As two owners of independent pharmacies in New Jersey, we often look at the health care cost landscape and ask each other, “How in the world did we get here?”
In fact, the idea of employer-based health care coverage didn’t exist until World War II, when employers started offering such benefits when they couldn’t afford to pay higher wages. Soon, the vast majority of Americans quickly began receiving health care through their jobs.
That’s still the case for more than 170 million Americans today, even as costs rapidly escalate for consumers increasingly in need of access to life-saving medicines. Most of the recent focus has been restricted to the practices of drug manufacturers and a few bad actors who have spoiled the bunch.
But while the government and the media continue to shine a spotlight on pharmaceutical companies, we should take this opportunity to look at the whole system so as not to leave one entity – the one who controls what you actually pay for your medicines – in the dark.
Pharmacy benefit managers (PBMs) are companies that handle prescription drug benefits for insurance companies and it’s likely you’ve never heard of them.
They are middlemen in the health care supply system between the doctor prescribing a preferred medication and the insurance company providing coverage.
They are the gatekeepers.
Three PBMs handle about 80 percent of all prescription drug claims and they are increasingly owned by health insurers. One of them made $2.5 billion in profits in 2015 off $102 billion in revenue.
In theory, these PBMs exist to curb the rise in prescription drug prices, but they are often artificially inflating the price you pay to pad their own bottom line.
A PBM can negotiate rebates for insurers, decide the drugs that are covered by your health plan and even determine whether you can visit a pharmacy or receive your drugs by mail order.
At the same time, these theoretical price controls are also sources of profit for PBMs, because they don’t have to tell customers how much of a discount they are pocketing.
As recently chronicled by Bloomberg, the extra money the PBMs receive is called a “clawback”.
For example, a customer might have a $10 co-pay, a fee that has been negotiated by the PBM and insurance company. At the time of purchase, the pharmacy gets reimbursed for the actual price of the drug and receives a small profit, both of which are far less than the $10 the customer pays. The PBMs “claw back” what’s left. What does that mean for you? It was likely cheaper for you to pay for the medication in cash, and not through your co-pay.
You expect your insurance coverage to increase as the price of manufacturing drugs goes up, but PBMs take more of the piece of that pie while the people taking the most medications can’t access what they need.
Recently, we had one patient on a specific brand of medication for years. It was the only one that worked.
After the insurance company negotiated a new deal with the PBM, the PBM wouldn’t put this particular medication on its list of covered medications.
It covered the generic, but the generic didn’t work.
The patient had insurance but still had to pay $250 in out-of-pocket costs per month to get the brandname medication she was prescribed by her doctor.
These stories are all too common and sometimes the costs are much, much higher.
All the while, no one gets better, pharmacies like ours struggle to make ends meet and patients may go broke.
Finally, lawmakers are starting to take note.
A bill (A4338), also known as the “Prescription Drug Transparency Act,” was introduced by Assemblyman Troy Singleton, D-Burlington, late last year. It would require PBMs to disclose information about prescription drug pricing and generic substitutions to all benefit plan purchasers.
Is it a comprehensive solution to this issue in New Jersey? No, but it’s a start.
Our elected officials must insist PBMs become more transparent in detailing their fees and associated costs.
To better address the rising out-of-pocket prescription costs and lack of access so many people are facing, these PBMs must move into the light and away from the margins where they currently operate.