During a brief period when my insurance company pretended it didn’t know I was insured, I found that the retail cost of a month’s supply of my antidepressant (generic Nortriptyline) was about $900. But two days later, when my paperwork got cleared up, the cost to me was $20. How on earth can there be such a difference? Are the “economies of scale” so extreme as to make these numbers make sense? Or are my drug costs being paid by 900/20=45 other insured people who don’t need prescription drugs? Or are there other reasons of which I’m not aware?
I hope I don’t jinx it by asking too many questions. I’d hate to find out that I’m an inadvertent beneficiary of an elaborate Ponzi scheme.
Yes, the whole point of prescription coverage discounts is that the insurance companies balance off the many people who pay into the system but don’t need the medications against those few people who require expensive medications.
For that matter, that’s how the entire insurance industry of all kinds and types of insurance works.
However, when everyone in the system needs a payout - after disasters, say - there isn’t enough money to distribute and insurance companies must either cut coverage, raise rates, or go out of business.
It is a very straightforward, even classic, economic model.
Drugs and other medical services are unlike many other things because
they are often necessities and the user doesn’t have the reasonable ability to refuse the purchase or to shop for a lower price. So the suppliers can put almost any price on the item.
The insurance companies or government programs that pay for drugs or services aren’t in that position. If the prices are way out of line with other suppliers or equivalent drugs, they can refuse to pay, pay less, eliminate the supplier or drug from future coverage etc. The insurance companies often have pricing agreements with suppliers, otherwise the suppliers can’t be used by individuals wanting their insurance to pay.