Re:Amazon is in exploratory talks with generic-drug makers
by conductr on Friday December 01, 2017 @05:49PM
(#15828441)
Agree. It’s complicated as all hell. PBM is where I think amazon should start for reason you stated
I’ve worked in a couple of healthcare segments over a couple decades. One thing I’ve come to learn is things can never be simple. I think economic complexity somehow adds s ton of system cost. If nothing else it adds layers of middlemen
Large pharmacies like Walgreens negotiates contracts directly with insurers. Smaller independent pharmacies band together to negotiate as a group.
Because so much discounting and rebates happen on drugs, it's actually really hard for an insurance company to know what a pharmacy paid for a drug. Plus, there are so many drugs, it's hard to negotiate each one. What you end up with are blended reimbursement rates. An insurer might agree to pay 5% below list for all blood pressure medication. The pharmacies then try and get the best price they can. As a result, they make a lot of a handful of drugs, a slim margin on most and lose money on a few.
PBMs that own pharmacies (Express Scripts is the biggest) are in a unique situation where they know both side of the transactions - what the purchase price was so they can set reimbursement.
There are also DIR fees happening where PBMs clawback additional funds later on. That makes knowing the actual margin for a pharmacy really hard to determine until the transaction is already complete.