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The Price of Health: Unpacking the Cost of Mounjaro in the U.S.

Last night, our leader took the stage, leaving plenty to analyze and debate. Rather than getting lost in the media frenzy—where opinions swing between calling him a “buffoon of a president” and claiming he's on a “mandate from God”—I’d rather shift focus to something more tangible: healthcare and the pharmaceutical industry.

Right now, I’m working with Beth (ChatGPT) to better understand the cost of medication through my health insurance and Pharmacy Benefit Manager (PBM). This journey began when my doctor suggested I try Mounjaro, a medication that could help manage my prediabetic blood sugar levels, high blood pressure, and peripheral neuropathy—with the added benefit of some weight loss. While my blood sugar levels aren’t technically in the diabetic range, some doctors believe they could still be contributing to my neuropathy, so I figured it was worth trying.

What I didn’t expect was the financial and bureaucratic maze I’d have to navigate:

• First, I had to appeal my insurance denial just to get approved. Fortunately, I won the appeal.

• Then came the cost shock: The retail price of Mounjaro is a staggering $1,129 per month in the U.S. Even with insurance, I’m expected to pay around $550 monthly—while in Ireland, the average cost is just $230. This raises an important question: Why does the same medication cost so much more in the U.S.?

Today, I’ll be diving into the economics of pharmaceutical pricing, PBMs, and how these factors shape the affordability of life-changing medications.

One-Page Summary: The Role of PBMs and the High Cost of Mounjaro

  1. Understanding the Key Stakeholders in the Pharmaceutical Supply Chain
    The primary players influencing drug pricing and access include:

• Patients – The end consumers who need medications and bear significant out-of-pocket costs.
• Doctors – Prescribe medications based on medical needs but have little control over pricing.
• Pharmacies – Dispense drugs but rely on PBMs for reimbursement rates.
• Manufacturers – Set the drug’s list price but negotiate discounts and rebates with PBMs.
• Insurance Companies – Determine coverage and patient cost-sharing, often working closely with PBMs.
• Pharmacy Benefit Managers (PBMs) – Act as intermediaries between insurers, manufacturers, and pharmacies, negotiating drug prices and rebates but also profiting from opaque pricing structures.

  1. The Evolution of PBMs: From Cost Savers to Price Inflators

PBMs were originally designed to lower drug costs by negotiating bulk discounts. However, over time, they:
• Incentivized higher drug list prices by negotiating large manufacturer rebates but not passing savings to patients.
• Engaged in spread pricing, charging insurers more than they reimburse pharmacies.
• Created formulary restrictions that sometimes prioritize profitability over patient needs.
• Grew in power through consolidation, with three major PBMs now controlling nearly 80% of the market.

  1. Unpacking Your Mounjaro Pricing Issue

• Manufacturer’s list price: $1,129.
• Insurance’s claimed invoice price: $1,600 (possible artificial inflation).
• PBM-negotiated price: $1,100.
• Your coinsurance (50% of $1,100): $550.
• Insurance payment: $550 (before rebates).
• PBM’s rebate from the manufacturer: $879.
• Final insurer/PBM cost after rebate: $221.
• Problem: Your coinsurance ($550) is more than the PBM’s final net cost ($221), meaning they profited off your out-of-pocket payment.

  1. The Key Question: Should Rebates Be Applied to Patient Costs?

• Your policy states you pay 50% of the drug’s cost, yet rebates are excluded from the equation, leading to overpayment.
• In traditional medical billing, patients pay based on the insurer’s final negotiated rate—but for prescription drugs, rebates are hidden from cost-sharing calculations.
• Your State has laws requiring PBM transparency, and recent reforms suggest PBMs should pass rebates to consumers.

  1. Next Steps & Potential Actions

• Request a detailed Explanation of Benefits (EOB) from your insurer to verify how the price was calculated.
• File a complaint with the State Department of Banking and Insurance (DOBI) regarding transparency violations.
• Challenge the insurance company’s pricing methodology under state regulations.
• Consider legal action for misrepresentation if the insurer’s practices violate cost disclosure laws.

Conclusion

The current PBM model allows insurers and middlemen to profit at the expense of patients, raising ethical and legal concerns. state’s PBM regulations may offer a path to challenging these practices, ensuring fairer pricing and greater transparency for patients.

This ends the summary The Remainder of this post is my actual questions and responces from Beth(ChatGPT)

The Price of Health: Unpacking the Cost of Mounjaro in the U.S. Session

The first question:

Who are all the stakeholders in the supply chain and what are their roles and responsibilities. My understanding is that the primary stakeholders are:
The Patient
The Doctor
Pharmacy
Manufacture
Insurance company
and the PBM
Can you provide a short description of all the stakeholders and if I am missing any please feel free to add them to the list

Beth’s Response(AI)

You're on the right track with the primary stakeholders in the pharmaceutical supply chain. Here’s a breakdown of their roles and responsibilities, along with a few additional key players that influence drug pricing and access.
Primary Stakeholders in the Pharmaceutical Supply Chain

  1. The Patient

o The end consumer who needs the medication for treatment.
o Responsible for obtaining prescriptions, adhering to treatment, and paying out-of-pocket costs (copays, deductibles, or full price if uninsured).
o Often has limited visibility into the pricing negotiations that determine what they pay.

  1. The Doctor (Prescriber)

o Diagnoses and prescribes medication based on the patient’s condition.
o Works with insurance requirements (e.g., prior authorizations, formulary restrictions).
o May have limited influence over medication costs but can sometimes advocate for patient access (e.g., writing appeals for coverage).

  1. The Pharmacy

o Dispenses prescribed medications and processes insurance claims.
o Works with PBMs to determine reimbursement rates.
o Often has little control over drug pricing but may offer generic or alternative options to reduce costs for patients.

  1. The Manufacturer (Pharmaceutical Company)

o Develops, produces, and markets medications.
o Sets the list price of a drug but does not control final consumer costs due to PBM and insurer negotiations.
o Provides rebates and discounts to PBMs and insurance companies in exchange for formulary placement.

  1. The Insurance Company (Health Plan)

o Provides coverage for prescription drugs, determining how much the patient pays out-of-pocket.
o Negotiates with PBMs and pharmaceutical companies to establish coverage rules and costs.
o May require prior authorization, step therapy, or quantity limits before covering a drug.

  1. The PBM (Pharmacy Benefit Manager)

o Acts as a middleman between manufacturers, insurers, and pharmacies.
o Negotiates drug prices and rebates with manufacturers and sets reimbursement rates for pharmacies.
o Designs formularies (lists of covered drugs) and dictates which medications require prior authorization.
o Profits from rebates and spread pricing, contributing to the complexity and opacity of drug pricing.
Additional Stakeholders to Consider

  1. Wholesalers (e.g., McKesson, Cardinal Health, AmerisourceBergen)

o Purchase large quantities of drugs from manufacturers and distribute them to pharmacies, hospitals, and healthcare providers.
o Act as logistical facilitators but do not significantly impact drug pricing for patients.

  1. Regulators (FDA, CMS, State Insurance Commissions)

o FDA (Food and Drug Administration): Approves medications for safety and efficacy but does not regulate prices.
o CMS (Centers for Medicare & Medicaid Services): Manages government drug programs (Medicare, Medicaid).
o State Insurance Commissions: Oversee insurance practices and ensure compliance with healthcare laws.

  1. Employers (For Employer-Sponsored Insurance Plans)

o Many Americans receive drug coverage through employer-sponsored health plans.
o Employers contract with PBMs and insurers to provide coverage options to employees.
o May influence which plans and drug coverage options are available.

  1. Advocacy Groups & Patient Assistance Programs

• Nonprofit organizations and drug manufacturers may offer patient assistance programs to provide financial relief.
• Advocate for drug pricing reforms and increased access to affordable medications.
Final Thoughts

Each stakeholder plays a role in determining the final price the patient pays for medication, with PBMs and insurers holding significant power in shaping costs and accessibility. The complexity and lack of transparency in these interactions are key reasons why drug prices in the U.S. remain high compared to other countries.

Second Question:

Since the PBM having a sizable impact on the cost of my medicines, can you please give me a little history of what a PBM does and the value they bring to the supply change both as originally envisioned and how they act today.

Beth’s Response(AI)

The Evolution of PBMs: From Cost Managers to Controversial Middlemen

Originally Envisioned Role of PBMs:

Pharmacy Benefit Managers (PBMs) were created in the 1960s and 1970s to help streamline prescription drug coverage, reduce costs, and improve efficiency in the healthcare system. Their primary role was to negotiate lower drug prices on behalf of insurers and employers by leveraging bulk purchasing power.

Their early responsibilities included:

• Processing prescription claims between pharmacies and insurance companies.
• Creating formularies (lists of approved drugs covered by insurance).
• Negotiating discounts and rebates from drug manufacturers to reduce costs for insurers and patients.
• Managing pharmacy networks to ensure widespread access to medications.
At this stage, PBMs were largely administrative entities that helped reduce inefficiencies in the pharmaceutical supply chain.
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How PBMs Operate Today: Increased Influence and Controversy
Over the past few decades, PBMs have grown into powerful industry players, controlling drug pricing, formulary placement, and pharmacy reimbursements. The industry consolidated significantly, with just three major PBMs (CVS Caremark, Express Scripts, and OptumRx) now controlling nearly 80% of the market.
Today, PBMs make money through several mechanisms that have raised concerns about their impact on drug prices:

  1. Negotiating Rebates with Drug Manufacturers

o PBMs negotiate rebates (discounts) with drug manufacturers in exchange for placing their drugs on preferred formularies.
o However, these rebates are not always passed directly to patients, and critics argue they incentivize higher list prices, as manufacturers must raise prices to afford bigger rebates to PBMs.

  1. Spread Pricing

o PBMs charge insurers more for a drug than they reimburse pharmacies, pocketing the difference as profit.
o This practice has led to independent pharmacies closing because PBMs often reimburse them less than the cost of acquiring the drug.

  1. Formulary Design and Prior Authorizations

o PBMs determine which drugs are preferred (covered with lower copays) and which require prior authorization or step therapy (where cheaper alternatives must be tried first).
o This has led to situations where patients are forced to switch medications based on PBM financial incentives rather than medical necessity.

  1. Vertical Integration

o Many PBMs are now owned by health insurance companies (e.g., CVS owns Aetna, OptumRx is part of UnitedHealthcare), creating conflicts of interest where they control both drug pricing and coverage decisions.
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Do PBMs Still Provide Value?
While PBMs claim they still lower drug costs, critics argue that their business model has shifted from cost savings to profit maximization. Instead of simply passing along savings to patients, they now extract revenue at multiple points in the supply chain, contributing to higher out-of-pocket costs and opaque pricing structures.
Potential value PBMs could provide:
• Negotiating lower prices through bulk purchasing (but whether these savings reach consumers is debatable).
• Managing drug utilization by ensuring patients receive appropriate medications.
• Providing mail-order and specialty pharmacy services for convenience.
Challenges and criticisms:
• Lack of transparency on how much of the rebates and discounts are actually passed to consumers.
• Incentivizing higher list prices due to rebate-driven pricing structures.
• Restricting patient choice through formulary controls and step therapy requirements.
• Squeezing independent pharmacies by under-reimbursing them.
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Final Thoughts

PBMs were originally designed to reduce drug costs, but over time, they have become key profit-seekers in the supply chain, often driving prices higher rather than lowering them. Their influence on pricing and coverage means patients often pay more than they should for essential medications, raising questions about whether reforms—such as requiring PBMs to pass along rebates directly to consumers—are necessary to realign their incentives with the goal of affordable healthcare.

Point of Clarification:

If I am to understand this correctly the PBM can negotiate a price lower than the patient copay. For instance the manufacturer list the price of Mounjaro at $1129 online, My insurance company says that they were invoiced `1600 for but had a negotiated price of 1100, My policy says I pay 50% so I Pay $550 My Insurance says they Pay $550, The PBM negotiates a rebate of $879 on the list price so they only pay $250. This is less than the 550 I paid.

Beth’s Response(AI)

Yes, you are understanding this correctly—your copay can sometimes be higher than what the PBM actually pays for the drug after negotiated rebates.
Let's break down what’s happening with Mounjaro's pricing in your case:
1. Manufacturer’s List Price (Wholesale Acquisition Cost – WAC)
o Publicly listed as $1,129 (this is often inflated).
2. Insurance Invoice Price (Before Negotiation)
o The insurance company claims they were invoiced $1,600 (this may include additional fees or artificial inflation).
3. Negotiated Price Between PBM & Manufacturer
o The PBM secures a discounted price of $1,100 for the drug, which is what is reported as the “cost” to your insurance.
4. Your Insurance Policy (50% Copay Rule)
o Since your plan requires you to pay 50% of the negotiated price, you are billed $550.
o Your insurance says they cover the remaining $550.
5. Rebate Negotiated by PBM
o The PBM negotiates a rebate of $879 from the manufacturer.
o That rebate is not passed directly to you—instead, it reduces the PBM’s net cost to $221 ($1,100 – $879).
6. Who Actually Pays What?
o You pay: $550 (more than the PBM’s final cost).
o PBM/Insurer pays: $550 initially, but after rebates, their net payment is only $221.
o PBM/Insurance profits from the rebate and keeps the difference.
Key Takeaways
• Your out-of-pocket cost ($550) is more than the final net cost to the insurer/PBM ($221).
• The PBM profits off rebates but does not pass them on to you, leading to higher patient costs.
• This rebate-driven system encourages higher list prices, since manufacturers inflate drug prices to afford large rebates paid back to PBMs.
• Patients with high-deductible or coinsurance plans are hit the hardest, as they pay based on inflated prices, not the true net cost.
The Big Problem with This System
• This pricing strategy is why drug costs in the U.S. remain artificially high, while in countries like Ireland (where PBMs have little influence), the same drug costs $230 on average.
• Instead of reducing prices for patients, PBMs and insurers extract hidden profits from the system through rebates, and those savings rarely lower what individuals pay at the pharmacy.
• Insurance companies might not be paying much at all after rebates, yet you still owe 50% of the “negotiated price” instead of the true post-rebate cost.
This is why PBMs have been under scrutiny—they claim to reduce costs but often increase out-of-pocket expenses for patients while pocketing rebate profits.

Third Question:

Since my Policy says I must pay 50% of the cost of the medication should I not only pay 50% of the final negotiated cost including all rebates and incentives to the insurance company or its representative, the PBM. My policy clearly states 50% of the cost, not 50% of the inflated negotiated cost. It is using the same wording as for medical where a doctor has a list price for a procedure of $1000 the insurance negotiates a rate of $250 and I pay 50% $125. They do not charge me 50% of the list price. Why is this different?

Beth’s Response(AI)

Why Are Prescription Drug Copays Based on the Negotiated Price, Not the Final Rebate-Adjusted Cost?

You are absolutely correct in questioning this—logically, your 50% coinsurance should be based on the insurer’s final cost, just like how medical procedures are billed. However, the prescription drug system operates under different rules than general medical billing. Here’s why:
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1. How Medical Billing Works vs. Prescription Drug Billing
• Medical Claims:
o If a doctor charges $1,000 for a procedure, and your insurer negotiates it down to $250, your 50% coinsurance means you pay $125.
o Your share is based on the final insurer-negotiated cost, not the sticker price.
• Prescription Drug Claims:
o If Mounjaro’s negotiated price is $1,100, your 50% share is $550, even though the PBM later gets a $879 rebate, effectively lowering the true cost to $221.
o Unlike medical claims, the insurer or PBM does not pass rebate savings to you, meaning you pay 50% of a price higher than the insurer's actual cost.
This discrepancy exists because of how PBMs and insurers classify rebates and drug pricing.
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2. Why Prescription Drug Copays Are Not Based on Rebates
The system is different for drugs because rebates are processed separately from the initial claim and classified as post-transaction financial adjustments, not price reductions. This allows PBMs and insurers to avoid directly applying them to patient costs.
• Rebates Are Not Considered “Price Reductions” in the Claim Process
o When you pick up your prescription, your insurance processes the claim at the negotiated price ($1,100 in your case).
o The rebate ($879) is paid back to the PBM/insurer weeks or months later, after your purchase is already finalized.
o Since the rebate isn’t applied at the point of sale, it doesn’t reduce your out-of-pocket share.
• PBMs and Insurers Keep the Rebate Instead of Passing It to Patients
o Unlike medical claims, rebates on drugs are treated as insurer revenue, not direct savings for patients.
o In some cases, insurers may use these rebates to lower overall premiums—but this does not directly help people like you who are paying high out-of-pocket costs.
• Conflict of Interest: Higher Rebates = Higher Costs for Patients
o Because PBMs profit from rebates, they incentivize higher list prices while insurers continue to base patient cost-sharing on inflated pre-rebate prices.
o This is why patients in high-deductible or coinsurance-based plans pay significantly more than necessary.
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3. The System Is Designed to Benefit PBMs and Insurers, Not Patients
You are being overcharged because the insurer/PBM has structured the system to their benefit:
Scenario What You Should Pay (50%) What You Actually Pay (50%) What Insurer/PBM Actually Pays
Medical Service ($1,000 list price, $250 negotiated rate) $125 $125 $125
Drug: Mounjaro ($1,129 list price, $1,100 negotiated rate, $879 rebate) $110 (50% of final cost $221) $550 (50% of negotiated price) $221 after rebate
• The insurance company’s true net cost is only $221, but you are paying $550 because rebates are hidden from you.
• In a fair system, your 50% coinsurance should be based on the insurer’s true net cost—not an inflated number that ignores rebates.
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4. Can You Fight This?
Yes, but it’s an uphill battle because PBMs and insurers control the pricing structure. Some potential actions:
• Request a formal explanation of benefits (EOB): Ask your insurer to itemize how the cost-sharing was calculated and whether rebates are considered.
• Check state laws: Some states have passed PBM transparency laws requiring rebate savings to be passed along.
• Appeal the cost-sharing decision: It’s possible to challenge the calculation based on unfair pricing practices.
• Push for policy changes: The Inflation Reduction Act and other federal efforts are trying to force insurers/PBMs to apply rebates directly to patients at the pharmacy counter.
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5. Why This System Needs Reform
• Patients should pay coinsurance based on the final net price after rebates—just like in medical billing.
• PBMs and insurers should not be allowed to profit from rebates at the expense of patients.
• Legislative efforts are underway to require PBMs to pass rebates directly to consumers, but for now, patients are stuck paying inflated costs.
Until reforms take hold, patients with high coinsurance plans will continue overpaying for prescriptions while PBMs and insurers pocket the difference.

Point of Clarification: Even though the rebate is processed after the transaction should a rebate be sent back to the patient. I ask this because by not giving the rebate back to the patient they are violating my insurance policy in which states I will pay 50% of the cost. Also, in my statement they are misrepresenting the cost by not providing the actual cost of the medicine to me the patient. I live in NJ and I believe we have regulations against not providing accurate statements and you can even say this is a performance report and they are falsifying the performance number.

Beth’s Response(AI)

Your concerns about how Pharmacy Benefit Managers (PBMs) and insurance companies handle rebates are valid. In your state, recent legislation aims to address these very issues.

State Legislative Actions on PBM Practices:

In 2023, Your Governor signed into law measures designed to increase transparency and reduce prescription drug costs. One significant aspect of this legislation is the requirement for PBMs to pass on savings from rebates directly to consumers. This move targets practices like “spread pricing,” where PBMs charge health plans more for a medication than they reimburse pharmacies, pocketing the difference. By mandating that these savings be transferred to consumers, the law seeks to ensure that patients benefit directly from negotiated rebates.

Implications for Your Situation:

Given this legislation, if your insurance policy specifies that you are responsible for 50% of the medication's cost, it's reasonable to expect that this percentage should be calculated based on the net cost after all rebates and incentives have been applied. Failure to do so could be seen as a misrepresentation of the actual cost, potentially violating New Jersey's regulations on transparent billing practices.
Recommended Actions:

  1. Review Your Insurance Policy: Carefully examine the terms of your policy to understand how “cost” is defined concerning your copayment responsibilities.

  2. Contact Your Insurance Provider: Reach out to your insurer for a detailed breakdown of how your copayment was calculated, specifically inquiring about the application of any rebates or discounts.

  3. Consult the State Department of Banking and Insurance (DOBI): If discrepancies persist, consider filing a complaint with the DOBI, which oversees insurance practices in the state.

  4. Seek Legal Counsel: For personalized guidance, consult with an attorney experienced in insurance law to explore potential violations of state regulations and to understand your rights.

By taking these steps, you can address potential overcharges and advocate for more transparent billing practices in line with state’s efforts to regulate PBM activities and protect consumers.