Why Pharmaceuticals Are So Complicated In The U.S. | CNBC Marathon

The United States has the highest drug prices globally, stemming from a flawed system that profits off the complex interplay between pharmacies, insurance companies, and patients. The U.S. retail pharmacy sector reached a record $465 billion in revenue in 2020. The issue is further complicated by the relationship between insurance coverage and pharmacies, leading to irrational drug prices. Major pharmacy chains like CVS, Walgreens, and Rite Aid are the primary sources of prescription drugs for millions, highlighting the pharmacist's role as the last point of contact in the healthcare system. Despite the industry's claims of cost savings for consumers, nearly one in four Americans struggle to afford their medications, according to a 2019 poll. The evolution of pharmacies from the 1800s to the present day has shifted from primarily selling medications to a more dynamic pharmaceutical delivery system, with a significant pivot due to technological advancements and mass manufacturing.

Pharmacy benefit managers (PBMs) are central to the drug pricing system, acting as intermediaries between insurance companies and pharmacies. They negotiate drug prices and coverage, influencing the final cost of medications. PBMs, such as CVS Health, Express Scripts, and Optumrx, have been criticized for their dual role as both negotiators and operators of pharmacies, creating potential conflicts of interest. The top three PBMs processed about 77% of all prescription claims in 2020. Despite controversy, PBMs argue they offer choice and competitive pricing for consumers. Federal regulation on drug prices has been weak, allowing pharmacies to set their prices, but the advent of third-party payers like PBMs has altered this dynamic. Efforts to regulate PBMs have been seen at both state and federal levels, with 42 states introducing laws aimed at PBM regulation.

Consumers have options to save money on generic drugs, although it may require effort. A 2018 survey by Consumer Reports found significant price differences for common generic drugs across various retailers, with independent pharmacies and big box stores offering lower prices than large chains. Using discount cards, which are backed by PBMs, can also reduce costs. There are different types of discount cards, including those created by PBMs, through retailers, and independent brands like GoodRx. These cards offer discounts by negotiating with pharmacies and receiving administrative fees when used. GoodRx, in particular, has grown rapidly by providing consumers access to network rates of multiple PBMs. Despite the potential savings, the use of discount cards raises questions about the pricing structure for insured consumers and the impact on pharmacies, which must pay fees to PBMs while potentially receiving less revenue per prescription.

Pharmacists play a crucial role in the healthcare system, with a study from July 2020 indicating that people on Medicare visit their pharmacist more frequently than their physician. Pharmacists are seen as the point of contact in the medical home, being the most accessible healthcare professional for patients. The COVID-19 pandemic further underscores the importance of pharmacies and their role in vaccine distribution. The rapid development of the Pfizer-BioNTech vaccine, which has been distributed worldwide, highlights the potential for pharmacies to contribute to global health initiatives. Despite the critical role they serve, the system within which pharmacists operate is complex and often challenging to navigate for both professionals and consumers.

BioNTech, a company initially focused on developing cancer treatments, pivoted its resources towards developing a vaccine for COVID-19 when it became clear the virus had spread worldwide. The company's founders, confident in their mRNA technology, redirected efforts to combat the pandemic. mRNA vaccines, unlike traditional vaccines, instruct the body to produce a specific virus protein, triggering an immune response. The speed at which mRNA vaccines can be produced, due to their lab-based creation from a DNA template, was a game-changer in the race for a COVID-19 vaccine. The success of the Pfizer-BioNTech vaccine has not only led to financial growth for BioNTech but also reinvigorated their work on cancer vaccines and other therapies. The company aims to expand into infectious disease vaccines, autoimmune treatments, and regenerative medicine, with over 150 mRNA-based vaccines and therapies currently in development.

Johnson & Johnson, facing legal challenges and market changes, announced its plan to split into two publicly traded companies: one focusing on pharmaceuticals and medical devices, and the other on consumer products like Tylenol, Listerine, and Band-Aid. This decision comes amidst lawsuits related to the company's talcum powder and its role in the opioid crisis. The split is intended to allow each company to focus on its respective areas, potentially leading to better growth and innovation. Analysts suggest the move could create shareholder value by allowing each entity to concentrate on its core competencies without the distractions of a conglomerate structure. However, the market's reaction has been mild, and there are concerns about the execution risks and the future potential of both entities.

Alzheimer's disease poses a significant healthcare challenge, with no effective treatment available until the recent FDA approval of Biogen's Aducanumab, marketed as Aduhelm. Despite the FDA's own advisers recommending against approval due to inconclusive evidence, the drug was approved under an accelerated pathway based on its ability to reduce amyloid plaques in the brain, a hallmark of Alzheimer's. The approval process has faced scrutiny, with allegations of close ties between Biogen executives and FDA officials. Aduhelm's high price tag, initially set at $56,000 per year, has been reduced by 50% to boost sales, which have been lower than expected. The drug's approval and pricing have raised questions about healthcare costs, patient access, and the role of pharmaceutical companies in shaping treatment options. As Biogen works to recruit more patients for its treatment, the long-term efficacy and impact of Aduhelm on Alzheimer's patients remain to be seen.

Alzheimer's disease affects more than 6 million people in the U.S., with the number expected to double by 2050. The disease is characterized by progressive dementia, leading to significant cognitive decline. The emotional and financial toll of the disease extends to caregivers, with over 11 million Americans providing unpaid care for Alzheimer's patients. The lack of effective treatment has made Alzheimer's particularly challenging, with Biogen's Aduhelm offering a glimmer of hope despite its controversial approval. Patients and caregivers alike are cautiously optimistic, seeking any potential relief from the disease's devastating effects. The journey of living with Alzheimer's is marked by a desire to maintain quality of life and a hope for a better future with accessible, effective treatments.