Monday, January 21, 2019

Pharma pricing, and the secondary market for diabetes test strips

The NY Times has the story on the gray market for diabetes test strips:

The Strange Marketplace for Diabetes Test Strips

"Test strips are a multi-billion-dollar industry. A 2012 study found that among insulin-dependent patients who monitor their blood sugar, strips accounted for nearly one-quarter of pharmacy costs. Today, four manufacturers account for half of global sales.

"In a retail pharmacy, name-brand strips command high prices. But like most goods and services in American health care, that number doesn’t reflect what most people pay.

"The sticker price is the result of behind-the-scenes negotiations between the strips’ manufacturer and insurers. Manufacturers set a high list price and then negotiate to become an insurer’s preferred supplier by offering a hefty rebate.
"For a patient testing their blood many times a day, paying for strips out-of-pocket could add up to thousands of dollars a year. Small wonder, then, that a gray market thrives. The middlemen buy extras from people who obtained strips through insurance, at little cost to themselves, and then resell to the less fortunate.

"That was the opportunity that caught Chad Langley’s eye. He and his twin brother launched the website to solicit test strips from the public for resale. Today they buy strips from roughly 8,000 people; their third-floor office in Reading, Mass., receives around 100 deliveries a day.

"The amount the Langleys pay depends on the brand, expiration date and condition, but the profit margins are reliably high. For example, the brothers will pay $35 plus shipping for a 100-count box of the popular brand Freestyle Lite in mint condition.

"The Langleys sell the box for $60. CVS, by contrast, retails the strips for $164.
"While some resellers use websites like Amazon or eBay to market strips directly to consumers, the biggest profits are in returning them to retail pharmacies, which sell them as new and bill the customer’s insurance the full price.
“Test strips are basically printed, like in a printing press,” said David Kliff, who publishes a newsletter on diabetes. “It’s not brain surgery.”

"He estimated the typical test strip costs less than a dime to make."

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