Example: Imatinib is listed anywhere between $3k and $19k retail depending on the store you buy it (source: GoodRX). With insurance, you would never pay this amount. Without insurance you can use a coupon provider like GoodRX to reduce the retail price to as low as $120. I am told, but have no proof, that if you have no insurance and no coupon, the store will provide a “cash purchase value” that matches or is very close to the coupon price.
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It’s all a game of exploiting the insurance company who is exploiting the pharmacy. Pharmacy jacks up the listed price because the insurance often pays less than what it costs us to buy the drugs. If they price it too low, the insurance just pays that. If they price it too high they price out cash patients. It’s illegal to charge a cash patient less than list price. Enter goodrx and other discount cards. They let us lower the cash price without lowering the list price so these games can continue. Because you have to profit on the drugs you can, otherwise you’ll go under. There’s so many fees anymore that Insurance claws back anything they have paid fairly quickly and profits are way down. It’s why your local pharmacy isn’t really a thing anymore and CVS and Walgreens are everywhere.
It’s essentially starting at a high price for negotiations with Ty the insurance company, who essentially end up paying pennies (if not fractions of pennies) on the dollar.
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This is all setup by the insurance companies there is infact a ledger agreed upon for hospital services that is used to make it seem like the insurance company saves you money, when really you are just getting the price you would have paid if insurance never existed, of you use your insurance. However, if you don’t use it then you get the made-up price to warrant the existence of insurance. Literally insurance companies give premiums to medical companies for taking their insurance then require they use their prices to justify the insurance. The exact same thing is currently happening in the veterinary industry.
A vet that doesn’t take insurance, the vet bill for check ups is about $80, this can include some testing too.
A vet that takes insurance but you don’t have it, starts at $180 for just a checkup, no testing.
The only way we come back from this, is to eliminate insurance and settle the prices back down.
The healthcare industry is corrupt in the US, thanks to insurance companies. The short story is businesses wanted a way to get employees without paying them more. The trick was benefits. By offering insurance as a benefit, you ultimately could pay less as only a small portion of your staff would use it within a given period, and any employee terminated would lose access to that money. Here’s where the corruption comes in – a shared bank account for medical expenses is nice but not profitable. So, the answer was “how can we convince care providers to pay LESS than cost for our subscribers?” The insurance company could take the cost savings and they could boast better coverage getting more subscribers and thus more monthly payments. Of course, care providers aren’t going to just lower prices below cost because someone asked nicely, so they came up with a plan: Jack up the prices for everyone, make subscriber discounts massive, doctors take a loss for subscribers but make up for it from people without insurance. And the icing on the cake – the prices are already so high they can convince people to pay 50% and they’ll gladly take such a great deal, even though the prices are so high, 80% off would be closer to the actual value of the service. Pharmaceuticals eventually took over the same idea – a lot of drugs are sold to pharmacies at one rate, insurance gets you close if not below cost, everyone else pays well above cost but below market cash price even if they use a discount. To balance it out, your insurance and prescription cards won’t give good discounts for every drug – even with insurance you could be expected to pay full price, and GoodRX typically only discounts common doses. For example, if you need a high dose that 20mg@60 taken twice a day would be just as good as 40mg@30 taken once a day but 20mg@30 is the normal, they would be required to fill it as prescribed, sticking you with the single 40mg@30 and it’s excessive cost or ask your doctor to switch and hope they don’t give a nonsense reason not to. Despite being illegal, drug companies incentivize this with perks to doctors because everyone but your makes a profit.
Edit: not pertinent to the question but to add, when a claim is submitted and approved for a service then paid by insurance, they say “you should charge X and we will pay Y” – you don’t have a say in this and it could potentially lead to you still paying well above the actual value of a service. To protect against this, there is nothing preventing you from applying for financial assistance even if you use insurance. If the cost is $100, they charge $1,000, insurance says “We’ll pay $75, bill them $200”, if you present them with “I’ll pay now but I will only pay $100,” they have the option of arguing with you over $100 you insist you’ll refuse to pay, and send it to collections where they have to pay to sell that debt, OR they can take it and still make a $75 profit above the true cost. In most cases, you’ll at worst get “how about we take 20% off?”, at best they’ll say “will that be credit, debit or eft?”
Medicare is forbidden from negotiating prices by law. They have to pay list price. This is because bribery in the USA is effectively legal, and pharmaceutical companies paid to have that insane law passed.
In the UK, the NHS (national health service) uses its size to negotiate great deals. Prescription costs to individuals usually cap out I think it’s around $200-250 for all your prescriptions for a year. That’s max, and only if you have multiple per month.
The UK provides single payer health care to the entire country mostly free at the point of use. The US state spends more per capita on healthcare than the UK does. Part of that is better drug pricing and similar insane healthcare policies.
Healthcare in general is so high because it’s paid by insurance in percentages. If you have an agreement to pay 10% for X procedure, then while you may only pay $1000, it’s billed at $10,000. The procedure is only worth $1000, but you bill it so much higher to achieve that. Further, the amount that is “lost” by the hospitals is written off so that it’s not really a loss.
If you want $10 from your mom, you ask her for $100 and act satisfied when she hands you a $10 to leave her alone.
The fact that you can ask nicely or ask for an itemized bill and get your bill cut in half if not more just proves that all these numbers are made up.
Here are the 4 parties involved in delivering generic pharmaceuticals to consumers:
1. The Manufacturer
2. The Wholesaler
3. The Pharmacy
4. The Insurance Company
Before I explain how these parties interact – remember this is a pre-Internet system.
The manufacturer makes pharmaceuticals. Demand for pharmaceuticals is much different than consumer good production. A wholesaler solves this problem by guaranteeing minimum orders, which gives the manufacturer enough liquid cash to fund the production of pharmaceuticals (labor, manufacturing overhead, and regulatory costs which are significant for a pharmaceutical company).
The Wholesaler acts as a logistics agent. Once upon a time, pharmacies were mostly independent and it required both logistics (think shipping) and business-to-business marketing to ensure that every corner pharmacy could have adequate supply. The manufacturer had neither the liquid cash to fund this type operation or logistics to deliver the pharmaceuticals.
The Pharmacy interacts with the consumer and adjusts the price on the specific script and also the contact it has with the insurer. Each insurer negotiates different end prices based on the needs of its members.
At each step, various terms and contracts between each party govern the price the each party pays. These are called chargeback , volume discounts, and rebates.
The last 2 are are the same as consumer volume discounts (buy more, pay less) and coupons / rebates (coupon = pay less). A Chargeback is when wholesaler accepts and refund unused inventory from the pharmacy. This makes sense because the wholesaler can bring it to another pharmacy.
This is why the price is opaque. Depending on the manufacturer, the wholesaler delivering to your pharmacy, the pharmacy, and your insurance, the price can vary wildly. Also consider most of the time a drug isn’t optional. You *have* to (or really should) fill the script.
Now why you ask – Mark Cuban launched, technically, a wholesaler that will sell directly to the customer. The business intends to remove 1) logistic costs with the internet and 2) insurance negotiations by drastically undercutting insurance costs.
This is a key distinction because Cuban intends that most people will purchase pharmaceuticals with cash (most likely HSA $) and so, the company won’t need to interact with insurance at all.
Second, he can negotiate directly with manufacturers and remove the administrative burden of negotiating and tracking the settlement price that pharmacies and insurance may have.
Third, as internet only “pharmacy”, it has no overhead like CVS or Walgreens (leading to cheaper prices).
Essentially, his strategy is to remove as many parties as possible from the transaction and reduce price.
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