Pharmacy Benefits Managers (PBM), according to whorunsmydrugplan.com, “act as an intermediary between the payer and everyone else in the healthcare system. They generally make money through service fees from large customer contracts for processing prescription claims, operating mail order pharmacies, and negotiating prices with drug makers.” The Wall Street Journal illustrates their convoluted role in the image below.
The sole function of the PBM is to save your insurance company money. Knowing that, do you really think they are concerned with putting your health needs first? Keep in mind that your pharmacy benefits manager is who is to blame for your medication not being covered.
While PBM’s are trying to save your insurance company money, they are always looking for ways to line their own pockets as well. Some report pharmacy benefits management as a $300 billion industry and that it is only expected to grow. Notice from the diagram above, that PBM’s aren’t making all that money just from what your insurance company pays them. Drug manufacturers want their products to be sold, which means they must be included on your insurance company’s drug formulary. PBM’s negotiate to get those rebates and often, instead of giving that back to the insurance company, keep part, or all, of the rebate for themselves, along with charging a fee for those negotiations. As a result, they encourage the use of, and even switch their patients to, those rebated medications because that is what is best for their bank accounts – not necessarily your health. These rebates create incentive for the PBM’s to favor higher priced drugs, and thus, higher co-pays for their patients.
PBM’s also engage in “spread pricing,” or charging insurance plans more than what they have contract with the pharmacies and pocketing the difference. Sometimes plans are unaware of this occurrence due to the non-transparent contracts they sign with the PBM’s.This non-transparency also allows PBM’s to over charge, and sometimes charge twice, for services rendered since they aren’t yet required to disclose their financial data. In fact, one PBM waited over 10 months to carry out a contract change that would have saved their client $10 million (The Street). Of course, some plans own their pharmacy benefits manager (e.g. Blue Cross Blue Shield owns Prime Therapeutics) allowing them to take even more money from their patients and pharmacies.
Another stream of revenue/theft comes from processing prescriptions. Every time a prescription is electronically submitted to your insurance company, the PBM charges the pharmacy an administrative fee. On top of that, they keep part of the reimbursement to the pharmacy for themselves by charging their insurance plan more than what they pay the pharmacies. Some PBM’s (e.g. Optum Rx), charge flat copay rates (e.g. $15 for generic drugs) to their patients based on the cost of the particular drug. For some generics, the medication cost is less than the copay rate. Instead of reducing the patient’s copay, they still pay the $15 but the PBM charges the pharmacy the difference by deducting it from what they are reimbursed. Thus the patient overpays, the pharmacy is swindled and the PBM is payed, yet again.
Are Drug Prices Affected by PBM’s?
You betcha! Pharmacists United for Truth and Transparency (P.U.T.T) suggest you ask someone in human resources whether their prescription drug costs have ever gone down from one year to the next. The answer is an obvious no! Ultimately, PBM’s mark up drug costs to your insurance plan, therefore your cost increases. Because some of these PBM’s don’t have to disclose this information to your plan, they are essentially free to charge them whatever they please, and you end up covering that inflated cost.
The lack of transparency has also led to a lack of competition in the pharmacy benefit management arena. According to the Wall Street Journal, as of March 2015, Express Scripts/Medco is the largest PBM, by volume of prescriptions processed, followed by CVS/Caremark. United Healthcare is the third largest, followed by Catamaran, that is until they finalize their merger. Once finalized, this deal would mean that the top 3 PBM’s in the country, would have processed roughly 75% of all prescription claims in 2014. According to this Valparaiso University Law Review, “transparent pricing ensures survival of the best firms and will result in lower prices as the firms compete with each other for market share.”
Retail pharmacies are usually offered a “take it or leave it” opportunity in regards to joining PBM networks. As competition decreases and more independent retail pharmacies are put out of business due to exclusion from these networks, patients will have no choice but to eventually get their prescriptions filled at one of the select few “preferred” chain pharmacies. As a result, these beneficiaries will be totally at the mercy of their insurance plan when it comes to pricing. Eventually, patients will be offered a “take it or leave it” deal when it comes to getting their prescriptions filled because there will be no other options for better prices.
So, what do I do?
Organizations like Fight4Rx and P.U.T.T. suggest you contact your members of Congress and share your story to expose the dishonest practices and bring change and accountability to the PBM industry. NCPA also has some helpful information on taking positive action.
It is unlikely that most people would be able to afford prescription costs without insurance. However, for some plans, generic drugs cost just as much, if not more, than buying those medications with cash. Shop around to different pharmacies for the best price and don’t be afraid to ask your independent pharmacists to match prices. Chances are, they will jump at the opportunity to gain your business over one of their chain rivals.
The fact of the matter is that your overall health is too dependent on your pharmacy benefits manager. Time and time again they have been found guilty of fraudulent practices at the expense of your health and money. Be aware, not a victim. Tune in regularly to The Independent Pharmacist for updates on these and other issues that affect your pharmacy needs.