Insurance intermediaries, PBMs, deserve more scrutiny
Rising health care costs affect the budgets of everyone, from young families with children to seniors and business owners. And in today’s job market, health care benefits are playing an increasingly important role in the hiring process for companies of all sizes.
The search for answers to rising health care costs often turns up the usual suspects: insurance companies, pharmaceutical companies, doctors, hospitals, even patients who are unaware of opportunities to improve their health.
Missing from this list, however, is a major suspect who sits right in the middle of healthcare providers and patients: pharmacy benefit managers, or PBMs.
What is a PBM?
PBMs are the intermediaries hired by insurance companies to negotiate prescription drug prices with pharmaceutical manufacturers and pharmacies. Long criticized by health economists, the six largest PBMs are now the target of a Federal Trade Commission investigation released in June.
The stated goal of PBMs is to create cost savings, but the reality is very different. Instead, they find ways to put smaller pharmacies out of business and put costs back on patients while raking in billions of dollars in profit. PBMs are known for taking advantage of nearly every facet of the pharmaceutical supply chain, and their power has grown as mergers and acquisitions consolidate the industry.
The FTC’s investigation will focus on the PBM’s role in negotiating reimbursements and rates with drug manufacturers, creating drug policies and formularies, and reimbursing pharmacies for patient prescriptions. In this role, and over time, they have been inserted into the operations of the largest health insurance companies and mail-order pharmacies as a key player in their workplace health benefit development.
PBMs have significant influence over what drugs are prescribed, which pharmacies patients can use, and how much patients ultimately pay over the counter. These intermediaries shape health benefit plans while operating in an unregulated environment that includes complex business relationships that are largely hidden from public view and would be virtually impossible to understand if there were any level of transparency.
In other words, employers are likely unaware that much of their healthcare benefit spending is not benefiting the health of their employees at all, but rather the bottom line of pharmaceutical PBMs due to a lack of transparency and regulation.
If you’re wondering who these PBMs are, the six largest include some familiar names: CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and Med Impact Healthcare Systems, Inc.
The FTC’s June investigation followed its February request for information on PBMs and the 24,000 public comments it received through June. The research will look at PBM practices that have been raised in recent years, including:
- Methods to direct patients to PBM-owned pharmacies
- Fees charged to non-affiliated pharmacies
- Complex methods to determine pharmacy reimbursement
- The Impact of Drug Manufacturer Reimbursements and Fees on Formulary Design and Prescription Drug Costs for Payers and Patients
- Use of specialty drug lists and specialty drug policies
- The prevalence of prior authorizations and other administrative restrictions
- Potentially unfair audits of independent pharmacies
This lack of transparency, and questionable pricing schemes, in the world of PBMs is increasing the cost of generic drugs instead of saving money for patients, governments and employers, according to research published this spring by the Schaeffer Center for Health. from the University of Southern California. Politics and Economy.
In some cases, patients and physicians have been denied access to less expensive generic drugs and forced into more expensive treatments that generate higher profits for the PBM.
According to the newspaper, these tactics have led to billions in overpayments. When patients (a business owner’s staff) pay more than $100 for a drug, they are more likely to abandon or delay needed treatment.
Connecticut has been a leader in passing policies that address some of the most obvious PBM issues. But there is more work to be done: the industry must be held accountable because as states and the federal government find ways to combat these practices, a new one appears.
Legislation has already removed “gag clauses” that prevented pharmacists from telling patients their medicines could be cheaper if they didn’t use their insurance. And a new law will take effect in 2023 to eliminate “copay accumulator” programs in which PBMs penalized patients for using third-party prescription assistance programs by not counting those payments toward a patient’s deductible.
As the FTC effort unfolds, employers should support changes that prioritize PBM transparency and require that they use their negotiated savings to reduce costs for beneficiaries.
Doing so could have an impact on a company’s results both now and in the future.
Tony Sheridan is President and CEO of the Eastern Connecticut Chamber of Commerce.