Episode Details

Well, this episode is suddenly incredibly relevant again just with all the stuff going on with co-pay maximizers. If you're gonna understand maximizers, though, you really have to start here.

In a nutshell, this whole thing is a battle royale between co-pay cards and patient assistance programs offered by pharma companies versus co-pay accumulators and co-pay maximizers deployed by health plans and PBMs (pharmacy benefit managers).

I just want to start by getting everyone grounded on a few really key points.

#1: Drug abandonment is a thing. Patient goes into the pharmacy to pick up their Rx and the out of pocket is too expensive, so they leave without their drug. This can happen on the first fill, like, "Oh, wow, I guess I don't really need that new drug my doctor just told me I should pick up." Or it can happen downstream, like in January when, all of a sudden, a deductible kicks in. But in all cases, we have a patient getting sticker shock on the out of pocket for a med and then going without the drug … or pill splitting or rationing or doing other things to save money.

#2: How PBMs shake rebates out of pharma manufacturers is to use what I just said (that whole abandonment possibility) as a leverage point. Pharma goes into a PBM that controls access for drugs for, I don't know, 100 million lives. The PBM says, "Hey, you, Pharma! If you want to be on our formulary, you gotta kick out this much in rebates."

Pharma says, "No, that is too much rebate. I cannot pay it."

PBM says, "Well, then … OK, you're not on formulary or you are poorly positioned on formulary. And let me translate what that means. Now the out of pocket for your drug will be so expensive that patients are gonna walk out of the pharmacy without your drug because I, the PBM, have control over patient out of pocket and I will make it very expensive."

From a pharma's standpoint, all those patients that aren't picking up the drug … that means a loss of market share. And that market share can translate into a lot of lost revenue for the pharma company.

And thus begins the whole war of the co-pays/out of pockets. So now, let's fast-forward through the past, say, 10-plus years. It'll be like one of those movie montages with the action sped up so fast you don't need words to see what's going on … except this is an audio podcast, so I guess you do need words.

Alright, so this is what happens next: Pharma starts raising its prices combined with there's more super expensive specialty pharmacy drugs. Reaction by the PBMs to this was to try to get more aggressive with Pharma demanding increasingly high rebates and other concessions, keeping in mind the prize and leverage point that the PBMs offered Pharma to secure those PBM rebates was lower co-pays or out of pockets for patients.

Again, it's a well-known fact that the higher the patient out of pocket, the lower the market share of the drug because the higher the patient cost, the more patients abandon at the pharmacy counter. It's the old supply and demand curve at work.

At a certain point here in all of this, the pharma companies start to get really pissed about their dwindling net prices as rebates start going up and up and their market share kind of doesn't because the PBMs are keeping the money and maybe not passing it along to plan sponsors or patients. It's a zero-sum game fight over the money, and Pharma feels like the PBMs are getting more than their share.

And they're pretty smart, these pharma manufacturers. So, Pharma comes up with a Houdini move to escape PBMs holding Pharma hostage for rebates by using their control over how much patients pay or don't pay at the pharmacy counter.

Fasten your seatbelts and let the games begin.

Pharma decided to hand out co-pay discount cards. Then Pharma doesn't have to pay PBM rebates to get lower patient out-of-pocket costs. They can finesse lower patient out-of-pocket costs