanders and Others Miss the Mark Over Pricey Insulin.”)

The academic study co-authored by Sood, and mentioned above, is:

Van Nuys, Karen, Rocio Ribero, Martha Ryan, and Neeraj Sood. “Estimation of the Share of Net Expenditures on Insulin Captured by Us Manufacturers, Wholesalers, Pharmacy Benefit Managers, Pharmacies, and Health Plans from 2014 to 2018.” JAMA Health Forum 2, no. 11 (2021), doi:10.1001/jamahealthforum.2021.3409.

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