The Big Business of Insurances in Big Pharmaceutical Industry
Have you looked into the industry of saving lives with the help of medicine? I am talking about the pharmaceutical industry. An industry where medications are paid for just so everyone is happy. No one is saying it is a bad thing to sell medications but for pharma, there is something called the excessive profit without considering people’s health.
I was having a chitchat with a friend when he confided in me that a medication that cost $1.10 to produce was sold to him at the pharmacy for $4.50 when he wanted to pay cash and when he was going to use insurance or other method of future payments, it cost $10.50. Now this is disgusting because the money being paid is high. So who is having this money, is it the insurance company, the pharmacist or the producers of the medication? Like we understand the distribution chain, goods produced are sold to wholesalers and retailers who then sell the goods to consumers, so this means that it is either producing company is selling the medication higher or is it the insurance or the pharmacy/drug stores?
The major goal of every business is to make profit and even when some businesses are funded by the government, they still aim at making ridiculous profit and pharmaceutical companies are one of them. The drug companies just like every other consumable production company has to pass some criteria and get the license to produce the medications. In the case of pharmaceutical companies, they need to pass through the FDA and other agencies. The drugs itself do not really come expensive as the chemicals needed to produce the drug but then the funds for research is higher and companies need to make profit.
When drugs get to the retailer then the patients come in. The thing about most patient is that they have an insurance plan which covers for medical bills and like you will say, who will pay from their pockets when they have an insurance policy that covers their health bills?
DO not get it wrong, Warren Buffett loves to buy insurance companies because of two reasons, first is they have a lot of money at hand and the second is they make a whole lot of profit. The goal of an insurance company is to make profit and not to do charity and this is where rebate comes in. The pharmaceutical store gives the insurance company a commission or rebate on every drugs bought with insurance. Rebates is sent to the PBMs who then sends the money to the insurance company after taken their share of the rebate.
Business is business, no matter where it is done and the pharmaceutical company is one big business while insurance companies are another larger businesses where profit are made. (I am not saying for sure, but there is a possibility that the COVID-19 pandemic might be a means for a few pharmaceutical companies to make money and when pharma companies are making money, insurance companies also make money.
