Comment by legitster
3 days ago
> CVS Caremark, by comparison, argued the FTC was guilty of “cherry picking” its analysis by focusing on generics, which represent a tiny fraction of client spending over branded specialty drugs in an attempt to mislead.
So it sounds like the report may be a bit misleading - what is being alleged here is that PBMs overpriced over the generics. So it's like if Coca-Cola set the price of their can at $50, and NoName at $0.50. So you be are being "overcharged" at the grocery store when you buy the Coke and not the NoName.
It's not actually clear from the report that the PBMs actually profited from overcharging. Furthermore, if the doctor prescribes a name brand drug, it's not always the prerogative of the PBM to switch the prescription on behalf of the customer.
No, it's saying that they bought the NoName for $0.20 and sold it for $20.
The PBMs are defending it, saying that coke costs $30.
The problem is that the insurer and thus the PBM are supposed to be working on behalf of the insured, but they pay their sibling pharmacy well above the reasonable market price.
>It's not actually clear from the report that the PBMs actually profited from overcharging.
Even if they did profit, it is clear from their 10-Q and 10-K that the managed care organizations (MCO) did not tremendously profit.
https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...
This kind of profit margin (<6%) would get executives in many other businesses fired. All the other MCOs actually have a sub 3% profit margin. UNH has a higher profit margin because it sells healthcare, not just managed care.
On the other hand, here are the profit margins for the companies that make medicine (20%+):
https://www.macrotrends.net/stocks/charts/LLY/eli-lilly/prof...
https://www.macrotrends.net/stocks/charts/NVO/novo-nordisk/p...
https://www.macrotrends.net/stocks/charts/NVS/novartis-ag/pr...
https://www.macrotrends.net/stocks/charts/PFE/pfizer/profit-...
https://www.macrotrends.net/stocks/charts/MRK/merck/profit-m...
Finally, search for the difference in rankings in market cap between pharmaceutical companies versus managed care organizations. There are at least 7 pharmaceutical companies in the top 100, and only 1 managed care organization. The next biggest MCO is #189.
https://companiesmarketcap.com
Edit to respond to below: It does not matter if UNH or any other MCO moves money from their right pocket to their left pocket, the SEC filed 10-Q and 10-K will reflect all revenue and expenses. Their low profit margin is evidence that the money is flowing out of the organization and away from the shareholders. If this business was as profitable as people claim, then its stock returns would indicate it, but they don't.
Yes, the profit flows into the pharmacy, which happens to have substantially the same owner.