Health Experts Pin Rising Drug Costs on Complex Supply Chain, Pricing Schemes

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FOR IMMEDIATE RELEASE: Friday, May 18, 2018

CONTACT: Erin Humiston, (972) 87405139, or


LANSING– As state and federal lawmakers across the country grapple with how best to address health care costs for patients, the Mackinac Center for Public Policy convened an event in Lansing to discuss the various solutions being weighed in Michigan. Joining the Center as panelists for this important discussion were the Institute of Policy Innovation’s resident scholar, Merrill Matthews, Ph.D., and Mr. Peter Pitts, president and co-founder of the Center for Medicine in the Public Interest.

“Price transparency in health care, and especially pharmaceuticals, has become a major policy debate,” said Matthews. “But price transparency is a problem in the whole health care system. Try calling a hospital to get a quote for the cost of an appendectomy. At least with prescription drugs, a patient can obtain and compare prices from pharmacies. What patients really care about is how much they have to pay out of pocket for their drugs. And health insurers have increasingly increased those out-of-pocket costs, especially for the newest and most innovative drugs. Legislation trying to deal with ‘price transparency’ won’t fix that problem.”

According to the panel, many Michiganders are seeing higher out-of-pocket costs largely due to the complex supply chain that absorbs many of the price discounts provided by drug makers.

“Drug companies don’t set the price consumers pay, pharmacy benefit managers, insurers and pharmacies do,” said Pitts. “PBMs and insurers negotiate significant reductions from the drug manufacturers’ ‘list price’ through a complex system of discounts, rebates and clawbacks, and then fail to pass most of those savings on to the consumer. The people who should benefit from those reductions are patients, not highly paid middlemen.”

The panelists echoed previous calls for transparency in the supply chain – especially when it comes to removing gag clauses that prohibit pharmacists from voluntarily telling a customer that her out-of-pocket cost would be less if she avoided using health insurance.

Last week, U.S. HHS Secretary Alex Azar joined President Trump in announcing a plan to curb drug prices that largely focuses on reforming the supply chain. In Congress, U.S. Sen. Debbie Stabenow (D-MI) has introduced bipartisan legislation that would prohibit PBMs from imposing gag clauses in pharmacy contracts that bar pharmacists from telling patients when the out-of-pocket cost of drugs is less than the copay through their insurance.

In Lansing, Rep. Mary Whiteford (District 80) is herself advancing a bill (HB 5858) through the legislature that would ensure that patients aren’t being taken advantage of by middlemen in the supply chain.

Video of the event can be accessed here.


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