'Middleman' adds billions of dollars to the cost of medications
Very few of my patients have ever heard of a Pharmacy Benefit Manager, or "PBMs" as they are often referred to in the healthcare community.
I doubt that most people reading this have ever heard of them either. But these invisible middlemen are a big player in the health care economy — generating more than $315 billion annually in revenue.
PBMs were originally intended to serve as third-party administrators working on behalf of insurers, large employers, the government and labor unions to manage prescription drug benefits.
Their purpose was to process prescription drug claims on behalf of clients, but that role has expanded to the point where they've become a significant link of the healthcare supply chain.
It's all part of a very opaque process that they like to keep a mystery as they establish approved drug lists, strike agreements with drug manufactures on pricing, and then negotiate rebate arrangements with those same drug companies.
When most of us hear the word rebate, we assume that it's money we will get back as a discount on our purchase; either at the register or as a mail-in coupon. That's not how it works with shadowy PBMs. Instead, those "rebates" are often pocketed by PBMs as a means of padding their profits to the tune of billions of dollars. That's right, billions.
PBM's also impact the cost of our Medicaid and Medicare systems by negotiating inflated prices with drug manufacturers only to pocket rebates that should belong to consumers. That is a significant cost for taxpayers as well as patients on fixed incomes.
What's even more shocking is that it's sometimes cheaper to pay for some prescriptions on an out-of-pocket basis rather than running them through your insurance due to artificially high costs set by PBM's.
Say that you take your prescription to the pharmacy where they tell you that you have a $20 co-pay. Naturally you assume that the cost is more than $20. While that may well be the case, there are also instances where the medication could cost as little as $7 and the PBM is actually pocketing the rest.
There are also often significant conflicts of interest with how PBM's operate. America's largest three PBMs — CVS Caremark, Express Scripts and OptimRX — account for nearly 70 percent of the market. CVS Caremark is owned by the CVS drug-store mega-chain, while large national health insurers Cigna and United Healthcare own Express Scripts and OptimRX respectively.
And whose interest do you think that they are watching out for?
PBMs reimburse their own pharmacies at higher rates than they pay small, independent pharmacies and often force those pharmacies to agree to one-sided contracts or risk losing access to customers that the insurance plans bring with them.
While Oregon has recently taken modest steps at addressing PBM practices, there's still far too little transparency. We must continue to push our state and federal politicians to take action against the anti-competitive tactics employed by PBMs. At a minimum, policy makers should ensure PBMs provide patients with access to rebates that they negotiate with drug makers rather than stuffing more money into their own pockets.
Dr. Gregory Knopf is a family medicine specialist in Troutdale.
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