Eduardo Ugalde
General Director & Founder Partner. Business Strategy | Strategic Marketing & Advertising | Commercial Excellence & Operations | Business Transformation (Digital Evolution) | Commercial Project Management
Do big ‘top’ pharma companies really have the power to lower medicine prices for patients within the current traditional USA healthcare commercial system?
To answer this question, it is critical to understand how the healthcare system operates (at least from a very general perspective).
The specific mechanisms pushed by the current administration (especially the Direct-to-Consumer deals and the threat of tariffs), are designed to force the pharma manufacturer to exercise its power to set a lower price and ensure that it reaches patients by eliminating the rebates and spread pricing of the PBMs (Pharmacy Benefit Managers).
The PBMs are acting as the intermediary between the pharma manufacturer and the health plans/patients. The PBMs negotiate a large discount, called a rebate, which is returned to the insurer or the PBM itself. This rebate often incentivizes the pharma manufacturer to keep the list price high (as a higher list price allows for a larger rebate), which helps the PBMs secure a better position on an insurer’s drug formulary. As a result, if a pharma manufacturer “voluntarily” lowers its list price it does not guarantee the patient’s out-of-pocket cost will drop (because the PBMs/insurers’ structures often keep the discounts for themselves).
If medicines are sold Directly-to-Consumers, the pharma manufacturer is cutting out the PBMs and the insurers, therefore, potentially reducing the prices for that specific group of patients as the discount is applied at the point of sale (ensuring those patients see the financial benefit).
Consequently:
• Can pharma manufacturers lower the price for all USA patients immediately? No. The power of PBMs and insurers over the total market remains immense (understanding that the total USA pharmaceutical revenue is between USD600 billion and USD800 billion annually; it is simply too vast).
• Can the pharma manufactures offer significant, realized discounts to some patients through specific channels? Yes (Direct-to-Consumer channels). The recent deals with Pfizer and AstraZeneca, combined with the pressure of tariffs or the pressure of the MFN* (Most-Favoured-Nation), a policy aimed at forcing pharma manufacturers to charge the U.S. government programs a price that is no higher than the lowest price the company charges in a group of other wealthy developed nations, demonstrate that pharma manufacturers can (and will), agree to offer a deeply discounted price when they are given an incentive (or a threat), to bypass the traditional commercial supply chain, as the pharma manufacturer does have the power to set this initial price to a government payer (but perhaps not able or willing to influence the market beyond that point).
• This suggests the pharma manufacturers see this as a way to contain the damage to a specific discounted portion of their business, while protecting their core market list prices from broader government-mandated controls (in the meantime).
Time will tell if this will be the case or not. What are your thoughts?
*MFN. Deals to Bring Most-Favoured-Nation Pricing to American Patients (Fact Sheet, The White House):
