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This article left me confused about why this practice exists. It seems like it could only be because the insurance companies are getting some kind of kickback

by ykler 9y ago

This article left me confused about why this practice exists. It seems like it could only be because the insurance companies are getting some kind of kickback (maybe in the form of lower prices on drugs) in exchange for having these anti-generic rules, but I would think that would be illegal. Can someone who understands explain more clearly the situation?

VLM 9y ago
The article is for lower upper class / upper middle class readers where obviously what the dr writes is what is done aside from questions about "why is money being wasted?". The actual strategy is for making money at the cost of poorer people. Lets say the name brand is $75, generic is $50. If a poor person gets the generic the insurance company is out $50, well, depending on deductible, etc. If the bureaucracy can be mysteriously blamed for not allowing the generic, at least some percentage of the poor people cannot afford the medication at $75 therefore the insurance company is NOT out $50. Its merely price based rationing. If you increase the cost of health care, some fraction of the population will be frozen out of the market, just like real estate or car prices or tuition. One of many failures of our current economic system is maximal profit does not coincide with maximal participation rate, some percentage will be frozen out for financial reasons, ranging from not too many like health care, up to most of the population WRT real estate in bubble areas. Eventually once a large enough percentage of the population is alienated and disenfranchised from the system, there will be enough support to burn it all down, until then its the existing slow boil.
- ykler 9y ago
  Your argument doesn't make any sense. If the insurance company is paying for the drug then they would rather pay $50 than $75 for it. If the person has a deductible, it is conceivable that they would forgo treatment if the price is $75 but not if it is $50 because they didn't think they would use up their deductible, but then they ended up using it up anyway. The insurance company would then save money. But this doesn't seem like it would happen often enough to make this a good bet for the insurance company.
emodendroket 9y ago
> Then, a few years ago, Shire tried a new tactic: giving ever-larger discounts to pharmacy benefit managers and insurers for preferential treatment over the generics. That did not mean lowering the list price of the drug, but rather negotiating rebates that were paid not to the patients but to insurers and middlemen such as CVS Caremark.
- ykler 9y ago
  Thanks, I did read this (and thought that it should have been put much earlier in the article and expanded on). But what was left a little unclear to me is whether the deductible calculation was based on the list price. I guess it is, but that does seem pretty dubious. I guess one of the advantages of a single-payer system is that it is a single-price system; I wonder if we don't have the political will for a single-payer system if there is any chance we could at least get a single-price system (or, failing that, at least a system where people who have insurance don't pay more for stuff out of their deductibles than their insurers will pay after they exhaust their deductibles).
  - emodendroket 9y ago
    I think that the insurance plans I've had have had a flat price for generic and name-brand drugs or at least a cap for each category. So yeah, this is a win for insurers and manufacturers, at the patient's expense.

by ykler 9y ago

VLM 9y ago

The article is for lower upper class / upper middle class readers where obviously what the dr writes is what is done aside from questions about "why is money being wasted?". The actual strategy is for making money at the cost of poorer people. Lets say the name brand is $75, generic is $50. If a poor person gets the generic the insurance company is out $50, well, depending on deductible, etc. If the bureaucracy can be mysteriously blamed for not allowing the generic, at least some percentage of the poor people cannot afford the medication at $75 therefore the insurance company is NOT out $50. Its merely price based rationing. If you increase the cost of health care, some fraction of the population will be frozen out of the market, just like real estate or car prices or tuition. One of many failures of our current economic system is maximal profit does not coincide with maximal participation rate, some percentage will be frozen out for financial reasons, ranging from not too many like health care, up to most of the population WRT real estate in bubble areas. Eventually once a large enough percentage of the population is alienated and disenfranchised from the system, there will be enough support to burn it all down, until then its the existing slow boil.

ykler 9y ago
Your argument doesn't make any sense. If the insurance company is paying for the drug then they would rather pay $50 than $75 for it. If the person has a deductible, it is conceivable that they would forgo treatment if the price is $75 but not if it is $50 because they didn't think they would use up their deductible, but then they ended up using it up anyway. The insurance company would then save money. But this doesn't seem like it would happen often enough to make this a good bet for the insurance company.

emodendroket 9y ago

> Then, a few years ago, Shire tried a new tactic: giving ever-larger discounts to pharmacy benefit managers and insurers for preferential treatment over the generics. That did not mean lowering the list price of the drug, but rather negotiating rebates that were paid not to the patients but to insurers and middlemen such as CVS Caremark.

ykler 9y ago
Thanks, I did read this (and thought that it should have been put much earlier in the article and expanded on). But what was left a little unclear to me is whether the deductible calculation was based on the list price. I guess it is, but that does seem pretty dubious. I guess one of the advantages of a single-payer system is that it is a single-price system; I wonder if we don't have the political will for a single-payer system if there is any chance we could at least get a single-price system (or, failing that, at least a system where people who have insurance don't pay more for stuff out of their deductibles than their insurers will pay after they exhaust their deductibles).
- emodendroket 9y ago
  I think that the insurance plans I've had have had a flat price for generic and name-brand drugs or at least a cap for each category. So yeah, this is a win for insurers and manufacturers, at the patient's expense.