Everyone knows the recent story of “rapscallion” Martin Shkreli: the ethically depleted CEO of Turing Pharmaceuticals who bought the rights to Daraprim, a generic anti-parasitic medicine and marked up the price of a tablet from $13.50 to $750 overnight.
As disgusting as Shkreli’s story is– the more important and interesting tale is how Turing was subsequently undone by Express Scripts, the large national pharmacy benefit manager. The NYT wrote a great piece on the Express Scripts triumph this morning.
According to the article, here’s how Express Scripts got the price of Daraprim down from Turing’s $750 to $1 in a few short weeks: Apparently Express Scripts found that a small California company called Imprimis was able to produce a cheap compound drug containing Daraprim and an additive, Leukavorin. Express Scripts agreed to promote the compounded drug aggressively. (The Leukavorin in the compound drug is ostensibly there to reduce Daraprim’s side effects– but the combo drug was a clever way for Imprimis to get around Turing’s intellectual property protections).
Compound medications are a bit of a hassle: they need to be made for individual patients and can’t be auto-substituted for Daraprim at the pharmacy level. By promoting the drug and by greasing the administrative wheels, Express Scripts made it easy for physicians to access the compounded drug. Imprimis in turn gets increased sales of a low-volume compounded medication that would languish with an advocate. Everyone (but Shkreli) benefits.
Why it this more interesting story than just watching Shkreli get his just deserts? I’d argue that Express Script’s foray into pharmaceutical activism is a harbinger: PBMs companies have often promoted formularies and negotiated hard in an attempt to exert price pressure on manufacturers. But I can’t recall a relationship as cosy as the one between Imprimis and Express Scripts.
Just as I’m watching the space between payer and provider get blurred on the medical side of the shop, I’m imagining what a more activist PBM looks like. Where does a blurred drug manufacturing/ benefit management space bring us?
When I was growing up, the local supermarket had a huge selection of generic house brand goods for sale. They were, appropriately enough called No-Name and came with bright yellow labels and minimalist fonts. This is what they looked like- honest.
And, they were cheap. The supermarket contracted directly with the manufactors and they undercut the brand-name products every time.
Will we see a day where PBMs contract with small generic manufacturers (or even own their own generic pharma companies) to produce their own No-Name brand drugs for direct sale to members? It would be a very clever way for PBMs to exert enormous leverage in the pharmaceutical market.
image: courtesy wdic blog