Disrupting the Pharmacy

John Tierney in The City Journal:

team of Internet entrepreneurs in downtown Manhattan wants to revolutionize how Americans get prescription drugs. Their company, Blink Health, has a crazy idea: let customers shop for the best deal. In any other industry, of course, this would not be revolutionary, but it’s a foreign concept at the pharmacy counter and a distasteful prospect to the businesses now shielded from marketplace competition. Politicians and activists routinely decry the resulting high prices, but their preferred solution is to impose price controls that would stifle the development of new drugs. Democrats—joined, at times, by President Trump—argue that government control is necessary because the free-market system has failed patients. But the real problem with prescription drugs, as with the rest of the health-care system, is that the free market hasn’t been tried.

A functioning market requires price signals to provide consumer guidance; but at the pharmacy, neither the buyer nor the seller knows what the price is. In choosing among drugs to prescribe, your doctor doesn’t know how much each will cost you or your insurance company. You can’t find out what you’ll pay until after you’ve chosen a pharmacy to handle the prescription. The pharmacist must contact the insurance company to find out how much to charge you—and even then, he doesn’t know whether the transaction will be profitable.

All that information is available only to the middlemen, who have exploited the system’s secrecy and complexity to profit at the expense of patients, local pharmacists, drug manufacturers, and taxpayers. While politicians denounce the supposed power of Big Pharma, the pharmaceutical manufacturers are a puny, disorganized force compared with the companies that control the pricing and availability of drugs—Big Pharmacy, as the executives at Blink Health call these middlemen. They’re the ones who decide whether your insurance will cover a drug, how much you’ll pay for it at the counter, and how much of that payment the drugstore will keep.

More here.

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