Medicare Price Floor, Big 3 Are More Profitable, & Baby Formula Shortages

Hey all,

I hope you’re staying warm. A lot of people demonize the pharmaceutical industry so I found Darius Lakdawalla’s op-ed in STAT about a price floor very interesting. That combined with the STAT article about potential baby formula shortages show the unexpected consequences of regulatory and legal actions to protect consumers. Enjoy the rundown.

Jacob Brody (Co-Founder & CEO, ZorroRX)

(STAT News) Medicare Need Drug Price Floors In Negotiations

Darius Lakdawalla argues that Medicare drug price negotiations need a “floor price” mechanism to safeguard valuable medical innovation while reducing spending on low-value treatments. A floor tied to patient-centered value would protect incentives for breakthrough therapies, countering the risks of arbitrarily low prices under the current regime, which lacks transparency and predictability. By prioritizing innovation for serious conditions and ensuring long-term investment in medical science, such reforms could balance affordability with the advancement of future cures. Full Article.

(Employer Coverage) Profits on Self-Insured Health Plans

Research shows that 65% of employees with employer-sponsored health plans are in self-insured programs (ASO), with major carriers like Elevance Health, Cigna, and CVS Group achieving far higher profitability—$40 per enrollee annually—compared to smaller ASO carriers, which face losses of $13 per enrollee. While these large ASO providers are gaining market share and influence, their inability to lower prices in consolidated provider markets highlights ongoing challenges for employers seeking cost control. Full Article

(STAT News) The Debate Over Infant Formula, NEC, and Industry Consolidation

Lawsuits alleging that Abbott and Mead Johnson failed to warn about potential links between infant formula and necrotizing enterocolitis (NEC) in preterm infants are contested by neonatologists, who argue there is no conclusive evidence formula causes NEC, only that human milk reduces its risk. Abbott’s threat to exit the preterm formula market amid costly litigation raises fears of critical shortages, exposing the risks of a heavily consolidated industry. Experts are urging FDA reforms, improved oversight, and potential liability protections to safeguard access to life-saving infant nutrition. Full Article.