PBMs Drive $215B Waste, 340B Is Blowing Up in Illinois, and Roche Plots End‐Run Around Middlemen

Hey all,

Happy Monday! The more I read about and see the long term effects of well meaning healthcare legislation, the more I’m convinced that the government caused our healthcare crisis. We need healthcare reform, but I’m also scared of it. 

Enjoy the rundown! 

Jacob Brody (Co-Founder & CEO, ZorroRX)

(Health Affairs Scholar) Cost of Misaligned Incentives in the Pharmaceutical Supply Chain 

This commentary argues that misaligned incentives driven by pharmacy benefit managers (PBMs) and other intermediaries—whose compensation is tied to drug list prices—lead to higher costs by favoring expensive, high-rebate drugs over generics and biosimilars. Analyzing U.S. drug spending from 2018 to 2023, the study finds that intermediaries capture about $215 billion per year (roughly one-third of the $650 billion net spending) and that delinking their compensation from list prices could reduce annual drug costs by $95 billion (15%) without harming innovation. And yet every time I try to explain all these middlemen, people’s eyes glaze over so hard they miss the part where our health care system is being mugged in broad daylight: Full Article.

(PricePoints) Illinois 340B Drug Pricing Program Analysis

The 340B program in Illinois—originally designed to help safety-net hospitals—has exploded in scope, now covering over half the state’s hospitals, with a 229% increase in participation over 15 years, and disproportionately benefiting large regional and academic medical centers rather than small safety-net facilities. This growth, fueled by incentives like unlimited child sites and contract pharmacies, has made outpatient drug revenue a major income source for big hospitals while offering little transparency on how savings benefit low-income patients, leaving states and providers stuck in a flawed system that Congress and HRSA have failed to reform. If lawmakers had acted ten years ago, reining in 340B would have been manageable—but today, cutting off that revenue stream would trigger financial armageddon for many hospitals: Full Article.

(Bloomberg) Roche May Sell Drugs Directly in US to Bypass Middlemen

Roche Holding AG is considering selling its expensive drugs for multiple sclerosis, eye diseases, and cancer directly to US patients, bypassing pharmacy benefit managers to reduce costs. CEO Thomas Schinecker argues that cutting out intermediaries—who can take up to 50% of profits—would allow Roche to slash prices while improving access, a strategy similar to initiatives by Pfizer, Eli Lilly, and Novo Nordisk as the US government pushes for lower drug costs. While this approach has shown promise for mass-market drugs like Wegovy and Zepbound, it remains to be seen how such a model will work for complex specialty medications. Full Article.