How pharmacy benefit managers affect you
COLUMBUS — The
As an independent pharmacist, those close relationships are vital to staying in business.
But what the pharmacist can’t share with customers is the rationale behind the questionable prices they are paying for their prescription drugs.
How under the drug-pricing system he’s effectively forced to use, he winds up charging some customers the maximum allowed by the PBM to make up for the losses he takes on other prescriptions with lower PBM reimbursements.
That system, and what his customers are charged, is largely controlled and created by pharmacy benefit managers, or PBMs.
Prescription drug costs have been the fastest growing sector of health care costs in America, according to
The Dispatch has spent the past three months uncovering how PBMs are operating in
Meanwhile, PBMs, drug manufacturers and health-care providers make money. Spending on health care in America has increased by
In response to the allegations about drug pricing, Ohio Medicaid officials have demanded more transparency from PBMs and asked for numbers from the five managed-care companies that oversee the state’s Medicaid system to see if PBMs are charging inappropriate amounts for medications.
Inside the black box
How this all works is difficult to understand.
The layers involved in getting drugs to the marketplace include drug manufacturers, the PBMs, health-care providers, health insurers both in the private sector and government, and pharmacists.
All of them take a cut and thus together determine how much your prescription drugs cost. But the secret pricing formulas of PBMs and their negotiations with drug makers are what need more transparency, according to pharmacists and state legislators.
The drug-pricing system basically works like this: Manufacturers create a drug that they want to get onto an insurer’s formulary — the list of drugs it covers — so it can be prescribed to patients.
The insurers (or their managed-care companies) hire PBMs to decide which of those drugs should be covered under the formulary, based on discounts and rebates they negotiate with drug manufacturers. For instance, if a PBM doesn’t agree with the price, it may not include the drug on its formulary so the insurance company won’t cover it and thus doctors will be less likely to prescribe it.
PBMs also set reimbursement rates paid to pharmacies for filling prescriptions. But that list is different than the one used to bill the insurer.
Insurers use the price from the PBM to help set premiums and copays for the customer.
PBMs won’t make those price lists public, instead calling them “proprietary and confidential.”
The Trump administration has called it a “rigged system” that is controlled by “monopolies.”
The Dispatch is not naming the
“The system is broken,” said
Where did PBMs come from?
The role of PBMs has changed since their incarnation. They were created in the 1980s to streamline the prescription filling process and operate as a data processing piece.
Their roles changed significantly under a Medicare overhaul in 2003. Under the Part D Medicare addition that year, older Americans were provided insurance coverage for prescriptions. That process is overseen by PBMs.
The key part of the federal law then was that the government “may not interfere” in the negotiations PBMs have with drug manufacturers to set prices.
Since then PBMs have become powerful players. With 37 percent of Ohioans on either Medicaid or Medicare, the financial stakes are high.
Spending on prescriptions drugs has increased from about
Estimates forecast spending to increase to more than
The country’s three largest PBMs — CVS Caremark,
CVS Caremark, formerly
Many pharmacists in
The corporation, the nation’s seventh-largest, insists that it maintains a “firewall” between its PBM and retail businesses so that the retail pharmacies can’t get an unfair advantage by knowing the competition’s pricing information.
However, The Dispatch has shown that after sharp, sweeping reimbursement cuts by CVS Caremark,
Critics call the practice “squeeze and buy.”
The paper also has reported on a practice known as “patient steering.” CVS Caremark and Silverscript, its Medicaid managed-care plan, have sent elderly patients letters about their prescriptions, suggesting that they can have them filled at CVS storefront and mail-order pharmacies.
CVS Caremark isn’t just the PBM to four of Ohio’s five Medicaid managed-care companies. The corporate giant’s tentacles have reached into the state Medicaid department in other ways.
The Dispatch reported in March that the Medicaid point person for pharmacist complaints about reimbursements,
In your pocket
Insurance premiums are directly impacted by how much prescription drugs cost the plan provider.
The PBM sets prices of brand name and generic prescription drugs for the insurer. What it doesn’t tell the insurer is what price it negotiated with the drug manufacturer, or the reimbursement price it sets for pharmacies.
Critics, including pharmacists, of PBMs say that the companies are incentivized to drive up the price on drugs with the manufacturers because it makes their discounts greater.
PBMs have used their power in the marketplace as leverage with drug manufacturers to get discounts or rebates. It’s unclear how much of those discounts, if any, are passed onto public or the health-care companies.
Last year, during testimony to
Of the
Mylan’s profit was
“Basically you have a profit-driven, non-fiduciary companies that are setting prices for drugs,” said
All three major PBMs have denied allegations they drive up prices and seek profits on prescription drugs.
“CVS Health is committed to helping both patients and payers with solutions to lower their prescription drug costs,” spokesman
What’s next
The Trump administration has recently said these companies have monopolized the market. Trump said he wants the government to use its buying power to negotiate cheaper prices for drugs, but so far his plan does not reflect that desire.
His health and human services secretary signaled last week it wanted to change the 2003 Medicare provision that the government cannot interfere in the negotiating process..
But officials offered few details on how they plan to force the issue.
In
Ohio Medicaid officials are investigating allegations that PBMs in the tax-funded health insurance program are paying pharmacies far less to fill some prescriptions than they charge the state and pocketing the difference, a practice known as spread pricing. A report is expected by June.
PBMs voluntarily turned over their price lists for the past year and, starting
State officials say the data will give a clearer picture of where tax dollars are going and the extent of spread pricing.
Meanwhile, the
In the
Dispatch reporters
@DispatchSully
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