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I noticed some heated conversations about pharmacies losing money in the comments section on the story page itself and thought the same thing. They can't get a

by jb775 6y ago

I noticed some heated conversations about pharmacies losing money in the comments section on the story page itself and thought the same thing. They can't get away with directly price gouging the consumer, so they transfer the price gouge to different parts of the supply chain so the pharmacy can eventually complain they're losing money. If anyone was actually losing money at the end of the day they wouldn't be involved.

lotsofpulp 6y ago
Pharmacies are losing money, they have the least power in all these negotiations. It’s go big or go home, and it’s medicine manufacturer vs insurer vs retailer (pharmacy). Insurers hold the money, and manufacturer holds the product so pharmacy is getting screwed right now. It’s why you see so many grocery stores and Target offloading their pharmacy operations, and others closing down. They have no control over how much they will be reimbursed for the medicine they dispense, so basically it’s going to be CVS/Walgreens/Walmart/Costco left standing, but CVS saw the writing on the wall and merged with an insurer since going vertical is the only long term solution.
- boublepop 6y ago
  In the US system I think it’s more appropriate to say the PBMs own the product and the producers are just providing a cheap raw material. After rebates the producers take only 1/3 of the sale, and they have all the costs. The PBMs take 2/3 and are in charge of driving price negotiations, which they are just absolutely terrible at, as can be seen by the prices that just keep rising and rising... I wonder why. And yes you might think it’s the pharmacy getting the short end of the stick, but you’ll see cases where insurance, Pharmacy benefits manager and the pharmacy are all owned by the same group anyway. So really it’s just the consumers. But it’s hard to notice since this all unfolds into higher insurance premiums, co-pays etc, which get compared to list prices, which keep rising, but are disconnected from then producers net take-home.
  - lotsofpulp 6y ago
    I don't differentiate between PBMs and insurers. All the big insurers own their own PBMs, and I don't see how it's any different from any other part of the insurance company that negotiates pricing such as for healthcare procedures. So the important players are the owners of the drug, who have the power to decide what they want to sell at, the insurers (and governments), who try to negotiate what to pay for the drug, and the premium payers, who decide which insurer gets to negotiate on their behalf. Everyone else is just middlemen that I don't see wielding much power. All the PBM and rebate nonsense is just price obfuscation, but I don't see it changing anything even if it was all removed. It would just be rebranded some other way, as the goal is price discrimination, and to get richer entities (or those lacking in time/money to negotiate or hire someone to negotiate aka pay insurance premiums) to pay for more medicine since they can afford to pay. By pharmacy getting crushed, I mean the retail operations. I imagine independent pharmacies won't be around longer, or if they are, they'll be making whatever scraps the insurance companies offer to throw them. There's lots of independent pharmacy owners who complain about not even knowing if the medicine they are selling is earning them money or losing them money due to the ability for insurance companies (and governments) to take back money for various reasons after the sale. This is all part of the squeezing of margins due to automation and pharmacy retail services becoming a low margin commodity. Or forced to become a low margin commodity. CVS went vertical with their insurance company/in person retail business, but I'm not sure if that will be as profitable in the long run as they hope. I've never seen in person retail work out well for profit margins on a large scale, except for Apple stores.

by jb775 6y ago

lotsofpulp 6y ago

Pharmacies are losing money, they have the least power in all these negotiations. It’s go big or go home, and it’s medicine manufacturer vs insurer vs retailer (pharmacy). Insurers hold the money, and manufacturer holds the product so pharmacy is getting screwed right now. It’s why you see so many grocery stores and Target offloading their pharmacy operations, and others closing down. They have no control over how much they will be reimbursed for the medicine they dispense, so basically it’s going to be CVS/Walgreens/Walmart/Costco left standing, but CVS saw the writing on the wall and merged with an insurer since going vertical is the only long term solution.

boublepop 6y ago
In the US system I think it’s more appropriate to say the PBMs own the product and the producers are just providing a cheap raw material. After rebates the producers take only 1/3 of the sale, and they have all the costs. The PBMs take 2/3 and are in charge of driving price negotiations, which they are just absolutely terrible at, as can be seen by the prices that just keep rising and rising... I wonder why. And yes you might think it’s the pharmacy getting the short end of the stick, but you’ll see cases where insurance, Pharmacy benefits manager and the pharmacy are all owned by the same group anyway. So really it’s just the consumers. But it’s hard to notice since this all unfolds into higher insurance premiums, co-pays etc, which get compared to list prices, which keep rising, but are disconnected from then producers net take-home.
- lotsofpulp 6y ago
  I don't differentiate between PBMs and insurers. All the big insurers own their own PBMs, and I don't see how it's any different from any other part of the insurance company that negotiates pricing such as for healthcare procedures. So the important players are the owners of the drug, who have the power to decide what they want to sell at, the insurers (and governments), who try to negotiate what to pay for the drug, and the premium payers, who decide which insurer gets to negotiate on their behalf. Everyone else is just middlemen that I don't see wielding much power. All the PBM and rebate nonsense is just price obfuscation, but I don't see it changing anything even if it was all removed. It would just be rebranded some other way, as the goal is price discrimination, and to get richer entities (or those lacking in time/money to negotiate or hire someone to negotiate aka pay insurance premiums) to pay for more medicine since they can afford to pay. By pharmacy getting crushed, I mean the retail operations. I imagine independent pharmacies won't be around longer, or if they are, they'll be making whatever scraps the insurance companies offer to throw them. There's lots of independent pharmacy owners who complain about not even knowing if the medicine they are selling is earning them money or losing them money due to the ability for insurance companies (and governments) to take back money for various reasons after the sale. This is all part of the squeezing of margins due to automation and pharmacy retail services becoming a low margin commodity. Or forced to become a low margin commodity. CVS went vertical with their insurance company/in person retail business, but I'm not sure if that will be as profitable in the long run as they hope. I've never seen in person retail work out well for profit margins on a large scale, except for Apple stores.