FDA Puts Drug Supply Chain on Notice
(This WSJ report is biased toward investors, but still interesting info)
Scrutiny of prescription drug prices isn’t going away, no matter how badly investors wish that it might.
Scott Gottlieb, commissioner of the Food and Drug Administration, laid out the flaws in how drugs are priced in the U.S. in a speech on Wednesday before a health-insurance trade group. It wasn’t music to their ears. He warned of “a backlash against these Kabuki drug-pricing constructs—constructs that obscure profit-taking across the supply chain.”
Excessive market concentration among drug distributors, pharmacies, and pharmacy-benefit managers has resulted in an opaque system of large rebates and discounts that manufacturers pay to middlemen to make sure their drugs can sell. Recently published research from Bernstein found that profit margins throughout the drug supply chain are significantly higher than income statements might suggest.
hat system has worked better for companies than for patients. For instance, complex drug-pricing rules have resulted in a much slower uptake of biosimilars, cheaper versions of complex biologic drugs, than the FDA would like. That has meant higher profits throughout the drug industry, including for payers like insurance companies. But those higher prices raise the risk of harsher future regulation.
Granted, the FDA isn’t capable of directly regulating drug prices. Investors shouldn’t take comfort in that fact, however. The Department of Health and Human Services, which includes the FDA, can take actions without waiting for legislation and has stated that high drug prices are a priority for the administration. The Council of Economic Advisers sharply criticized the market concentration of pharmacy-benefit managers in a report earlier this year as a factor in keeping drug prices high. Investors shouldn’t forget that midterm elections are only eight months away and that drug prices are a big issue for voters. Individual states also can create headaches for the industry.
Eventually, this scrutiny is bound to result in changes to U.S. drug-pricing practices, either from regulation or self-policing.
More..
https://www.wsj.com/articles/fda-puts-drug-supply-chain-on-notice-1520437670
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