WASHINGTON — President Trump signed an executive order Thursday directing the federal government to buy certain drugs solely from American factories.
The so-called “Buy American” order could represent a seismic shakeup of the drug industry: No one knows exactly how much of the American drug supply chain is produced abroad, but some experts insist up to 90% of critical generic drugs are made at least partially abroad.
It remains unclear, however, how broadly the order will be implemented — the executive order does not specify what drugs it covers. Instead, the order directs the Food and Drug Administration to decide which medicines will be subject to the new requirements. Certain drugs can also be exempted from the executive order if they’re too expensive to make in the U.S. or the U.S. isn’t already making them.
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I have been a hospital/health-system for many years, worked at a GPO and also in PhRMA industry and knew that there would be a price to pay, if we brought all the manufacturing back to the US. About 20 years ago, there was an anti-hypertensive drug we used for high risk pregnancy hypertension and the one manufacturer of the generic drug stopped making it, because they couldn’t make money. The physicians and I knew, after the OB-GYN National group petitioned, that we would pay more for this generic drug, but we needed it. I had a CMO from an ACO ask me once, “What is the Fair Value of a Drug? No one would object to paying that, if we can determine.”
Fred: There is an answer to the question “what is the fair value?” if more than one drug manufacturers were able to sell directly to the patient as it happens in any other business. However, in the Pharma world, drug sales are channeled by the PBMs (pharmacy benefit managers) and insurance companies. They get commissions from the manufacturer and the seller and also they decide whose product will be sold. Thus, no one in our mutually subsidized system knows the price of the drug except for copay.
If the drug makers were able to sell directly to patients, competition will set the fair value price. Manufactuirng technology innovation will be there for quality drugs.
One can reverse calculate the price of drugs and see how supply chain jacks up and dictates who sells to them.
Just for example: ONE KILO of Metformin Hydrochloride at active ingredient level sells for about $4.00 per kilo and the manufacturer has his profiting it. Formulator converts it in tablets and lets say his conversion cost is FIVE time the cost of bulk API. Thus ONE KILO metformin (which makes about 2,000 tablets) after formulator’s profit would sell for $20.00 which means each tablet should sell for $0.01 per tablet. However, at Walmart 180 tablets for 90 day supply (500, 850 & 1000 mg) sell for $10.00 irrespective of dosage. That tells us that Walmart makes more money selling 500 mg tablets vs. 1000 mg tablet. Similar calculations can be done for other drugs. Table 3 of the linked http://bit.ly/2NCDITU shows us US prices of Ciprofloxacin.
My point is that NO one in US knows the fair price and the reality has been highjacked by PBMs and insurance middle men. Proof is FOUR PBMs make the top 10 Fortune 500 list.
Be safe and well.
How is that going to cost more for Americans when they are already paying over 200 times more than country next door like Canada? It’s time, to hit those greedy CEOs whose priority is their stock prices come first.