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[KSweeley]

Reuters is reporting that Wal-Mart, Walgreens and CVS is actually leading the acceleration of the decline of drug pricing in the U.S., drug companies are already seeing their stocks declining as a result, generic drug pricing could drop as much as 9% by the end of this year alone: https://www.reuters.com/article/us-usa-drugs-generics-idUSKBN1AJ36D

The largest U.S. retail pharmacies, including Wal-Mart Stores Inc and Walgreens Boots Alliance Inc, are wielding more leverage when buying generic drugs, accelerating a decline in prices likely to affect drug companies for some time, industry experts said.

That pressure is exacerbated by efforts from U.S. health regulators to speed approval of copycat drugs, industry sources said.

The extent of the shift became clearer this week, when wholesale drug distributors Cardinal Health Inc and AmerisourceBergen Corp, as well as top global generic drugmaker Teva Pharmaceutical Industries Ltd, warned of generic price declines of as much as 9 percent through the end of the year.

The news prompted a sell off in shares of generic manufacturers and distributors. On Thursday, Teva fell 24 percent, while rival Mylan NV dropped 6 percent and AmerisourceBergen fell 10 percent. Drugmakers Perrigo Co Plc and Endo International Plc fell 5 percent and 6 percent, respectively. Since Thursday, Cardinal Health has dropped 10 percent.

Walgreens formed a drug-buying partnership with AmerisourceBergen in 2013, and earlier this year partnered with pharmacy benefit manager Express Scripts Holdings Co. Retailer CVS Health Corp has tied up with Cardinal Health and, more recently, Wal-Mart has joined with McKesson Corp to source generic drugs. Industry analysts said the alliances took some time to become effective, but their power over negotiations is becoming clear.

"There's no question those guys are getting much better pricing and really squeezing the manufacturers on margins," said Gabelli & Co portfolio manager Jeff Jonas. "It's going to be a tough space for some time ... they are just going to keep playing the manufacturers off against each other."

Express Scripts, in an emailed statement, said its partnership with Walgreens "helps enhance our ability to further drive down the cost of generics ... Scale matters and when you can negotiate on behalf of 83 million people."

Teva said it is awaiting the result of bids for a supply contract with Wal-Mart and McKesson, and that it now expects prices to fall by a rate in the high single digits through the remainder of the year. In May, Teva said its outlook for price erosion had worsened to 7 percent from 5 percent.

AmerisourceBergen sees generic drug price erosion at the high end of the 7 percent to 9 percent range it had previously forecast.

"It is not at all clear whether the pricing environment will materially improve next year either," Jefferies analyst David Steinberg said in a note to clients.

Generic drugmakers have also come under greater scrutiny from U.S. consumers, lawmakers and regulators after a series of steep price hikes for drugs long on the market in recent years. The U.S. Food and Drug Administration began in 2015 to clear a backlog of applications to bring additional competing generic drugs to market and lower prices, a mission endorsed by its new Commissioner Scott Gottlieb.

"There are good reasons to think the changes we are seeing are structural," Wells Fargo analyst David Maris wrote on Thursday, citing "larger retailing and wholesaling groups, a more efficient FDA, slowing generic drug penetration rates."

 

[SiteSeer]

 

[TheOfficeMut]

One instance where racing to the bottom is extremely beneficial for us.

That is until one gets a great majority in market share then conspires to fix prices even higher.

Hopefully it continues to lower and remain there.

 

[Sulik2]

One of the rare times where market consolidation benefits the consumer. Mass bargaining power is what the US government should be doing.

 

[Rafy]

I skimmed the article but do these lower prices for the retailers actually result in lower final prices on the shelves? I only read about the execs of said retailers claiming that, but I've heard that before and nothing actually changed. Feel free to point out if I missed something.

 

[TheOfficeMut]

One of the rare times where market consolidation benefits the consumer. Mass bargaining power is what the US government should be doing.

Also helps that copycat drugs are seeing faster approvals. I've done reports on drug companies as part of my job (not necessarily the specifics of their businesses but I would have to sort through litigation), and so many were going to court over the right to sell a specific type of drug for an allotted time (say 5 years) before the competition can make a similar drug or bid on the production of the same one. I read these cases and they just piss me off because they essentially say that you can trademark a specific drug and reap enormous profits by pricing it ludicrously high before your competitors are allowed to sell something similar in the future, all at the expense of the people dying to afford it.

Sigh.

 

[1.21Gigawatts]

One of the rare times where market consolidation benefits the consumer. Mass bargaining power is what the US government should be doing.

Without non-profit insurance companies who are negotiating prices directly with pharmaceutical companies, it will never be enough.

Under a system like that pharmaceutical companies would miss out on billions upon billions of pure profit.
Meaning that they are willing spend ungodly amounts of money to lobby politicians in order to prevent a system like all the countries with working univerasal healthcare systems have.


I really dont see substantial progress towards a proper healthcarw system happening anytime soon in the US. Mainly because not even the groups advocating for universal healthcare know what it would take to make it work.
Before there can be a movement there needs to be know-how.

 

[Keasar]

Maybe they can start selling cheap surgeries and medical procedures as well to start messing with the American hospitals stupid pricing as well:
https://www.youtube.com/watch?v=CeDOQpfaUc8

 

[Dreadnought]

9% is not enough to help the increase in the last few years and not nearly enough to be even comparable to other countries prices.

 

[KSweeley]

Maybe they can start selling cheap surgeries and medical procedures as well to start messing with the American hospitals stupid pricing as well:
https://www.youtube.com/watch?v=CeDOQpfaUc8

My state of Maryland actually controls hospital costs: https://theintercept.com/2017/07/24...e-that-is-quietly-revolutionizing-healthcare/

MARYLAND IS THE only state in America where all hospitals must charge the same rate for services to patients, regardless of what insurance they carry. There’s some variance between hospitals, but every patient in a particular hospital pays the same. Other states experience huge, seemingly random differences in hospital costs, depending on the insurer (or lack thereof).

Maryland’s Health Services Cost Review Commission has set hospital reimbursement rates for over 40 years. The state obtained a federal waiver to include Medicaid and Medicare in its all-payer system, with the goal of keeping cost increases below Medicare growth. And it’s worked, creating the lowest rate of growth in hospital costs in America.

In 2014, to prevent hospitals from making up profit margins through volume, Maryland tweaked the system, adding global budgeting. “The traditional way it worked, every hospital got a rate card,” said Joshua Sharfstein, an associate dean at Johns Hopkins’s Bloomberg School of Public Health, and a former head of Maryland’s Health Department. “Now you get a number, which is the total revenue for the year.”

Because the global budget doesn’t change based on the number of admissions, this creates hospital incentives toward better outcomes. “It makes the health system focused on keeping people healthy rather than just treating illnesses,” said Vincent DeMarco, president of the Maryland Citizen’s Health Initiative, a state advocacy group. That includes increased preventive treatment, using case managers to connect patients to primary care, eliminating unnecessary tests, and encouraging good health outside the hospital walls.

Three years into global budgeting, the state is “meeting or exceeding” its goals, according to a January Health Affairs study. Hospital revenue growth is well below counterparts nationwide, or the growth of Maryland’s economy. Plus, state hospitals have saved $429 million for Medicare, more in three years than it targeted for five. Most important, every state hospital (all of which are nonprofit) and every insurer in Maryland are on board with the system.

If a centralized rate-setter bands every insurer together to negotiate prices, all payer can functionally act like single payer in terms of bringing down costs. All payer reduces hospital and insurer overhead, since billing costs are known in advance. And because the Affordable Care Act caps the amounts insurers can take in as profits, lower hospital costs should flow back to the individual in the form of smaller premiums.

This is why five countries — France, Germany, Japan, Switzerland, and The Netherlands — use all-payer rate setting as the basis for their universal health care systems. These countries have been found to control costs far better than America’s fragmented system.

The system only applies to hospital payments, not primary care doctors or clinicians. However, last year Maryland submitted a “progression plan” to the Center for Medicare and Medicaid Services, with the goal of expanding the system by January 2019. That would line up with the swearing in of Maryland’s next governor.

Other states have looked to Maryland as a model. Pennsylvania has adopted global budgeting for rural hospitals. And in the wake of its single-payer failure, Vermont moved to an all-payer accountable care organization, where providers are paid based on health outcomes for the population. “In some ways it’s more radical [than single payer] if you’re able to get the incentives right,” said Joshua Sharfstein. But the true test of Maryland-style all payer is whether it can support universal coverage for every resident.

 

[Sulik2]

My state of Maryland actually controls hospital costs: https://theintercept.com/2017/07/24...e-that-is-quietly-revolutionizing-healthcare/

Great article. Some states have their heads on straight and want to fix healthcare and aren't just in it to line their pockets with bribe money. Its a shame the same thing can't be said about congress.

 

[KSweeley]

Great article. Some states have their heads on straight and want to fix healthcare and aren't just in it to line their pockets with bribe money. Its a shame the same thing can't be said about congress.

That's why I'm glad to be a Marylander, our state has been sensible and liberal for quite some time.

 

[DeviantBoi]

Trying to preemptively stop Bernie's bill?

"Look, our companies are already hurting because drug prices are going down, so there's no need for the government to regulate the price of drugs that were researched with tax-payer's money."

 

[Shogun413]

One of the rare times where market consolidation benefits the consumer. Mass bargaining power is what the US government should be doing.

Except that the unholy alliance of CVS, Walgreens, and Wal-mart has essentially squeezed out the independent pharmacies and cornered the market. They are also in bed with the insurance companies in keeping brand drug prices high.

https://www.bloomberg.com/news/articles/2017-06-29/the-crazy-math-behind-drug-prices

Read this article to learn more about how drug pricing actually works. Unfortunately the main chains support this model as it squeezes out the independents more and CVS owns one of the biggest PBMs in Caremark. Wal-mart and Walgreens also have the clout to negotiate directly with the PBMs whereas independents do not. It has been pretty dark working in independent pharmacy the past few years.

 

[hammysaurusrex]

The obvious trade off is that this also makes it increasingly more improbable for independently owned pharmacies to stay in business, because distributors try and make up for the losses by increasing the price on the entities that do not have the bargaining power.

So yes, prices go down, but eventually it's only going to be CVS and Walgreens. For most people that is sufficient, but I'm always somewhat uncomfortable using them for prescriptions given what I know about how brutal they treat their pharmacists and technicians.

 

[Pastry]

Trying to preemptively stop Bernie's bill?

"Look, our companies are already hurting because drug prices are going down, so there's no need for the government to regulate the price of drugs that were researched with tax-payer's money."

It's possible for market forces to be at work without it being some grand conspiracy against Bernie.

 

[SaviorX]

I'm just throwing this out there now

Don't be surprised if Amazon acquires one of these companies to jump into the medicine market. Money's on Walgreens

 

[Wag]

Walmart and Target carry their own brand of popular generics for very low prices. This is great when you're not covered by insurance or can't afford it.

Statins and beta-blockers are two of the medications on this list. If you're stuck you can pick these up for ~$4 a refill (without insurance).

 

[rokkerkory]

Screw big pharma anyways they still make a killing

 

[cyborgnumberblue]

Pharmacies like CVS and Walgreens regularly charge insane medication prices to profit. My Rx is 300 bucks at CVS without insurance and 37 at Costco. It's good they are getting cheaper, but CVS can eat shit, they make a profit robbing those who don't have the luxury of choice between then and their competitors.

 

[Jibbajabbawockky]

Except that the unholy alliance of CVS, Walgreens, and Wal-mart has essentially squeezed out the independent pharmacies and cornered the market. They are also in bed with the insurance companies in keeping brand drug prices high.

https://www.bloomberg.com/news/articles/2017-06-29/the-crazy-math-behind-drug-prices

Read this article to learn more about how drug pricing actually works. Unfortunately the main chains support this model as it squeezes out the independents more and CVS owns one of the biggest PBMs in Caremark. Wal-mart and Walgreens also have the clout to negotiate directly with the PBMs whereas independents do not. It has been pretty dark working in independent pharmacy the past few years.

Yeah, its really all about the PBMs. I don't think your typical person has any clue as to how many middle men there are when you start talking about the price of prescriptions and PBMs are a huge factor in it.

Pharmacies like CVS and Walgreens regularly charge insane medication prices to profit. My Rx is 300 bucks at CVS without insurance and 37 at Costco. It's good they are getting cheaper, but CVS can eat shit, they make a profit robbing those who don't have the luxury of choice between then and their competitors.

Or, read the article on PBMs posted above. Also, big box stores like Costco and Walmart can also use their pharmacy departments as more of a loss leader than CVS or Walgreens, since you're probably not going into Costco or Walmart just for your RX- you're probably walking out with a cart full of other stuff.

 

[cyborgnumberblue]

Or, read the article on PBMs posted above. Also, big box stores like Costco and Walmart can also use their pharmacy departments as more of a loss leader than CVS or Walgreens, since you're probably not going into Costco or Walmart just for your RX- you're probably walking out with a cart full of other stuff.

I'm not, I am going there specifically and solely for my prescription. I stand by my CVS can eat shit sentiment.

 

[Somnid]

Can't wait for Amazon to jump in and truly squeeze these guys as only Bezos knows how.

 

[Kthulhu]

Good for consumers. Screw big pharma.

Can't wait for Amazon to jump in and truly squeeze these guys as only Bezos knows how.

I was just thinking the same thing lol.

 

[SoRuffShoNuff]

Also helps that copycat drugs are seeing faster approvals. I've done reports on drug companies as part of my job (not necessarily the specifics of their businesses but I would have to sort through litigation), and so many were going to court over the right to sell a specific type of drug for an allotted time (say 5 years) before the competition can make a similar drug or bid on the production of the same one. I read these cases and they just piss me off because they essentially say that you can trademark a specific drug and reap enormous profits by pricing it ludicrously high before your competitors are allowed to sell something similar in the future, all at the expense of the people dying to afford it.

Sigh.

Well what is the incentive to develop a new drug if you won't profit from it? Seems the best course of action would be to only produce copycats after someone else spends all the money in R&D.

 

[LegendofJoe]

I'm just throwing this out there now

Don't be surprised if Amazon acquires one of these companies to jump into the medicine market. Money's on Walgreens

They'd go for Express Scripts. Their business model is the most closely aligned.

Wal-Mart has been at this for quite some time. Their strategy from the beginning was to push generics and drive prices down as much as possible. It sucks though that there aren't generics for many of the most needed drugs.

Biologics for example can't be 100 percent copied and are expensive to manufacture. There is a regulatory pathway for close approximations to be approved (called biosimilars) but they aren't much cheaper than name brand drugs.

I hope that will change when more start to be sold. But I'm not confident because Europe has had them for over 5 years and hasn't seen much of a price drop (the US just recently started to approve them).

 

[Shao Kahn Brewing a Stew]

Generic drugs is billions of dollar of market for each company invested in it.

Interestingly, been reading about TEVA today. Their stocks are plummeting due to stiff competition and prices lowering.

 

[Zoe]

I skimmed the article but do these lower prices for the retailers actually result in lower final prices on the shelves? I only read about the execs of said retailers claiming that, but I've heard that before and nothing actually changed. Feel free to point out if I missed something.

Is there a particular high priced generic you're thinking of? All of the major pharmacies have their most common generics at $4-10.

https://www.walmart.com/cp/1078664

 

[kirblar]

Trying to preemptively stop Bernie's bill?

"Look, our companies are already hurting because drug prices are going down, so there's no need for the government to regulate the price of drugs that were researched with tax-payer's money."

Businesses negotiating costs down due to economies of scale is not a grand conspiracy against Bernie's bill that only just appeared!