Healthcare: there are simple problems and there are wicked problems. A simple problem might have one or two steps or obstacles to be able to accomplish a goal. For instance, if you wanted to read this blog, you would have to find your computer, turn your computer on and search the web in order to read this blog. A wicked problem is something much more complex. Like poverty or pollution. Outside of utopia, wicked problems can be made better but never solved. Why can they never be solved?
Health care and specifically medication pricing are two examples of wicked problems. I liken the wicked problem of medication pricing to a giant Alexander Calder mobile where the large stegosaurus pieces in the mobile represent major players in the convoluted ecosystem of pharmaceutical pricing: pharmacies, pharmaceutical manufacturers, wholesalers, insurance companies patients, pharmacy benefit managers, etc. Some of these moving parts are interconnected and move together; some are, at times, uncoupled.
PBMs, pharmacy benefit managers, are the most dominant force in the mobile when it comes to the entities that control the price of medication. Every insurance company has a pharmacy benefit manager (PBM) that organizes and administrates all medicines in the insurance plan. Specifically, PBMs are responsible to design the payor’s formulary including designating specific drugs allowed on the plan, tiers of payment, negotiating terms with pharmacies, etc. Therefore, PBMs are principally responsible for the wickedness: establishing the cost of medications to patients and in the obscurity of pricing of medications.
Pharmacy costs are rising in excess of general and medical cost inflation, leading to calls for price and utilization controls by public and private payers.
Read more about the problems with Healthcare here.