FTC makes serious allegations on pharmacy manager

Antonio Ciaccia, President of 3 Axis Advisors says managers raised prescription prices for $7billion gain

Episode Transcript

Speaker 1 (00:00):
First, I wanted to pivot and talk about something that
affects a lot of people, and that is prescription drug
prices and why are they so darned high. Let's bring
in our expert, Antonio Chacha, president of Three Axis Advisors.
First of all, Antonio, good morning, and you are in
Ohio State grad. I believe you graduated in two thousand
and seven, so I think that would that put you

(00:22):
as a freshman when Trust won a title in two
to three, that would.

Speaker 2 (00:28):
Put me right in that sweet spot. And it's a
good morning in Columbus, is it not?

Speaker 1 (00:33):
Absolutely?

Speaker 2 (00:34):
Man?

Speaker 1 (00:34):
So I'm sure you are celebrating as a as a
true buck guy and not celebrating though prescription drug prices.
And your outfit at three Access Advisors is somebody who
continues to study the pharmacy marketplace and talk about how
drug pricing actually works. It's very complicated, So break it

(00:54):
down for us, why are drug prices so high? And
what are we doing about it?

Speaker 2 (01:00):
Well, the United States is used is different from its
international peers in that we rely on intermediaries to negotiate
our drug prices for better or worse. In other countries,
they set the prices, and what you see is what
you get. We rely on insurance companies and pharmacy benefit

(01:22):
managers to negotiate off of increasingly high prices. Part of
the reason that they are so exacerbated in the US
is because drug companies and pharmacies HiPE their prices higher
and higher as a mechanism to withstand the negotiation. So
think it this way. If the intermediary makes more money

(01:44):
based upon the amount off the top, it negotiates well.
The higher the price and the bigger the discount, the
better it is for their intermediary. So the insurance companies,
in PBMs and government programs all have a hand in
pumping up those prices.

Speaker 1 (02:01):
So we see this new report from the FTC about
the PBMs, the pharmacy benefit managers hiking up and marking
up prices of certain medicines, including medicines for heart disease, cancer, HIV.
These companies now seven point three billion dollars dollars in
revenue between twenty seventeen and twenty twenty two. I mean

(02:21):
these are middlemen, just to put it in planes speak,
these are middlemen negotiating these prices and we paid the
cost how and this is true in business anywhere to
be more efficient, do we eliminate the middleman?

Speaker 2 (02:36):
Well, the State of Ohio was a good case study
in that endeavor. Years ago, back when I was learning
how to spell what a PBM is. The State of
Ohio found that at PBMs operating in our medicaid program
had their hands in the cookie jar. We hired them
as a state to lower the costs of medicines in Medicaid,

(02:56):
and they did that. They went to pharmacies and they
paid very low rates of reimbursement for their goods and
services that they offered. But then those same PBMs turn
around and build the state two hundred and forty five
million dollars on top of what they actually paid the
pharmacies in a little known practice called spread pricing. Ohio

(03:16):
fired those PBMs and moved to a transparent payment system
that cut the fat and ultimately return value back to
our communities and our taxpayers. What the FTC found is
another scheme where PBMs own their own pharmacies, set the
prices at those pharmacies, and then steer patients to use

(03:39):
those pharmacies. So it doesn't take a rocket scientist to
figure it out where if you are the pharmacy and
you get to set the price, you overpay on the
drugs that you dispense, you underpay for the ones that
you don't, and voila, you own the pharmacy market.

Speaker 1 (03:56):
It seems like a smacks a little like a collusion
to me in that you're talking about three major companies
CVS Care, Mark, Signa, Express Scripts, and the United Health's
Optimum RX. According to data you sent me, control eighty
percent of prescriptions in the US. Is there no oversight?
Is there governmental involvement? I mean, you've got a new

(04:17):
administration starting. I don't know how high this is on
Trump's list, but is there not any congressional action that
can be taken here? And now you spent a lot
of time lobbing in DC for this kind of stuff.
What we know what the problem is? How do we
fix it?

Speaker 2 (04:32):
Yeah? So I think states have an ability to take
on their own problems. Certainly, Ohio Attorney General Dave Yost
has been a leader nationally ensuing over some of the
overcharges within state medicaid programs with the Hilbuerau workers compensation
and other programs that are in our state's purview. But

(04:52):
at the federal level, every major committee of jurisdiction is
now investigating PBMs. Just a few weeks ago, incoming pret
well now, President Trump said he was going after the middleman,
explicitly stating that they were involved in inflating the prices
of medicines. Usually you don't hear folks at the executive

(05:12):
branch talking about little known entities like PBMs because, let's
face it, most people have never heard of them. It
doesn't necessarily play well politically for them to grab the
attention of Trump as he's walking back through the door.
I think is a bad omen for their industry that
between Trump, Congress, and the Federal Trade Commission, the jig

(05:35):
might be up on some of these pricing schemes.

Speaker 1 (05:38):
Well, you talk about some of the things you know
that really affect people, you know, whether that's inflation or immigration,
or the price of bread milk at the grocery store.
I mean, nothing bigger than the price of their necessary
prescription drugs. I mean, this is something that you need, right,
It's not something that you can choose not to buy

(05:59):
just because there's the prices too high. So if you're
somebody who is just a guy like you or me
who knows it needs to go get their prescriptions. There's
really not much you can do at this point, right,
I mean, there's no options other than ask your dog
for a generic or a What can you do on
the just as the everyday guy and gal listening.

Speaker 2 (06:18):
Well, Unfortunately, the system was supposed to be designed such
that PBMs were the one working on our behalf. But
just like the drug companies, just like the wholesalers, and
just like the pharmacies and other intermediaries, they want to
make money too, and so they make a lot of
money off of the old ways that other members of
the drug channel used to. So when the PBM isn't

(06:39):
looking out for you, well they're the ones who were
supposed to, so you're left kind of to your own devices. Well,
one of the ways that you can insulate yourself from
some of these schemes within our insurance PBM marketplace is
shop around here in Columbus, there is a pharmacy in
Pickerington called Freedom Pharmacy where they have unplugged the insurance

(07:01):
PBM game and instead offer transparent cost plus prices to
anybody that walks through the door. You have Mark Cuban's
cost plus drug company nationally that will mail you prescriptions
based upon the underlying costs and a set, transparent markup
that is consistent for every customer on every drug. That's

(07:21):
kind of our roadmap out of this mess.

Speaker 1 (07:24):
I love that, and I love that you called out
that local pharmacy in Pickerington, call it's Freedom Pharmacy. Let's
give them another plug. Freedom Pharmacy in Pickerington.

Speaker 2 (07:34):
That is correct. The owner, Nate Coox, was an old
independent pharmacy owner who said this is stupid the way
the system works, and he literally closed down his old
pharmacy and opened a cash one