Extended Release = Now we can charge 1000% more! The gamification of RX drugs.

Imagine this: The board of directors at Airwyyck, a company that makes plug in scented air fresheners, (not a real company, it’s why I said “imagine”) are all huddled around a very lengthy conference table listening to R&D’s latest/greatest idea that will generate mountains of cash. We’re talking full-blown presentation by a nervous little chap with beads of sweat on his forehead.

They’ve invested months into this pitch, and man, is it a good one.

The big idea??? EXTENDED RELEASE capability! Bam! We’re going to take Airwyyck’s top products and just put them into this form where the scent is released slowly, over time, like, throughout the day.

Is it a new scent? Nah

Is it a new product at all? Nah. We’re just going to take the same exact product, and deliver it more slowly, like, throughout the day. And we’re going to be able to charge 10x just because of this new development, plus, it will buy us another decade of patent protection. Imagine, no more picking up a spray bottle and giving it a squeeze. This is so convenient, people will pay 10x for it…..promise.

Using “XR” to protect patents and high prices

“Extended Release” is a common way drug manufacturers game the patent system and extend their market protections for additional years. These drugs are often labeled “XR” or “ER”, prescription drugs like Xanax XR, Morphine XR, even amoxicilling XR. The argument is that these drugs are more effective when slowly released over time, and that patients have to take them less often. Watch this quick video about ways the patent system is being manipulated.

The make-up of the prescription isn’t different. Perhaps the manufacturer simply put a slow-release covering, like a capsule, on the drug, and voila! Now we can charge $1,000 more per month, and we are protected from competition for another 10 years or more!

For the record, I do believe that some XR drugs are critical, and work well for patients. But when you look at the 12 highest-grossing drugs in the US, you see that they’ve been on the market for 15 years or more, and only one of them has come down in price.

On those 12 medications, there are 125 patents filed and 71 granted patents…..per drug! (https://accessiblemeds.org/campaign/abuse-patent-system-keeping-drug-prices-high-patients)

Patent law typically protects a new drug for about 20 years. On these 12 highest-grossing drugs, there is an average of 38 years of extended patent protection requests, beyond the years they’ve already been protected and on market, currently in front of the FDA.

We help employers navigate these types of issues by working with transparent Pharmacy Benefit Managers (PBMs) that identify XR medications that provide little to no additional clinical value. We then exclude such drugs from the plans prescription formulary. Many PBMs are making additional revenue by keeping these drugs on formulary and keeping the rebates that are generated on these drugs.

Watch out for that employers! This means you must do your research, or hire a good consultant/adviser who knows how to identify such opportunities for you.

Avoid the games being played

Unfortunately, there are many games that are played in the RX drug industry. Most employers have no idea how certain players are generating massive profits directly at their expense. Rebates are only one of those areas. I’ve heard many employers say, “We get 100% of our rebates.”

There is no way to 100% ensure that. In addition, a rebate is “subjective”, not “objective”. It can easily be manipulated by the PBM. Here’s a good example: A large employer emphatically told me once, “We are absolutely getting 100% of our formulary rebates from our PBM.” I countered and said, “How do you know?” He replied, “Because it says so in our PBM contract.” He pulled it up, “See? Right there! It says so, right there.”

I calmly asked him, “When you get you rebates, do you get them quarterly from the PBM?” “Yes”, he replied. “And when you get them quarterly, is your statement itemized, or is it a lump sum check?” “Well, it’s all lumped together in one payment.” Then I asked him, “Ok, well, if the rebate payments are not broken down, per drug, how do you know you are getting the full rebate on say Humira, or any other prescription? By the way, what is the full rebate amount on Humira?”

He couldn’t answer either question, and it made him realize that even though his PBM contract STATED his organization would receive 100% of their rebates, there was really no way of knowing whether they truly were or not!

The “Buzz Phrase” in the PBM world

Employers are caught up on “rebates, rebates, rebates”. Look, having a good rebate strategy is critical, no doubt, but formulary rebates are but ONE WAY PBM’s make money.

That same employer I just told you about, who emphatically told me they were getting all their rebates, decided that they would hire my firm to conduct an in depth analysis of their PBM contract along with all of their pharmacy claims.

We did discover they were being treated rather fairly on rebates after all.

But we also discovered that the PBM was making an additional, undisclosed, $1.6 Million PER YEAR on generic “spread”. “Spread pricing” is the differece between what the PBM is purchasing generic medications from the manufacturers for, and what they are selling it back to the self-funded plan for. So, a PBM buys atorvastatin for $1 and sells it back to the employer for $4 – the PBM keeps the $3 as revenue.

This employer had no idea. They thought they were getting such a good deal, and we found one and a half million dollars, just on generic spread pricing alone! This isn’t uncommon, it’s just uncommonly known by most employers – the true payer.

Analyze Your Claims! Don’t put it off another year!

If you would like to have an in-depth analysis run on your PBM contract and your RX claims to see where your plan is being gamed, reach out to us. We provide objective analysis in great detail.