Ninth Planet Alters Drug Price Reform

You’d think eliminating secret kickbacks is a no-brainer
By Steve Hirsch July 23, 2019

spaceman holding up cash

Somewhere near Neptune, there’s a bunch of rock and ice thingamajigs orbiting the sun, but they aren’t orbiting the way they should. The astronomers aren’t sure, but they think, maybe, just maybe, the orbits are being altered by gravitational forces from a heretofore hidden ninth planet. I don’t know much about astronomy, so I’ll let the astronomers figure out whether or not there’s a planet tucked behind Neptune that’s trying to keep itself hidden from us earthlings.

But there is most definitely a ninth planet. I’m not talking extraterrestrial. It’s right here on earth, in the Washington DC area. It’s got gravitational pull and it’s great at keeping itself mostly hidden. That’s how it avoids accountability.

I call it the Swamp Planet. Cool name, huh?

A few days ago, the Department of Health gave up trying to prohibit a practice that drives up medicine costs. I’ve written about the secret kickbacks that the Department of Health wanted to outlaw before, but it’s important so here’s a quick refresher: The Department of Health & Human Services had recently proposed new rules that would prohibit the kickbacks that drug manufacturers pay to insurance carriers and the Pharmacy Benefit Managers (PBMs) that represent them. Trump’s HHS Secretary, Alex Azar, wanted to eliminate kickbacks because they drive up prices for medicines. Drug companies inflate list prices to factor in for the cost of kickbacks. The kickbacks average about 20% and are sometimes as high as 60%.

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The thing to remember about these kickbacks is that they’re secret. If you’ve got a 25% copay on a $400 medicine, you pay $100, and you think your insurance company is paying $300. But if the secret kickback is 60%, this means that, secretly, the real cost is only 40% of $400, meaning $160. You should be paying 25% of $160, which is only $40. Your insurance company and its PBM are ripping you off for $60. If you’re using a lot of prescriptions, your insurance company might be stealing thousands from you per year.

Shakespeare famously said, “kill all the lawyers.” I’d say the same about PBMs, but I know about a good one. SmithRx is a PBM, and its CEO, Jake Frenz, wears a white hat. He’s not only against secret kickbacks. He’s against them even if you shout about them from the highest treetops. He wrote a letter to HHS on April 3 supporting Trump’s HHS proposal against kickbacks. In it, he said, “So long as rebates persist…all but a select few will remain confused by how much drugs are truly costing patients.” Jake Frenz says that PBMs don’t need to negotiate for kickbacks. They can negotiate for lower or discounted prices without rebates. Makes sense to me.

The average American would think that eliminating secret kickbacks is a no-brainer. What could be more bipartisan? Whether you’re a Republican, a Democrat, a conservative, or a liberal, you probably believe secret kickbacks are a bad thing. And everyone wants lower medicine prices. So why did Trump’s HHS Department give up and allow the secret kickbacks?

Like I said, I don’t know much about astronomy, but to paraphrase the old Sam Cooke song, I do know one thing. If all the politicians are against kickbacks while allowing them, something is altering their behavior. Something big. Something so astronomically big that its gravity pulls politicians away from what’s right the same way that astronomers think a ninth planet pulls rock and ice thingamajigs from what would otherwise be their correct orbits.

medicine dollar sign

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Beware the ninth planet hidden right under our noses in DC. The Swamp Planet.

Being the Swamp Planet, it’s green, but don’t think algae, duckweed and bubbling microorganisms. It’s green because it’s made out of money. Insurance-industry money. The insurance industry, our nation’s second biggest lobbyist, spent $158 million on lobbying in 2018. Oh, and don’t forget AARP money. Yes, AARP, headquartered in DC, represents itself as a consumer advocate for seniors, but it wrote a letter to HHS advocating for continuation of secret kickbacks to insurers. Call me a cynic, but I think AARP’s anti-consumer/pro-insurer opinion might have something to do with the fact that, according to AARP’s 2017 financial statements, it rakes in over $600 million a year from America’s largest medical insurance company.


Good luck to the astronomers in their quest to figure out if there’s a ninth planet hiding behind Neptune. Here, in the Washington DC mini-solar-system, the quest isn’t to prove existence of The Swamp Planet and that it’s made out of money. No ifs, ands, or buts, we already know it exists. Now that I think about it, Swamp Planet is a cool name, but Planet AARP sounds fittingly evil, plus it’s got a sci-fi ring to it. Yeah, an even cooler name!

So what is the quest we need to go on?

We need a federal investigation into how the insurance industry and AARP altered the political landscape. We need to investigate why it is that politicians of all stripes tell us they want lower medicine prices, while allowing secret kickbacks that drive up those prices.

President Trump should ask the Justice Department to investigate. Also, and even more importantly, he should instruct HHS Secretary Alex Azar to re-propose the prohibition of secret kickbacks. But this time, HHS should take the advice of SmithRx’s CEO, Jake Frenz: outlaw kickbacks to insurance companies and PBMs altogether.

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Steve Hirsch

Steve Hirsch
I'm a businessman who is fast approaching retirement age.