(The power of the middle man)
To simply put in perspective, PBMs work for insurance companies to manage their drug costs, negotiate with manufacturers for better pricing and placing their drugs on preferred formularies versus others. By doing so, they eventually save money for insurance companies, promote drugs of companies who negotiated “good deals” or rebates and thus, make money from both entities.
This model is so lucrative for PBMs. Think about it. They don’t make drugs, they are not the insurers either but they get to control everything about prescription drugs and make tons of money being the middle man….lol! Caremark, Medco, Optum RX, Prime Therapeutics are some of the giant PBMs who control pretty much the entire country’s prescription business. Most insurances fall into these 4 PBMs.
It’s neither doctors, nor patients nor pharmacies- it’s a trio of insurance companies, manufacturers and PBMs that get benefitted for the most part!
Doctors are often unhappy when certain drugs are “not covered”. Some drugs need extensive “prior authorization” process for them to be covered. Some expensive drugs (medications for specialty conditions like oncology, rheumatology, dermatology, multiple sclerosis, etc.) require patients to pay extensive copays. In most cases, pharmacies help them to get copay assistance but sometimes unavailability of copay assistance make these treatments unaffordable. Thus these patients go untreated making doctors look unsuccessful.
Patients become victims of this complicated system. They get unpleasant surprises all the time in-spite of paying exorbitant premiums every month. They not only have to deal with complex disease states but also PBM led complications.
And of course, the pharmacies are not spared either. In a lot of cases, pharmacies dispense the drugs bearing a “LOSS”. Yes it’s unbelievable how PBMs force these pharmacies with such loss imposing contracts. It almost looks like pharmacies are at the mercy of PBMs. If pharmacies don’t agree their terms, they are out of network and won’t have any business. The contractual rates and reimbursements are so terrible that pharmacists are not seeing this as a prosperous business anymore. Even chain pharmacies have gotten a big hit from PBMs. The gross profits have gone down to bare minimum, so much so that the companies have stopped giving raises or bonuses to their pharmacists. Lack of transparency regarding rebates and DIR have created issues of mistrust and conflict of interest.
Read the following article from “http://obroncology.com/article/pbms-hatch-a-new-scheme-dir-fees/“
By Christina Bennett, MS
“Pharmacy benefit managers (PBMs) have found a new way to manipulate pharmacies—specialty pharmacies in particular—for their gain with direct and indirect remuneration (DIR) fees.
The term “conflict of interest” has never really been more justly stated than when it describes the relationship between a PBM and a specialty pharmacy, said Jeff Vacirca, MD, Community Oncology Alliance, CEO, New York Cancer Specialists, in an interview with OBR. “It’s an atrocity,” he told us.”
Legit DIR Fees Have Become Warped
“Normally, after a drug is sold to a patient, PBMs and insurers receive additional compensation, such as manufacturer rebates, that produce a net drug price much lower than the list price. Under Medicare Part D plans, patient co-pays are calculated off the list price of a drug, not the lower net price.
Having co-pays calculated off the list price, which typically is inflated and not transparent, means neither Medicare beneficiaries nor CMS share in any cost-savings. CMS requires all transactions after the point of sale to be reported to CMS; these transactions are called DIR fees. CMS then uses the reported DIR fees to capture the true net price of the drug and calculate accurate payments to Medicare Part D insurers.
However, PBMs have misrepresented DIR fees to their benefit. Several months after a prescription has been dispensed, PBMs are charging fees to the specialty pharmacy that eliminate most, if not all, profit it may incur for dispensing the drug. Retail pharmacies are being hit by these fees as well, but mostly this practice is occurring within specialty pharmacy and with Medicare Part D plans.1,2”
“A lot of PBMs own pharmacies, such as CVS Caremark that has its own specialty pharmacy, and they always keep saying, ‘well they’re paying DIR fees too’—but you’re paying them to yourself,” said Eric Dallara, RPh, pharmacist in charge of the dispensing pharmacy at New England Cancer Specialists.
Four national PBMs—Express Scripts, Inc., CVS/Caremark Corp., OptumRx, and Prime Therapeutics—control 80% of the prescription drug market and they each own a specialty pharmacy.1,3-6
Additionally, the four largest Medicare Part D plan sponsors—UnitedHealth Group, Humana, SilverScript (CVS Health), and Express Scripts—own or are affiliated with a PBM.2 Having PBMs and insurers so closely tied together is like taking money from one pocket and putting in another.2
Worse, PBMs do not always label fees as DIR fees; instead they use phrases like “network rebates” or “pharmacy performance payments.”1
- Gag clause prohibitions: Gag clauses are provisions written into contracts between PBMs and pharmacies, prohibiting pharmacists from informing customers when the out-of-pocket (or cash) price for a prescription is lower than the medication’s co-payment, or whether a cheaper alternative is available.
- Claw back legislation: “Claw back” requirements are provisions written in contracts that force pharmacies to pay back to PBMs and/or health plans the difference between a patient’s copayment and the negotiated drug price, when a patient’s copayment for a drug is greater than the price the PBM or insurer negotiated with the pharmacy. In 2019, SD and NE became two of the most recent states to enact legislation prohibiting co-pay “claw back” contract provisions. To date, at least 22 states have passed some form of “claw back” legislation.
- Price gouging and price increasing reporting: Prohibiting manufacturers and wholesalers from engaging in “price gouging” which is defined as an unconscionable, excessive, unjustified price increase of an essential off-patent drug.
So, do we need PBMs? Unless PBMs become patient-centric and provide some relief to pharmacists, unless PBMs stop being opaque to their revenue flow, unless PBMs do not cater to one specific entity and avoid conflicts of interests, they WON’T be trusted at all.