This is the second in a two-part series about price transparency. In the first podcast, I discussed pricing as it relates to hospitals and other providers. In this episode, I will talk about the pharmaceutical industry – a little about how it works and a lot about the types of drugs that are sold and how many of the different kinds of these drugs that we use. In both podcasts, I will talk about efforts underway by the government to provide better information to consumers. The hope is that better access to pricing will increase competition and reduce prices. While I support this free market idea, it has its limitations. In each show, I will provide additional initiatives that should be pursued to not only increase access to better pricing but also to push prices down to realistic levels.
Key Citations

* Video about the drug supply chain in America: The Wall Street Journal
* Accessing drugs for Medicare enrollees: Medicare.gov
* Drug comparison website: GoodRX.com

Transcript
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Welcome to The Powers Report Podcast. I am your host, Janis Powers. The show brings you candid, unique and data-driven perspectives on the health care industry. I believe that any solution that is going to positively impact the American health care system has to satisfy two major criteria: financial viability and behavioral incentive alignment. In other words, access to high quality care can only be achieved if we can afford it, and if we behave in ways that optimize our health. Please subscribe to our show on iTunes or on your preferred podcasting platform and connect with us on social media. Again, this is Janis Powers, and welcome to The Powers Report Podcast.
Americans have become increasingly frustrated with the health care system, and pricing is a big part of the problem. Drug pricing in particular is a bee in almost everyone’s bonnet. And the reason is simple: about half of all Americans take a prescribed medication every day. Drug pricing is crazy and it matters a lot because it affects the daily lives of so many Americans.
As you know, I like to use this show to describe issues in health care but more importantly, to outline some ideas about how to fix them. I will provide an overview of the pharmaceutical supply chain. However, there are a lot of great resources out there that can explain in detail how things function. In particular, I suggest an excellent video “How Drug Prices Work” which was created by The Wall Street Journal. If you want to learn what’s offered to Medicare beneficiaries, I invite you to check out the Medicare.gov site about prescription drugs.
Ok. Let’s talk about drugs.
It’s important to note that there’s a difference between the price that pharmaceutical companies charge for their drugs – which is called the List Price – and the price that we actually pay. If you listened to my last podcast about pricing for hospitals, I talked about the Charge Master. That’s a hospital’s List Price for their services. Insurers negotiate down from these prices, so hospitals are incented to make them very high. Same kind of situation with a drug company’s List Price.
Except there aren’t just insurers in between the drug manufacturers and the consumers. There’s yet another intermediary complicating things, and that’s the pharmacy benefit manager, or PBM.
PBMs exist, some argue,