Cost of Medical Supplies and Pharmaceuticals

United States vs. Europe

Medical Supplies: The cost of medical supplies in the U.S. increased by approximately 10.57% from 2014 to 2024, with an average annual inflation rate of about 0.67%.

Europe: Healthcare expenditures, including medical supplies, have steadily increased in Europe. For example, Germany and France had the highest healthcare expenditures relative to GDP in 2020, with Germany at 12.8% and France at 12.2%.

Pharmaceuticals: The cost of pharmaceuticals in the U.S. has risen significantly, with an average annual inflation rate of about 3.31% over the past decade.

Europe: Pharmaceutical expenditures have also increased in Europe. In 2018, retail pharmaceuticals alone accounted for around one-sixth of all healthcare expenditures in the EU, with Germany spending the most per capita on pharmaceuticals among EU member states. Europe's total pharmaceutical market value has grown substantially, with significant R&D investments.

We can analyze these statistics and attribute them to COVID-19, or the soaring demands post-COVID-19. Ultimately, pharmaceutical companies have deliberately raised costs after 2021, surpassing the historical trends of the past decade. The numbers do not lie.

Question: Has PBMs created a runaway train on cost?

Let's Discuss the topic of PBMs and their influence on drug cost and access:

The impact of Pharmacy Benefit Managers (PBMs) on healthcare costs is complex and multifaceted. On the one hand, PBMs are designed to negotiate drug prices and manage drug formularies with the aim of saving payers and patients money as drug prices rise. However, there has been increased scrutiny and criticism regarding their role in the healthcare system.

Here are some key points to consider:

• Negotiation of Drug Prices: PBMs negotiate drug prices, which should result in savings for payers and patients.
• Lack of Transparency: The lack of transparency in PBMs’ dealings, particularly regarding rebates and pricing practices, has been a concern.
• Research: This has shown that Pharmacy Benefit Managers (PBMs) negotiate substantial rebates on costlier drugs, yet patients frequently incur cost-sharing expenses aligned with the drugs' list prices.
• Formulary Development: PBMs develop health plan formularies, which determine which drugs are covered by an insurance plan. This may affect patients' access to medications.

In conclusion, although Pharmacy Benefit Managers (PBMs) can manage costs, there is ongoing debate regarding the extent to which the savings they secure are transferred to consumers and their overall effect on healthcare expenditures. This discussion persists as additional data and regulatory examination emerge.

Is this reminiscent of a Ponzi scheme?

This reminds me of the saying, "If it looks like a duck and walks like a duck, then it must be a duck."

Think about it,

Tim