Drugmakers Are Embracing Direct-To-Consumer Sales. That’s Fantastic News For Patients.
“By embracing a DTC sales model, pharmaceutical companies and the patients that consume their drugs can essentially cut PBMs and other middlemen out of the picture,” writes Pipes.
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Several Big Pharma companies have started selling their drugs directly to consumers (DTC). This shift — driven in part by President Trump’s push for lower drug prices and fewer middlemen — has garnered relatively little media coverage. But the implications for American patients, employers, and the healthcare system as a whole are enormous.
Over the past two decades, the DTC sales model has revolutionized the way Americans buy everything from mattresses to contact lenses. If DTC sales become the norm in the pharmaceutical industry, patients and employers could save tens of billions of dollars — by cutting out the middlemen who currently profit from the convoluted and opaque drug supply chain at everyone else’s expense.
In recent years, Eli Lilly, Pfizer, Bristol Myers Squibb, and Novo Nordisk have all unveiled DTC programs for a select handful of drugs. Roche is considering its own program. And President Trump just urged every major pharmaceutical firm to follow suit. The result will be lower drug prices for American patients.
These programs generally offer a heavily discounted cash price — along with free shipping — to patients who buy directly from the drug giants, rather than filling their prescriptions at brick-and-mortar pharmacies and paying with their health insurance cards. The model has broad, bipartisan appeal: new polling from Unleash Prosperity Now found that 86% of all likely voters — including Republican, Trump, Independent, and Democratic voters — support allowing drugmakers to bypass middlemen and sell directly to patients and local pharmacies.
It’s no mystery why companies are rethinking their traditional business model of selling bulk quantities of drugs to the pharmacy benefit managers that oversee insurance plans. Just three PBMs — CVS Caremark, Express Scripts, and Optum Rx — control about 80% of all prescriptions dispensed in America. PBMs determine whether tens of millions of American patients can, or cannot, access a given drug through their insurance plans.
PBMs use this leverage to extract enormous secret discounts, rebates, and fees for themselves and other middlemen. Roche CEO Thomas Schinecker recently noted that roughly half of all U.S. drug spending now flows back to PBMs and other middlemen, rather than the companies that actually develop and manufacture medicines.
In fact, net inflation-adjusted prices for brand-name drugs — meaning the amounts that manufacturers actually retain after giving discounts and rebates to PBMs and other middlemen — have actually fallen for seven years in a row.
That statistic would surely shock most patients, who generally feel as if they’re paying more than ever for prescriptions. And in many cases, patients really do face rising out-of-pocket costs. But the blame rests with middlemen who are siphoning off an ever-greater share of the money spent on medicines, leaving both the drug innovators and the drug consumers worse off.
PBMs actively exploit this lack of price transparency to gouge patients and employers alike.
One report from the House Oversight Committee found that PBMs use “opaque pricing and utilization schemes to overcharge plans and payers.” Roche’s CEO noted how his company’s multiple sclerosis treatment Ocrevus was “priced at a 25% discount to the existing standard of care at launch” — but PBMs structured insurance coverage in such a way that Ocrevus actually came with higher-than-average out-of-pocket costs for patients.
By embracing a DTC sales model, pharmaceutical companies and the patients that consume their drugs can essentially cut PBMs and other middlemen out of the picture — and capture the tens of billions of dollars that PBMs record in profit each year.
DTC sales wouldn’t just save patients money, though. It’d also spare them the hassle of having to deal with PBMs’ and insurers’ coverage restrictions, claims denials, prior authorization requirements, and restrictive pharmacy networks.
Right now, PBMs frequently block patients from accessing common drugs in order to steer them towards competing treatments that come with larger rebates for the PBMs.
For example, CVS Health’s Caremark recently excluded Lilly’s GLP-1 weight loss treatment Zepbound from its list of covered drugs, essentially forcing patients to either switch to a replacement with different side effects or stop filling their prescriptions entirely. The same thing happened when Caremark forced patients to switch from blood thinner Eliquis to Xarelto — a move that was “sharply criticized” by doctors.
If patients instead pay a transparent cash price directly to drug companies, they won’t have to worry about any of those restrictions. And they could save even more money by using funds from their tax-advantaged health savings accounts, or from flexible spending accounts or health reimbursement accounts that employers contribute to.
Employers could also save enormous sums. They’d no longer be forced to pay huge fees to PBMs. And over time, insurance premiums should theoretically decline as fewer drug claims are routed through insurance.
Markets work best when buyers and sellers have clear price signals. But right now, most patients have no idea how much their medicines will actually cost out-of-pocket, since those obligations are determined by insurers and PBMs.
Fortunately, that’s starting to change. As drug companies increasingly adopt the DTC sales model, patients will gain the ability to buy the medicines they need at fair, transparent prices — without interference or price gouging from middlemen.