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Senate panel hears pitch on physician-dispensed generics


Senators on Tuesday mulled a different way to get cheap, generic drugs to patients—encourage physicians to go around insurance plans and buy medications directly from drug wholesalers.

Senate health committee chair Lamar Alexander (R-Tenn.) was struck by Tuesday’s testimony from the co-founder of a direct primary-care practice who described the extremely low prices he can secure for his patients for generic drugs. Physicians in 44 states are able to purchase medications directly from wholesalers, and Alexander said he wanted to learn more about how this practice could spread.

“We’re looking for ways to lower healthcare costs, and 17% of healthcare costs are prescription drugs,” Alexander told Modern Healthcare after the hearing. “The manufacturers say their list prices haven’t gone up much the last two or three years. But prices to the consumer have.”


Dr. Josh Umbehr, co-founder of Kansas-based Atlas MD—what he described as a “blue-collar concierge” direct primary-care model that eschews Medicare, Medicaid and private insurance and collects monthly membership fees from patients—said he keeps a cabinet in his facility that holds about $50,000 worth of about 200 medications. He marks them up about 10% to sell to patients.

“I’m cheaper than 340B,” he told Modern Healthcare, with the caveat that he doesn’t carry or sell high-cost drugs such as insulin where there’s no generic competition.

This type of direct purchase is possible in 44 states, leading Alexander to ask, “Why won’t they do it?”

Umbehr said for the most part physicians don’t know they can, or they have come to rely on the insurance model and don’t separate various goods and services like generic drugs.

Tuesday’s hearing picked up on the Senate health panel’s examination of high U.S. healthcare costs. The hearings started last year, and Alexander is keenly focused on legislative solutions ahead of his announced departure from the Senate in 2020.

Drug wholesalers have been mostly absent from Washington’s conversation about drug pricing, which has focused on manufacturers and the rebate system for pharmacy benefit managers and insurers. There are two business types for wholesalers, according to Adam Fein, CEO of the Drug Channels Institute and author of the Drug Channels blog.

Full-line wholesalers typically buy and store a drugmaker’s complete medication line and sell them to pharmacies, hospitals and physician offices. Specialty distributors focus on specialty medicines for physician-owned and -operated clinics, hospitals and hospital-owned outpatient sites. Specialty drugs account for about 30% of full-line wholesalers’ revenue and most of a specialty distributor’s line, according to Fein.

Umbehr posed his own challenge to the current insurance landscape as he touted his direct primary-care model to the senators. His company started consulting with physicians on setting up direct primary-care options about four years ago. He told lawmakers that the firm went from converting about one to two physician practices per month to a direct primary-care option.

Now, he said, they convert about 20 to 30 practices per month.

He reiterated that direct primary care is not anti-insurance, but said in the pursuit of lower costs people shouldn’t rely on insurance for low-cost treatments and drugs. They should reserve insurance for expensive care. He compared the universal use of insurance coverage to insuring windshield wipers as well as a car.

Umbehr’s testimony came one week after Sen. Kamala Harris (D-Calif.), who is mounting a bid for the presidency, challenged private insurance in a different way as she addressed her support for Medicare for All, or single payer.

The hearing took place hours before the State of the Union speech where President Donald Trump is expected to talk about bringing down pharmaceutical costs and legislation to rein in surprise medical bills.

Alexander said he hopes Trump focuses on the overall cost problem of healthcare.

“If the president focuses on reducing healthcare costs and makes that our target, rather than a seemingly perpetual argument about Obamacare, that will be a big service to the country because that’s what we’re trying to do,” the senator said.