How Drug Prices Work | WSJ

Drug pricing is complicated and secretive. WSJ explains how the flow of money, drugs and rebates behind the scenes may drive up the price of prescription medicine for consumers. Illustration: Mallory Brangan
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[@AntonioCostaRealEstate]

Now that is news worth printing. Good job WSJ.

[@zotac1018]

I think nowadays more people watch youtube than printed news, so its pretty fine here.

[@SharkLightning]

The one thing left out we're DIR fees, or as we call them, claw backs. Several months after we dispense a med to a patient, the PBM can decide they paid us too much and take away the little bit they already paid the pharmacy. In the process, pharmacies have to continue to cut back on labor due to ever shrinking profits, but PBM's still continue to have record profits quarter over quarter.

[@trendthis364]

Killed the PBMs

[@Subvisual]

I think you're using the term clawback incorrectly here. True clawbacks are a different and even more mind-numbingly evil thing. Say my pharmacy wants to charge you $10 for your prescription. Alas you have clawback drug plan, which you foolishly request we bill. Your PBM receives our payment claim, and for some insane reason requests that we make you pay a $15 copay, and then reimburse the PBM the $5 difference. A clawback PBM claim literally has the pharmacy charge the patient more than the usual cash price purely so the PBM can profit off the handling fee.

[@Terrafire123]

The information PBMs are using to decide whether they gave pharmacies too much money is proprietary, isn't it? What's stopping them from charging DIR fees on EVERY transaction?

[@FoodLiquorCool]

Such a great video, so much more informative than anything else I've seen on drug prices.

[@johnl.7754]

People without insurance gets screwed over the most in US medical system.

[@dennisp8520]

So buy insurance...

[@user-td7xf3gz4l]

Yes and people without home owners insurance "get screwed" when their house burns down

[@evilbred974]

@@dennisp8520 Ever consider some people can't afford insurance? Take all those fake 'sub-contractor' agreement where companies 'hire' someone to sub-contract on a $16 an hour retail or serve position. Now that person needs to buy all their own tools, uniforms and health insurance. Not sure if you are good at math, but when you make $2,900 a month before tax, it's pretty hard to afford good health insurance for your family.

[@dennisp8520]

@@evilbred974 I can do math and if you did it as well you would know that insurance always works out to be cheaper than paying out of pocket. Even if it's "bad insurance" it's better than no insurance at all

[@h2lo704]

Yeah, people without insurance gets crewed by the Pharma industry, while people with insurance gets crewed by the Insurance industry. It's a loose loose situation for the people but win win for the corporations. This is America where capitalism has gone rogue.

[@rayeemon]

I was really shook when I discovered this in Pharmacy school. PBMs a wild monster never heard to many

[@emotionscomeandgo]

Pbms are destroying small retail pharmacies to help cvs by not even paying the cost of the drug the pharmacy pays to get it. Its insane. They are truly the Villan here.

[@auro1986]

take out the middle men and make things cheaper

[@faiyazabdullah9485]

Because of the structure of the system you cant

[@jakeofalltradesmusic]

I worked in this industry in rebates, and some of those rebates were secret even to the members and employees.

[@cherchehacknostale]

oh. Such a nice dirty secret

[@dannybans23]

So what was your role exactly? How were you involved?

[@loganmarquis7378]

Very well laid out for an individual or class. In no way is this “straightforward”, but the use of explanations and examples helps the audience understand more. Glad I got to see this and now I can engage in more educated debates on the topic and do more advanced research.

[@thebradmarkschannel957]

It would almost be a joke if it weren't killing thousands of people every year. Glad I live in Australia.

[@JohnDoe-ft8zs]

Or Canada and many other countries.

[@evilbred974]

@@JohnDoe-ft8zs This happens in Canada as well, not to the same extreme, but without a National Pharacare Plan this still happens.

[@spazzappleee]

this comment did age well lol

[@bengt_axle]

Very good explanation. I would like to see how the introduction of off-patent generic drugs influence the rebates negotiated for brand name drugs, and whether generic manufacturers are paying rebates to PBMs.

[@AntonioCostaRealEstate]

Now I can see why CVS bought the Pharmacy Benefits Program company and became Caremark.

[@MusicGameFinatic999]

Biggest pharmacy in the US for a reason!

[@SteveWiIIDolt]

@@MusicGameFinatic999 CVS is the least likely to catch drug interactions per a study by the Chicago Tribune. It is not safe to get your drugs there.

[@MusicGameFinatic999]

@@SteveWiIIDolt1. I don't 2. Wouldnt that technically be the fault of the doctor who is prescribing you the drugs, not the pharmacy? 3. Since CVS is the largest pharmacy in the United States I think statistics like that don't really mean much unfortunately.

[@SteveWiIIDolt]

@@MusicGameFinatic999 CVS is not the largest, that would be Walgreens. It is the pharmacists job to catch drug interactions, not just the doctor. Most patients see more than one doctor anyway.

[@MusicGameFinatic999]

@@SteveWiIIDolt also as far as the interactions go, it should be a combo of both right? The pharmacy just fact-checks the doctor's prescriptions if I'm not mistaken and makes sure there are no interactions or fishy business going on.

[@MyLifeOfficial]

The solution is simple: *Get rid of the entire concept of rebates* which also makes the "formulary" completely redundant . Have negotiators/committees directly employed by government/employers/insurance companies whose job it will be to drive down the price as much as possible. They don't get any kickbacks from anything, they get paid a salary that they are happy to work for and that motivates them to do the right thing.

[@alvinsoehendrywijaya]

Nope it dont work that way. We need to delete pbm. But negitiator works if you get % of profits. You know it like salesman work.

[@Patmorgan235Us]

@@alvinsoehendrywijaya I don't have a problem with insurance companies hiring someone to negotiate on there behalf with the drug manufactures, but there needs to be an anti-kick back law put in place. the only person eligible to get a rebate from a drug company should be the consumer, not any of the middle men.

[@MyLifeOfficial]

That makes no sense. What is the point of increasing the list price of the drug and then giving rebates to Insurance companies, government and employers, apart from artificially creating an opportunity for a middleman/PBM to take their cut from it, and that too for adding 0 value to the transaction? It's crazy. If they were worth their cut, they would be able to justify it very easily (real estate brokers, financial advisers, car dealerships etc. can do this and so can many other professionals). They wouldn't need to hide behind the "proprietary" nonsense.

[@SteveWiIIDolt]

The rebates are a bribe from the manufacturer to the PBM. It should be illegal.

[@camisetasnba]

I think that’s spot on the best way to define it. Helped me understand whats happening. Thank you

[@nickgehr6916]

*Pablo has a better simple way and it's cheaper to operate*

[@raphaelcostantzer302]

Zenn Lozanno Pablo escobar is dead

[@jen_nice2059]

Legalize crack

[@zukacs]

There was a video recently on some other channel where they basically said that US is subsidizing all the other countries where the drugs are cheap. Thx america for absorbing the costs of drug development and filling stockholders pockets

[@mueffe1357]

Its VOX. Its really Muricans fault for having these PBMs instead of open tender/decent govt healthcare like the rest of the world.

[@zukacs]

@@mueffe1357 I dont think that works in healthcare similar to aviation, only the big dudes have the resources and tools to develope new drugs

[@priceofsilver]

PBMs sound like that guy in Office Space who says he talks to the customers so the engineers don’t have to!

[@kngu1911]

PBMs steak from patients and the local pharmacy. The demand from the manufacturers and dictate limitations PBMs also create difficulties and cloud information from wholesalers that limit wholesalers to properly provide preferred pricing to pharmacies.

[@raghavshankar8332]

I love how Trump's statements were used for the problem definition of the video

[@jen_nice2059]

Raghav Shankar not they weren’t. They were used to underline the fact that the drug price problem is the result of a very complicated supply chain

[@nsav8]

Trump is the only politician that has attempted to address the high cost of prescription drugs. Hope he wins 2020 in a landslide.

[@Raj-wf6ln]

@@nsav8 even when he lost he still won

[@usandmexico]

Although it isn't a panacea, shopping around for drugs can dramatically reduce your cost at times. Every pharmacy I have ever called has answered my questions regarding price, and I have always gone to the cheapest. And whenever I get prescribed something like prescription strength ibuprofen, I buy the cheapest generic OTC and take enough to meet the prescription dosage.

[@SteveWiIIDolt]

This video is missing an important part of the equation. CVS owns a PBM, which it uses to force people to use it's own phamacy.

[@emilyv.3152]

great way of explaining it, so glad you guys put this up!

[@diskographi]

I hear you. So... cut out PBMs, take the money going to them and reduce the price of the drug at the Rx

[@AntonioCostaRealEstate]

Consumers or retailers ought to organize in Coops. This used to be a wining formula for the Aftermarket Auto Parts program when they went into programs such NAPA, Carquest, etc. To few pharmacy chains due to consolidation allowed this to fester through the 90’s . There ought to be more chains The Veterans Administration Program do not have such Shennaningans as the Medicare does , because they are not tied by laws passed through the Congress. They grind to the best bulk buying rate.

[@carlosgarcia-jz3dq]

if PBMs ran Mcdonalds a cheeseburger would cost $500

[@JN-ox2yd]

I came here to find out why my cocaine is so expensive and was disappointed

[@summertime69]

If PBMs are getting rebates and passing it on to the insurance companies to lower prices, and we know the insurance doesnt reduce their prices, so doesnt that just sound like a bribe to classify a drug into a tier that will sell more? If a PBM is getting a rebate, and throws some at the insurance company so the company will push the drug more, isnt that just a bribe?

[@SteveWiIIDolt]

That's exactly what it is. Unfortunately, the law allows it at this time.

[@doriscastillo2232]

The key word is is money making.

[@binarydiver]

Impressive video, good work WSJ. I think definitely the media of USA better than the media of South Korea.

[@dileepchandran392]

Surprised this has only 111,000 views in 10 months.

[@bgregg55]

And US citizens get hosed for pharmaceuticals. They would be amazed how cheap they are in Mexico.

[@norman3605]

How about a simple solution to this problem: Congress needs to repeal the single line passed in the 1987 Medicare Amendments that exempts GPOs ( an exemption later extended to PBMs) that exempts them from the Medicare Anti-fraud and kickback statute. Because these organizations do pay kickbacks to directly incentivise those persons (and not necessarily their companies or employers) who sign the service contracts. These legal kickbacks (aka rebates) would be a great topic for a follow up video by the WSJ.

[@AcesizOfficial]

Interesting

[@Ashkanman]

I still don't understand why distributers were mentioned at all. Only things mentioned were pharma companies, pbms, and insurance companies.

[@NicholasLittlejohn]

Taxpayers also pay for all of the research for these private profits.

[@MyLifeOfficial]

Rebates in this context, and "Formulary" sound like concepts some scammers and fraudsters would come up with if they were given the responsibility to handle this task for the benefit of society.

[@whiterooksme]

Well explained. Thank you.

[@marks6663]

I am in Canada. We have no insurance middleman. Our drugs are very affordable. I buy my drugs out of pocket and they are cheap. America needs to get rid of the all the middlemen that jack up the prices. The drug company makes the drug, you use it. That line needs to be as short as possible, not as long as possible. In the US, there are too many people trying to make money off of the regrettable fact that people need medication. Making healthcare a business and not a utility like the energy company, is what drives the cost of healthcare into orbit.

[@JamesRendek]

Thank you Mr. Ben Dover :)

[@theblukatlife]

Now do a video on how, why and who made this thing to happen in the first place

[@mkevinbradley3930]

PBM came in 1960's to process insurance claims. Gradually they took over everything.

[@anthonymarquez6493]

And what about the patients without insurance?

[@kkirschkk]

this system isn't designed for them sadly. They pay the full price

[@Dear_Mr._Isaiah_Deringer]

Supposed to go get their _Meds in Mex._

[@Triplekia]

They pay list price which can be absurdly high because its already jacked up to compensate the high rebate that being asked by insurance company.

[@Dangic23]

Drug price is the least of our problems. The intermediary health insurance companies are the largest problem in the US. Adding billions of dollars to the cost of healthcare with their bureaucracy.

[@axeblue]

and cortez was yelling at the pharma companies.

[@AbuSous2000PR]

Master piece

[@cappuccinopapi3038]

we don't have that in Italy (and Europe) everything costs like 15-20 euros

[@judyl.7811]

0:33 supply chain for prescription drugs. prescription drug coverage 處方藥費保險計畫 1:00 Pharmacy benefit management 藥品福利管理 understand the drug and money flow.

[@JameBlack]

True enmies of the people!

[@mc88dx]

Saw video was released 5 minutes ago for 6:45 long video and there were already 17 upvotes and 3 downvotes. People know what they like before watching.

[@chetanpilla32]

Google starts the ball rolling.

[@CamRebires]

Really well done WSJ, good job

[@SpencerKimber]

All of this was good except for the conclusion. The patients don't pay the list price in almost all situations.

[@SoomNou]

You forgot to Add doctors getting bribes to write brand names

[@ankitk.pathak3977]

Yaaaa

[@Error_694]

Step 1) They make the drugs Step 2) They rip you off

[@ladhkay]

Step 3) The US government lets them keep and renew patents for decades ensuring only they can make them

[@boygenius623]

Actually, the description of how Pepsi works is inaccurate. Pepsi sells its concentrate to bottlers (many who are now vertically integrated with PepsiCo), the bottlers sell it to distributers, and the distributers sell it to retail stores.

[@hussainmuammar6296]

They need to get rid of the rebates and those PBM's.

[@FiftymonkeysonAtree]

All I see is two arrows going out from the customer 😂😂😂

[@snakeboy2904]

Good Vid. This pretty much sums up how PBM works. This is also a pretty good representation of how Hospital Bills get paid as well. All the contracted rates between the Hospital and Network are also "Proprietary".

[@TakeNoPrisoners]

The only leader I’d trust who’s be able to solve this con scheme in time

[@FutureAIDev2015]

What if... The supply chain for pharmaceuticals was the same as the chain for hamburgers?

[@Jadeserphant]

This reminds me so much of high school. If you aren't in the "cool kids" group then your screwed.

[@colt0110]

Those who can't share information "PBMs" etc are the villains in this situation.

[@Sunkissedguy]

*no wonder the prices are way higher in the US than in other developed nations*

[@kakalabrhm]

Admit it *You clicked to know why your weed costs so much*

[@shaneintegra]

thought this was about recreational drugs... that would have been a good video!

[@ChristianCarpesoChannel]

Wow! This is so confusing

[@abrahamdecruz5128]

That's in the USA. What about in other countries where there are no.pbm's but the cost of drugs is still high? How do you explain that? One can only see the drug companies trying to milk their profits.

[@ruzzelladrian907]

Should drug companies sell straight to consumers instead? Sort of like what Apple and Tesla did? But my hunch is that some bureaucratic crony politician might put out a law that makes direct selling illegal.

[@dennisp8520]

No direct sale should be illegal because consumers are stupid. It's bad enough in the states that we have drug ads telling people to see their doctor for a certain pill. Drugs should only be taken when prescribed by a doctor. They should not be sold directly because dosage matters. There are already drugs that get sold over the counter that are cheap thanks to patents wearing off and the same will eventually happen with the drugs of today.

[@kolektivmozak238]

Corruption at it's highest.

[@paulhetherington3854]

1. drug

[@jzk2020]

How would you disrupt that whole industry? Could you make a video on that. It might inspire the next Elon Musk / Uber / Jeff Bezos etc.

[@GeliCarlosJ]

they should just remove PBM’s and then make the CDC or whatever decide what drug goes on where in the formulary. PLUS government should regulate prices by pharma companies

[@YuraEnjoji]

yeah but that's socialism. That's a big no-no in The States.

[@ten_tego_teges]

Heck, the best part is that Medicare cannot negotiate their own prices. The law literally cripples the government insurer, cause God forbid they negotiate the best prices having 60M customers. The guy who passed this law in 2003 under Bush, got a tasty position in a pharma lobby group. Look up Billy Tauzin and the Medical Modernization Act of 2003.

[@forloop7713]

Why are drug costs in the US higher when both EU countries and American insurance companies buy drugs in bulk

[@schanemassey3861]

CLICKBAIT! I thought it was going to talk about street drugs, cocaine, crack, meth, pcp, angel dust, heroin, molly, green goblin, sunset powder, Indian kusma etc.

[@AnhTuPhucDerrickHoangCanada]

This is all behind the times. They should prepackage doses.

[@tomasbickel58]

I think, the core problem is, that while you can refrain from buying that Pepsi and drink tap water all your life for a fraction of a cent per gallon, the drug market is extortionistic. I don't get, why people think, those two markets are comparable ...

[@prasadkadu9737]

I got baited .. i thought they were going to be talking about the Drugs of drug lords

[@Subvisual]

It's just an elaborate series of kickbacks to maximize insurance company and drug manufacturer profits and leave the consumer/taxpayer footing the ever increasing bill.

[@rosinamartinez6322]

Altogether this is not fair for the customers who have to pay for drugs we are always paying and paying and getting the lower end of the stick. We pay taxes every year, we pay car insurance, house insurance, medical insurances and they still stick to us in doctors and drugs. What more do they expect to do to the customers drain us of whatever money we have left? The government should have stopped all these business from getting our of proportion and limit them to what they can do. Or is this a country where the rich keep getting richer and the poor pooer with no end in sight. There were times way back when the government put limitations of what the insurances and all those companies would put controls on them, not now anymore?

[@jcost2012]

Greed is the main driver of their prices..

[@ahsenshahid]

Where is FDA in whole cycle ?? Secondly, many mouths need many loaves. Reduce the no. of mouths

[@sizzla123]

Scientia Potentia Est

[@Aman-kn5iv]

Not for dis vid couldnt find the real one

[@user-xd4sk4pk7h]

*laughs in european*

[@yangliu3905]

The list price $100, with 50% off is same as list price $50.

[@manuelcunharocha8889]

WSJ, did you get the idea for this videos from Cheddar ?

[@hassaan3861]

Too bad cheddar can't even come close to explaining stuff properly

[@Alduinsshadow148]

It seems like the video is missing something, like government policy or regulation on intellectual property rights for drugs/R&D.

[@christiantioye5171]

I think the cost of R&D as well as bringing drug to market should be already included in the list price of the drug, which is set by the manufacturer. This video is concerning the extra costs being added by the middle men in the supply chain, causing the final cost to the consumer to be several times higher

[@reynanhenry612]

Why pharma companies dont make their own insurance company? This eay they can lower insurance price because there will be no more pbm and they can increase their profit because there will be no more rebate

[@amycuaresma]

Pharmacy benefit managers:

[@VipinChanders]

In India as per disease you have valid for policy...and specific hospital and doctor confirmed the your money's back or goes to company..if you have policy than hospital charged more than actual rate...adjust with it govt & company... We are totally opposite...in every manner...shop keeper will make money and patience is with empty hand.....

[@oraromaochi5584]

Wait a minute, Trump outlined the supply chain perfectly??! 0:58

[@mahendrakumarshanu8047]

I didn't get that complex system I mean if the drug leveled as $100 and consumer have to pay suppose 20 of it then suppose 50 discounted to insurance companies so they will pay $30 of it right . so that means the drug cost only $50 isn't it..just levelling it as 100 doesn't make any difference I think its the insurance companies having control and manipulating the system because out of pocket became extremely costly.... correct me if i am wrong above

[@AntonioCostaRealEstate]

To those who claim the U.S. consumer is subsidizing other countries consumers, well there is a misrepresentation right then and there. So before you blame others look inward and see how flawed your supply chain is. First of , in those countries, whether Health Coverage and Delivery is done through a single payer system or not, the incumbent Government Public Health Entity actually negotiates directly bulk pricing rates for every drug it distributes through the lowest rate it can bargain for. No broker fees, no benefit managers , no intermediaries. Then local retail chains negotiate pricing, but then, if such country has an indigenous pharmaceutical industry, then the local manufacturer will either produce a generic equivalent, or license the original formula and shoulder manufacturing and distribution all under a lower cost structure. Then there are multinationals who will manufacture , promote , and distribute their line directly. That being said , their local branded product will often be slightly more expensive than a generic equivalent on the account of being a household brand name. Fair to assumption, and using the dollar as an absolute value reference , on other parts of the world your median household earning might not be as high as the US , or even then, the typical local consumer might not tolerate what Americans will pay for. Your garden variety big pharmaceutical company still has to generate sales or else shut doors and pack it up. If they are in business in country A,B, or C, lower price or not , make no mistake , they are still reaping profits. And there are simply drugs that are not available in such countries simply because their average consumer cannot afford the cost the market will bear, the government sponsored health organization won’t fork over the asking price , and there is not a critical demand level to negotiate bulk rate or license and manufacture locally. I am using São Paulo , Brazil, as template. We have local pharmaceutical retail chains that stock and market packaged products , totally separate retail oriented compound pharmacies, private health plans, Government sponsored Health Care Entities , private Hospitals and even vertically integrated health care delivery supply chains.

[@evilbred974]

The 'invisible hand of the market' making America great again.

[@WhatTheF0K]

Every Doctor that writes a script gets a big commission.

[@duwalagepasinduchamodyagun7552]

i was thinking of different kind of drugs

[@pstha4537]

why dont they just sell it like a regular product. i don't get it.

[@paladin696969]

Sorry I was looking for the price of street drugs

[@minahilalvi9169]

Ahahhaahah same!😂

[@theredflagisgreen]

Maybe people should be able to make their own drugs.....

[@sethsmith2161]

The title was a bit click batty ( I thought it was like illegal drugs)

[@michaelsmith953]

lol me too but i mean learning how your legal drug dealer charges you extortionate amounts is just as interesting as how your illegal one does

[@nathankelly2796]

Too bad more voters don’t understand why this is able to happen.

[@hollyhold6960]

Where is the Republican bill lowering pharmaceuticals for Americans?

[@nealpatel4641]

WSJ is confused, straight up look at what Eli Lily was saying, and think again, pharma companies need to make a profit but don't want to jack up prices, but they have to or they will get punished by the system, if the PBMs didn't exist, the price of Insulin would be slightly higher than the revenues in the video ($135), and not the absurdly high prices (~$600). It costs a lot to make insulin (raw materials, manufacturing, packaging, safe transportation, etc), so the list price isn't going to be cheaper unless the individual costs can become lower with scale or competition. If anything, PBMs should be replaced by a government agency that can limit the list prices of pharmaceutical products (not a capitalist society then) OR trust pharmaceutical companies to make ethical decisions (which is a 50/50, there's always going to be good and bad ones), but society can pressure the bad ones in doing the right thing. Maybe there should just be more transparency in the whole pharma industry, especially about how much PBMs pocket for talking to everyone and controlling the formulary (which sounds like a bribery system at best).