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DiRx cuts out Rx middlemen to lower costs

Written by Diane Archer

Why should insurers be involved in people’s purchase of prescription drugs?  Allison Bell writes for Think Advisor about Satish Srinivasan,  whose company eliminates insurers and PBMs from the prescription drug purchasing process for generic drugs. It should bring down your cost for generic drugs, but it’s not clear by how much.

Srinivasan is the CEO of DiRx. His company operates an online pharmacy principally for individuals who pay for their medications with their own money, rather than through insurance. For the most part, Srinivasan’s customers either don’t have insurance or have high-deductible plans and want to pay as little as possible for their drugs. They might have a health savings account to get their drugs tax-free. In some cases, people use DiRx and then submit their bills to their health insurers for reimbursement.

Srinivasan started his business to reduce prescription drug costs for Americans. He saw firsthand how health insurers drive up the cost of prescription drugs. Insurers add their administrative costs to the prescription drug’s cost. Moreover, their cost is based on a “reference price,” not the drug’s actual cost to them. So, insurers want to keep the reference price as high as possible. Then they can keep as much of the spread between the reference price and the drug’s actual cost for themselves.

Srinavasan also blames Pharmacy Benefit Managers (PBMs) for the high cost of drugs in the US. PBMs negotiate drug prices with pharmaceutical companies and then decide which drugs will be covered and at what cost to patients–the formulary. They can, and will often, include prescription drugs on their formularies that cost more than other similar drugs when they make more money by doing so. And, PBMs will sometimes exclude low-cost drugs from formularies when they profit more by doing so, as CVS has been charged with doing.

Srinavasan’s company cuts out the PBMs and the insurers to drive down drug prices. How much savings you get is unclear. DiRx works directly with the generic drug manufacturers.

Mark Cuban’s Cost Plus formulary manufactures hundreds of prescription drugs and sells them at cost plus 15 percent and a $3 processing fee. His company has begun contracting with insurance companies to cover drugs you buy through his formulary.

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