Pennies from Heaven

The GLP-1 Windfall for Pharmacy Benefit Managers

We have grown tired of the mindless repetition of a $1,350 monthly list price for Wegovy in endless news reports about the great expense of this very important new drug for obesity. Not because the drug isn’t expensive. But because that list price is not an accurate representation of what the drug really costs. So we are grateful for Gina Kolata digging deeper into this issue in the New York Times. She leads us to wonder: How much is the windfall pharmacy benefit managers (PBMs) are garnering from GLP-1 medicines like Wegovy?

It appears to be more than just pennies from heaven.

Huge Discounts from List Prices

A new analysis tells us the net cost of Ozempic, Wegovy, and Mounjaro are nothing close to the list prices that superficial reporters and pundits cite as gospel. Economists Benedic Ippolito and Joseph Levy concluded that the net cost ranges from about half of the list price for Wegovy to one fifth of it for Mounjaro. Ozempic lands somewhere in between at a net cost that is a third of the list price.

The difference comes from rebates that PBMs negotiate and very often from which patients do not benefit.

“We document a large difference between net payments to manufacturers and the prices faced by some consumers who pay list prices, even after we adjust for currently available coupons from manufacturers.”

PBMs Profit from the Spread

It turns out that pharmacy benefit managers are doing quite well in the age of GLP-1. Their business model relies upon retaining as much of these huge rebates as possible. Optum Rx, one of the top three PBMs is enjoying double-digit profit growth. The division of Cigna (Evernorth) that runs its Express Scripts PBM business is seeing the same trend. In a recent call with financial analysts Cigna’s Chief Financial Officer explained that GLP-1s are helping:

“GLP-1 utilization does continue to build, which in the Evernorth business is a positive contributor to our earnings at this point in time, whether that be for diabetic indications or non-diabetic indications.”

So high list prices and big fat rebates for these medicines are good for the PBMs.

Patients Get a Raw Deal

This twisted way of doing business with high pricing and big rebates for PBMs might be good for the PBMs, but consumers often get a raw deal. That’s because they are just about the only ones who pay the full, inflated list price. For Wegovy, with the highest list price of all these drugs, this hurts the most.

Even if the drug is covered by health insurance, the copay can be large because it is a percentage (averaging 37% for tier 3 drugs) of list price. Patient assistance programs can help with that, but not without significant rigamarole for patients.

Health Plans Get an F on Obesity

In Kolata’s reporting, health economist Amitabh Chandra sums up the performance of PBMs and health insurance on obesity quite well:

“The purpose of health insurance is not to save money, but to improve the quality of life, happiness and self-esteem.”

These systems are failing us.

Click here for the excellent reporting of Gina Kolata and here for the analysis of Ippolito and Levy. For perspective on the role of PBMs, click here, here, and here.

Pennies from Heaven, record label design from recording by the Don Byas All Star Quintet / Wikimedia Commons

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October 24, 2023