When you look at the numbers

Has anyone every notice that when it comes to healthcare gross outlays.. we just tend to look at this year.. last year and state what per-cent they have went up..  Why do we not look at a longer view point to help isolate where these increases are coming from… Whose purpose does this serve?

Numbers are my friends… always have.. always will be.. I have a fairly good handle on many pharmacy numbers back to the late 60’s.  Keep in mind at that point in time.. there were no PBM’s, Medicare and Medicaid were in their infancy, no computers, no calculators, very few generics, drug prices were so stable that you could memorize the wholesale cost… because all prices had to be manually calculated. The average Rx price was in the $4 range… pharmacies worked on a mid 40% gross profit and wholesalers worked on 18%-20% gross profit. Minimum wage was $1.25/hr.  Medication expenditures were pretty consistent at 6% of total healthcare dollars. Expensive drugs were mostly antibiotics…  some of the BIG SELLERS.. Lilly’s V-Cillin-K and Pfizer’s Terramycin.  Virtually all Rx transactions were cash and/or store charge, nearly every drug store provided Free Delivery for prescriptions and some of the largest chains in the country had 400-500 stores.

In 1969 -1970 entered the “drug cards”. Reimbursement was AWP plus $2 – $3 – depending on what part of the country you were in. Since the only discount from the wholesaler was 2% for cash and typically a store could buy “direct” from the major Pharma’s for 18%-20% off posted AWP’s. Bottom line is that the system’s profits.. including the cost of filling out the PBM forms.. was probably a wash. The copay were generally $2.00 meaning that the PBM paid for the medication and the patient paid us for services. Thus the term “professional fee” seems to be appropriate.

Like today, some “smarter management types” decided to discount the fixed co-pays.. the gross numbers were small in most markets (5%-10%).. a chance to gain market share.  As if the PBM’s weren’t going to notice that they were probably paying us more than we really needed/wanted.

Didn’t take long,  the wholesalers started more and more automation and passing along their cost savings to the pharmacies and the PBM’s were there with their hands out wanting those additional “excessive profits” from the wholesaler.  As we all know, every time the retail system found a new means to become more efficient.. the PBM’s were right there… wanting most/all/more of what the efficiencies were able to produce.

Flash forward to today.. the PBM’s have for-profit companies that “negotiate” rebates/kickbacks from the Pharma’s for them.. the PBM’s are extracting healthcare dollars out of the system from any all player they can extort money from.. and yet when you look at the per-cent of our healthcare bill belongs to medication .. it has DOUBLED to 12%..

Wholesalers now work on 5%-6% gross profits, community pharmacy now works on 20% gross profits.. Rxs are 70%-80% generics.. and the rest of healthcare has some very expensive tools and diagnostic equipment.. that seems to be continually being upgraded… at no small cost.

In the 45 years that have passed, the vast majority of insurance companies have de-mutalized .. becoming public held, for profit companies.

Has providing healthcare become more the business of healthcare? How many stealth middlemen are out there that few know about.. that are making our system “more efficient” while putting much of those efficiencies into their corporate coffers and their own personal pockets. Could this explain the explosion of overall healthcare costs, the doubling of the share of overall healthcare cost of medications and a major contributing factor why for the last 20-30 years …one million + more people each year are no longer able to afford health insurance nor adequate healthcare?

Maybe the old “inefficient system” that we had pre-1970 should be re-evaluated as a better alternative? “New and Improved” does not always serve everyone better !


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