You are correct. It’s a rebate game. Net price of insulin has been going down.

https://1.bp.blogspot.com/-ZfBANMMU5dQ/XzFtNw93ZCI/AAAAAAAAq...

Eli Lilly's profit margin is double digit, usually around 20%. Managed care organizations (insurance companies), which own the PBMs, have profit margins of ~5% or less.

That is a nonsense talking point from the industry. They use passthrough revenue to distort their profit margin. Express scripts is closer to 15% and CVS is closer to 10%.

See https://www.fiercehealthcare.com/payer/facing-criticism-pbms....

CVS net profit margin is in the 2% to 3% range:

https://www.macrotrends.net/stocks/charts/CVS/cvs-health/pro...

Cigna purchased Express Scripts in Mar 2018, and has profit margins of 3% to 5% over the last couple years.

https://www.macrotrends.net/stocks/charts/CI/cigna/profit-ma...

If these PBMs are making lots of profits, then they are simply subsidizing losses elsewhere in the MCO. The total costs paid for insurance premium plus out of pocket costs by the end user in the US would not be affected.

You are not addressing my main point which is that these MCO's distort their "net margin" stat using accounting tricks. And yes PBM's are INCREDIBLY profitable. Express scripts made 4.5 billion in net income in 2017. They have never produced a drug that has saved a life.

PBMs are important but they should not be able to put a gun to these pharma companies heads because they control the formulary.

CVS net margin includes their retail business. You can't compare AWS's margin to Walmart's e-commerce margin.

I am not addressing it, because I do not see any further evidence of distortion of an MCO's net profit margin other than what this article claims. Nor would it matter to me unless some MCO executives are smuggling cash out of the country or something.

As a customer, it does not affect me.

In the healthcare business, the flow of money is:

Individual -> MCO (insurance company) -> healthcare providers and drug manufacturers

What does it matter to the individual what portion of an MCO is earning what profit if the net profit margin of the whole MCO is 5% or less? They are obviously not left with a lot of money, their employees are not known to be lavishly compensated.

That doesn't seem too strange when you consider that those two types of companies have different operating models. A drug company is in the business of taking relatively cheap goods and converting them to very expensive goods, in other words adding a lot of value. A insurance company/PBM is mostly in the business of skimming a percentage off transactions.

It is not strange, but it also contradicts claims about managed care organizations earning tons of money. It is not a business you go into to get super rich.

LMFAO. Express Scripts (the biggest PBM) was bought for 67 billion! They have never saved a patient life but are bigger than most pharma companies.

That sounds irrelevant to my point that MCOs do not make a lot of profit.