Category Archives: Medicaid

Should the Government Regulate Prescription Prices, Part 1

Consider these recent headlines:

The cost of Biogen’s new drug: $750,000 per patient

Gilead’s New Hepatitis C Drug Approved by FDA, Priced at $74,760

Hospitals Furious at Cancer-Drug Price Hikes

Got Insurance? You Still May Pay A Steep Price For Prescriptions

There is quite a bit of unhappiness about drug prices these days.  One of the proposed solutions to the problem of high drug prices is to have the federal government negotiate or regulate prices.  In the next few blog posts, I’ll examine various arguments that support government regulation of prescription drug prices and some that oppose it.  But first, in this post, I’ll provide some basic background on the prescription drug market that I think is useful in understanding the arguments for and against government regulation of prescription prices. Continue reading

Discounts, rebates and kickbacks

One of the purposes of this blog is to educate readers about basic issues in pharmacy business.  This post will discuss the differences between discounts, rebates, and kickbacks.  Warning – I am not a lawyer and this is not a legal opinion.  It’s a non-lawyer’s attempt to understand and explain some basic pharmacy business concepts.

A headline on the Wall Street Journal Health Blog from earlier this year announced that “AstraZeneca Pays $7.9M to Settle Kickback Charges Paid to a PBM”   The federal government alleged that AstraZeneca made illegal rebate payments to Medco in exchange for preferred formulary position for Nexium (a very popular drug prescribed for ulcers).

Pharmaceutical companies commonly provide rebates to PBMs and specialty pharmacies to increase use of their products, so why was the rebate in this situation a kickback? Continue reading

Changes in pharmacy reimbursement

Big changes are occurring in Medicaid reimbursement for prescriptions and, surprisingly, this has received little attention in the pharmacy press.  Medicaid agencies in 9 states have switched from reimbursement based on Average Wholesale Price (AWP), which provides pharmacies’ with bigger profits on more expensive drugs, to one based on pharmacies’ actual acquisition costs (AAC), where profits are determined by the dispensing fee.  If this trend spreads to private payers, it could have a huge impact on pharmacies’ profits and viability. Continue reading