May 24, 2023

Most have heard the sick joke that starts, “I have good news and bad news. Which do you want first?” Following is very good financial news in healthcare that is terrible news for patients. 

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Optum PBM (pharmacy benefits management) is one of the three PBM companies that control 79 percent of pharmaceutical distribution in the U.S. Optum recently reported a 25 percent increase in its revenue growth. Consider the effect of this improved profit margin on patient care, which is the reason for any healthcare system to exist. 

The answer lies in dollar flow, or as Cuba Gooding Jr. exclaims in the movie Jerry Maguire, “show me the money!” PBMs are middle men, third parties who contract with health plans to choose the drugs in hospital and outpatient pharmacies. They claim to achieve lower prices for the health plans and thus save them money. Drug manufacturers provide large rebates to PBMs as incentives to buy their particular medications. 

Put simply, PBMs make their profits by limiting patients’ access to the cheapest drugs. PBMs save money for third party payors, i.e., health plans or insurers, not patients. Worse, PBMs practice medicine without a license. By suppling limited lists of authorized drugs, PBMs restrict what drugs doctors can prescribe for their patients. If a physician believes a drug not on the PBM “menu” is best for a specific patient, the health plan won’t pay for that prescription. Given the exorbitant prices of modern drugs, most patients cannot pay out of pocket, and thus PBMs deny patients the best drugs for them.

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When Optum posts record profits, health plans, not patients, benefit financially. Patients do get drugs, just not the ones their doctors would choose for them. 

Hims & Hers Health is a stock touted for 235 percent growth in stock price over the past year. The company has an 80 percent profit margin. Average profit margin for providers of health care services is 2.14 percent. This contrast bears emphasis. Those who provide direct value to consumers – providers of medical services – work for two percent profit while those who never touch a patient make forty times as much. 

Another positive financial news headline read, “Pfizer and Stryker [stocks] Have Strong Growth Prospects.” When publicly traded companies, whether insurers, PBMs, or pharmaceutical manufacturers, report good earnings, their stock prices rise. The market price of any stock is driven by investors’ projections of future earnings, generally based on trend of present earnings. 

A 2020 study compared changes in healthcare stock prices to measures of access to medical care. The ten-year period of 2007-2017 was chosen as it spans a time before the Affordable Care Act was passed in 2010 to three years after the ACA was implemented (2014).  Changes in stock prices and care availability should in part be attributable to the ACA.

Over the ten-year study period, the S&P 50 increased 82 percent, while stock prices of the seven largest health insurers rose between 157 percent and 635 percent. During the same time period, access to care declined dramatically.

Maximum wait times to see a primary care physician rose from 99.6 days to 175.7 days. In 2007, 74 percent of U.S. family physicians accepted new Medicaid patients into their practices. Ten years later, that percentage decreased to 55 percent.