7 May 2018 - When the latest version of the iPhone comes out, customers can judge whether the price is "worth it" to them. In other words, consumers make decisions whether, from their perspective, price and value are aligned. 

The conditions for an efficiently operating market are met. There's competition, a free flow of information regarding the product, and transparency regarding pricing. Not so with prescription drugs.

Broadly, drug pricing follows a script in which drug manufacturers set a list price and payers and pharmacy benefit managers express a willingness to pay at that price or some other. Usually, negotiations ensue, resulting in a transaction price lower than the list price. The key operative term here is "rebating"—a process by which drugmakers give PBMs a percentage off of a drug's list price in exchange for increased market share. PBMs can increase their market share by granting certain drugs a preferred status on the formulary.Precisely how much of a discount drugmakers provide, and also how much of the rebate is passed through to the end-user, remain a carefully guarded trade secret.

Read Modern Healthcare article