"The FTC also said these so-called Big Three health care companies — which it estimates administer 80% of all prescriptions in the U.S. — are inflating drug prices “at an alarming rate, which means there is an urgent need for policymakers to address it.”"
These companies have agency and are choosing to act this way.
I'm sure the lawmakers will take immediate action by allowing these three companies to merge into a single too-big-to-fail monster with even greater gouging (and profits!).
Can someone explain why this matters. Other than outrage, and of course the justice aspect: this must be stopped. However, this is not the problem. Let's calculate a bit:
$7.3 billion, over 5 years = $1.46 billion per year
Technically this is extra revenue, and for example, taxes are due on it. But let's say it's pure profit. The three involved insurers (CVS health PLUS United Health PLUS Cigna make ~10 billion in profit on revenue of 300 billion)
So this would, generously, mean they make 11.5 billion profit on 300 billion in revenue, and the entire profit is 3% of your health insurance bill, with this representing about 0.5%.
Again, there's the justice aspect. This is not very honest of them, and should be changed. But it's a principle thing ... it won't make any real difference on your bill.
Let’s talk incentives. Pharmacies, insurers, and PBMs (pharmacy benefit managers) are in a tangled drug pricing system. PBMs get rebates from drugmakers for pushing their drugs, but when the PBM and insurer are part of the same company, things get questionable. Suddenly, there’s a clear incentive to favor expensive drugs with bigger rebates, even when cheaper alternatives would work just as well. You’re stuck paying a higher copay and, next year, likely higher premiums too—because, wow, these drugs are pricey! Meanwhile, the insurer isn’t concerned. They’re not covering the full cost of the drug or your copay, and they’re pocketing the rebate. The system works—just not for you.
If you started doing calculations beyond "is this number greater than 0?" you've already gone way off the rails and missed the point entirely.
These are generic drugs, so paying extra for the same amount is not creating any additional value for society, and in the short term this money could have paid for other things. It's a classic destructive enterprise, like putting a chain on a road and charging people a toll without doing any road maintenance.
> it won't make any real difference on your bill
It's actually insane that anyone could presumably finish middle-school math and think this. Just because you divide a number by a sufficiently large other number and arrive at a small number doesn't just mean the impact disappeared or was reduced. There are lots of people in a society. We aggregate or average out things to calculate.
It means you fudged the numbers and arrived at some nonsense instead. Is the education crisis really this bad that this needs explaining to an adult?
I always feel crazy when it starts to sound like fully open and unregulated free market, maybe apart from regulating drug manufacturers safety and purity standards would be lot cheaper...
This is about generic drugs.
"The FTC also said these so-called Big Three health care companies — which it estimates administer 80% of all prescriptions in the U.S. — are inflating drug prices “at an alarming rate, which means there is an urgent need for policymakers to address it.”"
These companies have agency and are choosing to act this way.
This beaks the human contract.
I'm sure the lawmakers will take immediate action by allowing these three companies to merge into a single too-big-to-fail monster with even greater gouging (and profits!).
Can someone explain why this matters. Other than outrage, and of course the justice aspect: this must be stopped. However, this is not the problem. Let's calculate a bit:
$7.3 billion, over 5 years = $1.46 billion per year
Technically this is extra revenue, and for example, taxes are due on it. But let's say it's pure profit. The three involved insurers (CVS health PLUS United Health PLUS Cigna make ~10 billion in profit on revenue of 300 billion)
So this would, generously, mean they make 11.5 billion profit on 300 billion in revenue, and the entire profit is 3% of your health insurance bill, with this representing about 0.5%.
Again, there's the justice aspect. This is not very honest of them, and should be changed. But it's a principle thing ... it won't make any real difference on your bill.
Am I calculating this wrong?
Classic conflict of interest.
Let’s talk incentives. Pharmacies, insurers, and PBMs (pharmacy benefit managers) are in a tangled drug pricing system. PBMs get rebates from drugmakers for pushing their drugs, but when the PBM and insurer are part of the same company, things get questionable. Suddenly, there’s a clear incentive to favor expensive drugs with bigger rebates, even when cheaper alternatives would work just as well. You’re stuck paying a higher copay and, next year, likely higher premiums too—because, wow, these drugs are pricey! Meanwhile, the insurer isn’t concerned. They’re not covering the full cost of the drug or your copay, and they’re pocketing the rebate. The system works—just not for you.
> Am I calculating this wrong
Obviously.
By the logic you implement in your comment these companies will have made 0.0005% profit before their 1000% price hikes.
Beyond that you are also ignoring that a lot of these companies are paying themselves these amounts so it’s Hollywood accounting all the way down.
Why spread back of the envelope misinformation like this for these corpos?
Nope. That 3% represents their profit before the price hikes, the 0.5% (a generous estimate) is the impact of the price hikes.
If you started doing calculations beyond "is this number greater than 0?" you've already gone way off the rails and missed the point entirely.
These are generic drugs, so paying extra for the same amount is not creating any additional value for society, and in the short term this money could have paid for other things. It's a classic destructive enterprise, like putting a chain on a road and charging people a toll without doing any road maintenance.
> it won't make any real difference on your bill
It's actually insane that anyone could presumably finish middle-school math and think this. Just because you divide a number by a sufficiently large other number and arrive at a small number doesn't just mean the impact disappeared or was reduced. There are lots of people in a society. We aggregate or average out things to calculate.
It means you fudged the numbers and arrived at some nonsense instead. Is the education crisis really this bad that this needs explaining to an adult?
I always feel crazy when it starts to sound like fully open and unregulated free market, maybe apart from regulating drug manufacturers safety and purity standards would be lot cheaper...