Personal statement:

"...This kind of pricing change is a tremendous policy success, it’s the idea behind American patent policy, and how that was implemented in pharmaceuticals through the Hatch-Waxman Act of 1984, which allowed for a period of tremendous profit for the creator of a drug, and then fostered a path for generics to bring the price down after the patent ran out.

But then, something odd happened. Though the acquisition cost of Gleevec collapsed, in some places, the cost to the payer did not. Here, for instance, is what happened in Ohio.
Most patients didn’t front the full cost, paying co-payments, but Medicaid systems and companies using certain insurers had to cover it on the back end. Such costs are one reason that health care costs keep going up far above the rate of inflation.

Why was there such a big spread between the cost of buying the drug and the price being paid by payers? It wasn’t what most people expected, that the pharmaceutical company Novartis, had found a way to maintain its patents. The answer, according to a new Federal Trade Commission report, is that a small group of middlemen were inflating the price.

These middlemen are called pharmacy benefit managers, and what they are supposed to do is clerical work. When a pharmacy dispenses medicine, it sends the claim to a PBM, which bills the insurer and patient and remits the pharmacist money. But because of a legal change I’ll explain, just three PBMs are now in control of pricing of pharmaceuticals, and are redirecting vast amounts of money to themselves. And they are why the price of generic Gleevec didn’t drop as it should have...

...several changes shifted the business model. The first was consolidation. From the 1980s" [thank you p.o.s.ronald reagan] "to the 2000s, PBMs consolidated both horizontally and vertically, so each big PBM is now owned by a major healthcare conglomerate. CVS owns Caremark, Cigna has Express Scripts and UnitedHealth Group (UHG) runs Optum Rx. (For a case study, see my 2020 piece called “How CVS Became a Health Care Tyrant.”) There were big acquisitions, like Express Scripts buying Medco in 2012 and CVS buying Aetna in 2018, but smaller ones as well. “According to PitchBook,” the FTC report noted, “these four entities and their subsidiaries (which include the largest PBMs) collectively engaged in more than 190 transactions over the 2016 to 2023 period (UHG, 88; CVS, 53; Humana, 39; and Cigna, 14).”

UHG, for instance, is one of the top PBMs, but it also employs 10% of the doctors in America, is America’s biggest health insurer, runs Optum Bank through which bailout funds during Covid flowed to hospitals, and even owns Change Health, the large payment network for hospitals and pharmacies. More importantly, the big PBMs, while they contract with independent pharmacies, also own their own retail and mail-order pharmacies, thus setting the reimbursement rates for themselves and their competitors."

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