EconTalk Robin Feldman on Drugs, Money, and Secret Handshakes
Apr 8, 2019
Robin Feldman, a law professor and expert in pharmaceutical law, dives into the complexities of drug pricing and regulation. She discusses how the current legal framework incentivizes drug companies to cling to monopolies, often leading to high costs for consumers. Feldman critiques the role of pharmacy benefit managers in manipulating prices and hindering transparency. The conversation also highlights the need for systemic reforms in patent laws to prioritize real innovation over minor modifications that merely extend profitability.
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Rapid Drug Price Increases
- Medicare spending for brand name drugs rose 62% between 2011 and 2015, exceeding typical salary growth.
- Drug companies raise prices sharply for commonly used medications like those for diabetes, high cholesterol, and asthma, impacting affordability.
Rebates and Exclusion
- Drug companies use rebates to incentivize middlemen (PBMs) to exclude cheaper drugs, effectively sharing monopoly profits.
- This system, shrouded in secrecy, harms competition and inflates out-of-pocket costs for many patients, especially those with deductibles or coinsurance.
PBM Dominance and Misaligned Incentives
- Three large firms dominate the PBM market, often acting in unison, limiting negotiation power for large employer plans.
- PBMs, originally claim processors, evolved into negotiators, but their incentives now misalign with patients' interests, leading to higher drug costs.
