FDA Commissioner Says ‘Rigged’ System Raises Drug Costs for Patients, Discourages Competition

Scott Gottlieb, commissioner of the Food and Drug Administration (FDA), on Wednesday criticized what he called a “rigged” system that keeps some generic drugs off the market and leaves patients paying high costs.

Complex and secret deals between drug distributors, pharmacies, insurers and other key players have kept less expensive drugs off the market, he argued during a speech at a conference Wednesday for major health insurance companies.

“The rigged payment scheme might quite literally scare competition out of the market altogether,” Gottlieb said.

“I fear that’s already happening.”

Gottlieb said the existing system makes it harder for biosimilars — cheaper versions of complex drugs — to enter the market because older, more expensive drugs are favored.

“The very complexity and opacity of these schemes help to conceal their corrosion on our system – and their impact on patients,” he said. 

“In the long run, the interests of patients, providers, and manufacturers are not well served by these arrangements, precisely because these practices encourage large list price increases to fuel the pricing schemes.”

Gottlieb specifically called out prescription benefit managers (PBMs), which serve as middlemen between insurers and drug manufacturers and work to negotiate prescription drug prices with drug makers. 

But those savings aren’t passed along to patients, Gottlieb said.

“Too often, we see situations where consolidated firms — the PBMs, the distributors, and the drug stores — team up with payers,” Gottlieb said.

“They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers.”

Gottlieb also criticized drug rebates, a process in which drug manufacturers give insurers discounts on certain drugs.

Insurers often use these savings to lower premiums for all patients, not passing the discounts on these drugs directly to those buying them, who pay the list price set by manufacturers. 

“Patients shouldn’t face exorbitant out-of-pocket costs, and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries, or is used to buy down the premium costs for everyone else,” Gottlieb said.

“The big copay or rebate on the costly drug can help offset insurers’ payments to the pharmacy, and reduce average insurance premiums. But sick people aren’t supposed to be subsidizing the healthy.”

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