EP439: Fixing the Generic Drug Pricing Problem, Where Patients Pay More When They Use Their Insurance, With Luke Slindee, PharmD

Traditional PBMs make billions of dollars on generic drugs simply by paying pharmacies less than what patients pay at the counter — buying low and selling high on the spread. Luke Slindee, PharmD, senior pharmacy consultant at Myers and Stauffer (the firm that calculates the NADAC benchmark for CMS), returns to offer a different fix than the one covered in the Ge Bai episode: adjusting the "usual and customary" price construct for generic medications that has gotten wildly inflated over time.

WHAT YOU'LL LEARN

✅ What a "usual and customary" price is, and the logical, behavioral-economic reasons it has become so inflated for generic drugs

✅ How PBMs end up setting both what a pharmacy charges the patient and what the PBM pays the pharmacy for the same transaction — and why that dual role is what makes spread pricing possible

✅ Whether pharmacies should be allowed to maintain two separate cash prices, and how GoodRx fits into the pharmacy/PBM dynamic

✅ How the Amazon anticompetitive contract lawsuit connects back to pharmacy contracts with PBMs

✅ What it would actually take for the generic drug market to return to normal, competitive pricing

WHY THIS MATTERS

Generic drugs are supposed to be the cheap, boring part of pharmacy benefits, but spread pricing has turned them into a reliable profit center for PBMs at the direct expense of patients and pharmacies. The fact that 79% of the time a patient in their deductible phase pays less using GoodRx or a cash-pay option than using their own insurance is not a fluke of the market; it's the predictable result of a usual and customary pricing construct that PBMs have every incentive to keep inflated. Fixing this isn't just about saving patients money at the counter — it's about correcting a pricing mechanism that quietly undermines the entire premise of having insurance for generic drugs in the first place.

MENTIONED IN THIS EPISODE

EP395 with Brennan Bilberry: Apple Podcasts | Spotify | Other Apps

EP420 with Ge Bai, PhD, CPA: Apple Podcasts | Spotify | Other Apps

EP418 with Mark Cuban and Ferrin Williams, PharmD, MBA: Apple Podcasts | Spotify | Other Apps

=== LINKS ===

🔗 Show Notes with all mentioned links: Episode Page

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00:00 Introduction.

08:12 Where do cash prices fall when pharmacies have contracts with PBMs?

08:39 What is a usual and customary price?

12:14 How is the usual and customary price affected by PBMs?

16:49 Should pharmacies be allowed to have two sets of cash prices?

17:14 Where does GoodRx fit into this because of the pharmacy/PBM dilemma?

19:06 What's happening with Amazon and the anticompetitive contract lawsuit, and how does it relate back to pharmacy contracts with PBMs?

20:38 EP395 with Brennan Bilberry.

21:05 EP420 with Ge Bai, PhD, CPA.

23:27 Why is there a new wave of cash-only pharmacies?

24:02 EP418 with Mark Cuban and Ferrin Williams, PharmD, MBA, from Scripta.

25:41 What would allow the generic market to return to normal competitive pricing?

26:39 How does this dysfunction create a negative downstream effect?