Big Pharma Cartels

Legalized antitrust of pharmaceuticals — the heart of collusion between Big Pharma and insurance companies.

How it came about is immaterial. But the result is indisputable: if the behavior of the American pharmaceutical industry was not facilitated by federal law, it would be considered racketeering in any other industry. Yet, this behavior is not only allowed. It’s encouraged!

There are many more layers to the corruption of Big Pharma, such as pushing newer medicines over older ones and the lack of interest in studying anything except that which will help them push new drugs — but these are separate problems to discuss later.

Antitrust laws are designed to protect consumers. Antitrust laws make it illegal for firms to collude and form cartels aimed at increasing their profits through price fixing.

Yet the United States healthcare laws instead encourage this very antitrust behavior.

Regulatory laws around drug prices are made with good intentions, but they allow Big Pharma to collude with Insurance companies when setting the price that a consumer will pay for a given drug. The consumer has no say in this, and the price-fixing behavior is hidden from their view because this collusion happens behind the scenes. The consumer rarely sees what they pay, not the “contracted amount.”

Furthermore, drug companies regularly review the average prices paid to insurance companies, then set a new contracted price — usually at an increased rate.

Price fixing, in any market, always is detrimental to the market and the consumer, so why is this allowed?

Part of the problem is visibility: consumers only pay the up-front cost and don’t see the actual amount being exchanged.

Another part of the problem, which is clearly at the heart of the corruption, is the system’s complexity. There’s a third party in the mix between the pharmaceutical and insurance companies set up to facilitate the exchange and help set the prices. The idea is this is a third-party company that should, in theory, be a neutral party.

However, in reality, what has happened is these third-party billing companies are, in reality, owned in part by the big pharma companies and in part by the insurance companies! They’re the fox guarding the henhouse.

The abstractions and complexity added to the system make it even harder to understand. Most consumers never see the real money being exchanged behind the curtain because they’re given a sugar pill of a low up-front “co-pay” amount.

The overall corruption is relatively easy to see if you know what to look for. Next time, when picking up a prescription, ask for four things:

1. Co-pay — What am I paying? (you should already know this) This is the sugar pill made to help hide the collusion.
2. Market Price — What is the amount if I don’t use insurance but a third-party discount card instead? This is the closest thing we have to a true market rate (see more about free markets below).
3. Contracted Price — What is the contracted amount? This is the collusion. In most cases, this will be far more than the market rate.
4. List Price — What does this cost if you were to buy it with no other assistance? This is the big lie, as nobody should ever pay this amount.

They get away with it so much because they set a high list price, even though NOBODY should ever pay that amount. Instead, the actual exchanged amount is either a Market or Contracted price, mostly done through the Contracted price.

However, when the pharmaceutical and insurance companies collude to set the price, they consider the list price part of the decision context. This would make sense in a healthy free market, as the List price should is by supply and demand. But in this market, it is not. Big Pharma arbitrarily sets it, and they set it high on purpose.

And remember those exchanges set up in the middle? At the end of the day, after the contracted amounts are paid and settled, there are often kickbacks that can go both ways.

Most insurance plans have some form of a deductible — an amount that you, as a consumer, must pay before the big benefits kick in. As you pay the contracted rate with a co-pay, your co-pay amount is added to that deductible.

But what happens if you don’t pay the contracted fixed price? What if you instead buy it at the Market Price, which often may even be lower than your co-pay amount?

The insurance companies will not allow this to count against your deductible.

Why?

Because you are bypassing their collusion.

So why is that prohibited? Shoudln’t it be encouraged?

This entire system is rotten to the core, and we need a complete reset.
The solution, however, is not more and more legislation! It’s not more governmental controls or socialization of the medical system: that simply adds fuel to the very fire (more governmental control has always, historically, resulted in greater system corruption).

The solution is simple: increase visibility and allow the free market to work.

1. Insurance companies should be required to add any payment made by a consumer, through any means or exchange, to the person’s deductible — not only the arranged contracted rate. This may seem minor, but it’s a stake right to the core of the problem.
2. Pharmaceutical bills for a consumer should be straightforward and focused, showing simply:

• Market rate — How much this would cost on the open market (NOT LIST PRICE) — this amount should be based on market samplings, including independent discount programs.
• How much you are paying now (co-pay)
• How much is paid up-front by the insurance company (contracted amount)?
• True contracted rate — how much the insurance gets in kickbacks from the exchange and pharmaceuticals, subtracted from the contracted amount.

In the end: Simplify and focus regulations on pharmaceutical billing by increasing true visibility to enable and empower the free market. The free market works, so let it. Remove the legal systems of collusion that have been put in place.

What do you think? Am I missing something? Are there other options?