What’s a great way for Amazon to prove it can make America’s healthcare system better for consumers?
Cut the cost of a high priced generic drug by getting it out of the reimbursement structure dominated by middlemen called pharmacy benefit managers (PBMs), according to Julie Grant, a partner at VC firm Canaan Partners and board member of the Biden Cancer Initiative.
“It’s not going to happen tomorrow, but [Amazon] could basically make PBMs irrelevant,” she said at CNBC’s Healthy Returns conference. The drug business middlemen, which say they negotiate lower prices from drug companies and pass a portion of the savings along to insurers, are on her list of companies that could be threatened by Amazon getting into healthcare.
Medtronic’s former CEO and chairman Bill George agrees. He thinks Express Scripts’ recent move to sell itself to Cigna is one of weakness rather than strength, he said at the CNBC conference. “We don’t need all these layers in the system.”
$100 billion of the $500 billion spent on pharmaceuticals in the U.S. is “wasted” on the middleman, said Faisal Mushtaq, CEO of the company Truveris which helps employers choose a PBM to administer their employees’ benefits. He thinks Amazon should “break up the entire business of rebates” that power PBMs, and get rid of the lists of medications called formularies that prescribe what drugs insurers will pay for.
“Fundamentally, Amazon is a company built around supply chain improvement,” Mushtaq said. “It makes the most sense for them to go in that direction.”
FDA commissioner Scott Gottlieb took a couple shots at the drug middlemen earlier in the day, too, for stifling competition that could drive down drug prices. Sometimes PBMs and other parts of the drug supply chain act “in cahoots” with pharma to block generic drug companies from getting the doses of branded drugs that they need to prove their products are equivalent, Gottlieb said. “We could affect that. There are things that we can do to try to make it easier for the generic companies to end that kind of gaming, and we've taken steps to do that.”