The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
Do you trust your doctor? Most patients assume their doctor is working in their best medical interests whenever he or she orders a diagnostic test or recommends a particular treatment. Customers might wonder whether an unscrupulous auto mechanic is being truthful when he recommends a brake job or a new transmission. But most patients trust […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
So you’ve maneuvered the Obamacare website, plugged in your top-secret information and found out how much you are forced to pay to avoid a fine.And for some of you, it turns out you qualify for a government subsidy — making the premium sound like a bargain. But signing on that line to accept the government’s […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
Dr. William C. Padgett is a retired optometrist who has been trying to bring an elderly care facility to Beaufort County, North Carolina, for over a decade.“Our senior citizens,” he laments, “are finding that it is difficult and in many cases impossible to find an appropriate long-term care facility locally.” Though he has received several […]
Professor John H. Cochrane of the University of Chicago had an op-ed in the Wall Street Journal on Dec. 25, in which he gave a brief description of (among other things) a market in which individuals buy our own health insurance — and not from an Obamacare exchange.According to Professor Cochrane: “…we should transition to […]
A new survey from Harvard University found a large majority of young Americans do not believe the law will save them money, do not believe it will improve their health, and do not intend to sign up for insurance through the new exchanges.
Liberal supporters of the Affordable Care Act specifically, and big government in general, are quick with excuses for all the problems that Obamacare has been experiencing in these early days. We have heard: they did not have enough time, it’s complicated, it’s the insurance companies’ fault, we just need to make a few adjustments, and […]
I opened a new bottle of probiotics this morning, and it had one of those circular seals on the top. You know, the one that reads, “Sealed for your protection.”And that seal got me thinking… how much protection do we need? How much security is enough?How much homogenization, pasteurization, disinfection, national security, etc…. do we […]
As the fallout continues over the cancellation notices sent to millions of people covered by health plans in the individual insurance market, it is becoming clear that millions more workers and their families are expected to lose their employer-based coverage as the Affordable Care Act (ACA) is implemented.According to the Congressional Budget Office (CBO), 156 […]
A president stands disgraced. Congress is scattering. Bureaucrats are baffled. Pundits are reaching. Industry is scared. Politicians are scrambling to do something, anything, to make it better. One political party is in meltdown and the other loving every minute of it, hoping to ride the calamity to electoral gains.The so-called Patient Protection and Affordable Care […]
Any married couple that earns more than 400% of the federal poverty level -- that is $62,040 -- or a family of two earns too much for subsidies under Obamacare. But if that same couple lived together unmarried, they could earn up to $45,960 each -- $91,920 total -- and still be eligible for subsidies through the exchanges in New York state.
The president assures us he is not responsible for the wave of health insurance policy cancellations. The insurance companies are. OK, so where is the other side?
The saying goes that things have to get worse before they get better. But with Obamacare, things just keep getting worse — and then they get worse still. In private, even many critics of the law are at least a bit surprised by how poorly the rollout has gone. The question that many are asking […]
Though the rollout of the Affordable Care Act (ACA) exchanges has dismayed even the law’s supporters, the problem the ACA is designed to address is real enough: Millions of Americans, even those with insurance, lack access to adequate health care. In a voluntary society, civil-sector groups would step up to provide social services, like health […]
It is such a kick to read the transcripts from the White House’s health care “war room” in the first days of release. What a meltdown, and you get to watch it all in real-time.I’m not trying to be cruel to the kindly despots who have wrecked so much of what worked in the existing […]
Obamacare certainly has made history. It has set the record for the fastest-failing Big Government program in world history. This isn’t only about a website flop; it is about the failure of government to accomplish the aims of Obamacare in general, and in a way that has profoundly touched millions of individual lives.“Train wreck” is […]
A handful of reports last week suggested that the Obama administration had moved to delay the health law’s individual mandate — the penalty the law imposes on those who are uninsured. That’s not quite right: Instead, the administration will align the 2014 penalty date, which had been February 15, with the end of Obamacare’s open […]
A common argument made in favor of government-financed health care is that it is inherently cheaper than a private system. Strangely, however, the people who celebrate the government’s ability to hold down health care spending would be horrified at the same argument applied to other public-sector functions. It’s a seriously inconsistent position held by advocates […]
You didn’t want to be the guy chosen to tell Stalin that the wheat crop failed or the production quotas on trucks and cars were not met. Why?Because despots always blame people, not systems.In the same way, you don’t want to be the guy chosen to tell Obama that his health care websites are a […]
Lately, many have characterized this administration as socialist, or having strong socialist leanings. I differ with this characterization. This is not to say Mr. Obama believes in free markets, by any means. On the contrary, he has done and said much that demonstrates his fundamental misunderstanding of and hostility toward the truly free market. But […]
As the health care debate rages on, there is one reality that even the proponents of this hostile takeover of health care by government cannot ignore — and that is money. The government simply does not have the money for a new, expansive, public health care plan.The country is in a deep recession. The last […]
The online Internet exchanges created by the Affordable Care Act are up and running.OK, they’re up. Uhh, OK, some of them are sort of up.It has been almost a week since last Tuesday’s initial launch, and there have been more than a few problems.Website crashes, excessive response times and other problems have plagued the exchanges. […]
Every time you buy a drug at a pharmacy — be it by prescription or over the counter — there’s a middleman that makes a huge profit…
And it doesn’t matter what pharmacy you go to, either. It could be Walgreens, Rite Aid or part of a larger, more integrated health care network… Regardless, the middleman, called a pharmacy benefit manager (or “PBM”), is there taking his cut.
While most PBMs are privately held firms (such as Benecard Services, Innoviant Inc. or WellDyne Inc.), some are publically traded… they could turn out to be the safest way to make money in America over the coming years…
If you haven’t heard of this industry, you may be surprised to find out how tied in it is with individuals and companies — big and small. They are the hustlers of the U.S. healthcare system.
According to BusinessWeek:
“America’s pharmacy benefit managers (PBMs) administer prescription drug benefits for more than 210 million Americans, whose health coverage is provided by Fortune 500 employers, health insurers, labor unions and Medicare Part D.”
Here’s how these companies make their money…
Whenever you go to the pharmacy, you take a special card in order to get your prescription filled. That card, depending on your company’s health benefit package, grants you access to your medication.
The pharmacist checks out your card, figures out which pills your package covers and — under pharmacy guidelines — determines which pill to offer you at what price.
What you’re not told is that the PBM, contracted by companies or health insurers to manage the pharmacy benefits of your health plan, makes all the decisions.
And their decisions are guided by one goal: They want to keep your company’s or health insurer’s spending on pharmaceuticals low.
The best way to do that — and the best way for them to make money themselves — is simple: They issue cheaper generic drugs to you.
Most people tend to be brainwashed by superficial brand loyalty, when they could be getting the exact same thing generically for a huge discount.
Take the example of a cholesterol-lowering drug. It’s basically the same case. You’ll be asked if you want to pay $30 and get a generic cholesterol-lowering pill or you could pay $200 to get something like Lipitor.
Again, generic drugs are tested, and for most people, they provide the same benefit. So unless your doctor insists on the specific brand, you’re going to choose generic.
PBMs love generics because they can aggregate the demand for various cholesterol-lowering drugs based on all the contracts they have with their clients. Then they buy generics in bulk at dirt-cheap prices, mark them up 20-50% and resell them to you.
This is actually a win-win scenario. And if you’re invested in a PBM, it’s a win-win-win scenario. Here’s why…
First, the PBM is saving your company money through lower pharmaceutical spending. Second, your copay is much cheaper than if you were forced to buy the branded pill. And third, the PBM makes a nice profit for itself and its shareholders by reselling the generic drug to customers.
Any PBM that’s looking to increase the number of generics that its customers use translates to higher profits.
Now, let’s review this in the context of tomorrow’s trends…
There are fewer generic drugs coming over the next two years. Last year, for example, according to The New York Times:
“More than 40 brand-name drugs — valued at $35 billion in annual sales — lost their patent protection, meaning that generic companies were permitted to make their own lower-priced versions of well-known drugs…”
But next year…
“the value of drugs scheduled to lose their patents and be sold as generics is expected to decline by more than half, to about $17 billion, according to an analysis by Credit Agricole Securities. ‘The patent cliff is over,’ said Kim Vukhac, an analyst for Credit Agricole. ‘That’s great for large pharma, but that also means the opportunities theoretically have dried up for generics.’”
That’s good news for large generics company Watson Pharmaceuticals, which just merged with and is renamed Actavis…launching it from the fifth to the third-largest generic drugmaker worldwide.
Any PBMs that can claim a large share in the shrinking generics supply could do very well.
Other PBM’s, like the company Actavis, could do very well by developing biosimilars, or generic biotech drugs. Biotech drugs are more expensive than pharmaceuticals. That means that generic biotech drugs have the potential to be more profitable than generic pharmaceuticals. The first of these new drugs will be showing up soon.
Teva Pharmaceuticals, which formed a partnership with Swiss company Lonza, is another example of a company on the road to develop biosimilars.
Two other big reasons these PBMs could become cash cows… If you’re an avid Tomorrow in Review reader, you know about them already: Obamacare and baby boomers.
Obamacare is going to bring another 38 million-some people into the health care system. Many will start using prescription drugs, and they’ll be put on generics through a PBM.
Plus, 76 million-some baby boomers are going to become senior citizens in the next 20 years. They’ll use more prescription drugs as they get older. Lots of generics are going to be used by baby boomers.
For more publically traded PBMs, you can check out the three largest: Caremark (NYSE: CVS), and Express Scripts (NASDAW: ESRX), and Catamaran Corp. (NASDAQ: CTRX).
Article originally appeared here.