Paying more for some medications

People frequently complain about the outrageous drug prices that patients endure. KFF Health News published an interesting piece, however, describing a case when maybe patients (or payers) are not paying enough: generics. The article reports that "Everyone wants to pay less, and the middlemen who procure and distribute generics keep driving down wholesale prices... As generics manufacturers compete to win sales contracts with the big negotiators of such purchases, such as Vizient and Premier, their profits sink. Some are going out of business."

In the short-term, middlemen and payers might feel that they are winning by securing lower prices. However, when the long-term supply dwindles such that there are meaningful shortages of live-saving medications, patients can suffer. Likely, a major problem is that there is too much market consolidation within the world of middlemen in this industry (presumably, the pharmacy benefit mangers), and as a result, they command too much market power. Another factor might be long-term contracts that make it difficult for suppliers to raise prices to cover their costs when shortages arise. A controversial way of addressing this problem could be to make insurers somehow liable for medical harm (including deaths) caused by shortages of generic drugs. Similar to provider coverage requirements that are imposed upon insurers (where insurers must have certain number of providers per enrolled patient in areas they sell policies), insurers could be made responsible for the actual acquisition of generics. After all, the theoretical ability to buy a medication at a certain price if it is available is not that helpful when that medication is actually not available. If the shortage of medication leading to medical harm is due to insurers' relentless obsession on short-term savings, it seems fair that they bear at least some of the burden of fixing the problem.