Thinking About Health: PBMs horn in on doctors’ decisions about medicines
November 21, 2014
A few weeks ago Jean, a 64-year-old retiree from Littleton, sent along an e-mail in response to a column I had written. I had told of my friend's ordeal trying to refill a particular cholesterol-lowering drug that a pharmacy benefit manager, known as a PBM, wanted him to exchange for a new drug. That new medication would have resulted in an out-of-pocket cost increase of more than 1,000 percent.
"Oh my gosh," Jean said. "That sounds like me."
Her story was a little different, but still involved a sales tactic similar to the one my friend experienced. In September Jean noticed that the price of a generic statin she was taking had jumped to $29.99, almost six times as much as the $4.72 she paid for 30 pills in August. In fact the pharmacy where she was getting her medicine had been changing the price every two months — from $14.85 in May to $5 in July, then to $4.72 and finally up to $29.99.
She asked the pharmacist why. "We don't make that decision about prices. Your insurance does that," the pharmacist told her.
Jean called Cigna, her insurer, and asked the same question. A Cigna representative told her the cost of prescriptions is determined by the pharmacy and a price negotiator, and insisted the insurance company had nothing to do with setting prices for drugs. "Who are these negotiators," Jean pressed the Cigna rep who claimed she did not know.
"I was very frustrated," Jean said. "Is this another problem with PBMs, drug company rip-offs or the failure of a universal health coverage plan?" Or is it a totally different problem?
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A few weeks earlier a pharmacist who lives in the Nebraska Sand Hills sent an e-mail. "We take on the PBMs daily," she said. "They force switches to drugs they get kickbacks on or that they can make more money on when the patient fills a prescription." Curious to know more, I called the Nebraska pharmacist.
At one time PBMs simply handled prescription billings, but now they cut deals with drug companies and decide which drugs insurers will cover, how much pharmacies will charge for them, and how much pharmacies will be reimbursed.
The difference between these two numbers is called "spread pricing" and earlier this year USA Today reported the spread "remains a murky but highly profitable area."
The Nebraska pharmacist explained that on top of this spread arrangement, the PBMs make deals with the drug companies to get more people to use specific drugs, presumably those that return high profit margins. "A drug company wants more people to use their product so they make these deals," she told me. A PBM can steer patients to drugs that gives them the highest payments.
Is that what happened to my friend and why the PBM pushed hard to get his doctor to agree to the higher priced drug? (In the end my friend got what he wanted, but the effort took several weeks and many phone calls.)
The pharmacist said PBMs sometimes entice patients to buy their drugs through mail order pharmacies instead of from a local druggist. One way is to make the consumer pay more out-of-pocket to use the corner pharmacy. Why do PBMs want you to switch? PBMs and insurance companies often own the mail order pharmacies. When consumers buy through the mail, PBMs pocket the dispensing fee that would normally go to the pharmacy, the pharmacist explained.
The strategy worked with Jean who has just signed up for mail-order delivery saving about $48 for a three-month supply of her drug from Cigna Home Delivery Pharmacy. Jean called Cigna Home Delivery Pharmacy and asked who owns it. "Cigna owns it," she was told. Cigna is Jean's insurer.
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