Jan 31, 2019
Pharmacy Benefit Managers (PBMs) serve as middlemen administering prescription plans for insurance companies. This middleman industry, which began innocuously in the 1960s, has now through unregulated mergers and acquisitions been reduced to 3 major companies due to lack of regulation.
Pharmacy Benefit Managers (PBMs) serve as middlemen administering prescription plans for insurance companies. This middleman industry, which began innocuously in the 1960s, has now through unregulated mergers and acquisitions been reduced to 3 major companies due to lack of regulation. The situation has created a major monopoly in the healthcare industry and is and driving up prices prescription drug prices at a staggering unchecked rate.
The unfair, anti-competitive business practices of PBMs include:
Spread Pricing – PBMs take a “cut” of the reimbursements to contracted pharmacies. These "cuts" also known as "spread pricing" are the difference between what a pharmacy is paid by the PBM upon filling a prescription and what the PBM bills the insurance plan. In many cases, local pharmacies are paid far less than what it cost them to purchase a patient's medication, yet the plans are billed upwards of 50 to 100% above the cost. How can this happen? Because 3 major corporations control over 85% of all prescription drug plans in the U.S. and that includes private plans, Medicaid, and Medicare. Pharmacies are paid at a loss on prescriptions filled and taxpayer dollars are bilked. It's a lose-lose situation for everyone BUT the PBMs.
Clawbacks – Insurance charges a $10 copay to the patient, then turns around and takes back $9 from pharmacy….sounds ridiculous right? IT IS! If PBMs are supposed to save money, what is the practice of clawback? Why not charge the patient $1 copay instead? Read more in our about section and follow our blogs for ongoing litigation updates.
Rebates & Pay to Play Tactics – Sounds like a mafia-style corruption scheme right? That’s because it is. The rebates negotiated for brand medication are responsible for up to 50% of a drug’s retail price. Guess what? PBMs get additional commissions from negotiating rebates. If you find it unfathomable that prescription drug prices go up each year at a rate that's far higher than the inflation rate, you're not alone. PBMs set "preferred" and "non-preferred" drugs on insurance plans - the PREFERRED drugs are a lower copay because the manufacturers PAID to be on the formulary (pay to play) not because the drug was better.
Mandatory Mail Order – If a company keeps all the business in-house, they can drive competition out and make more money - but that's a violation of the Sherman Anti-Trust Laws, right? Unfortunately, PBMs found a loophole. Let's say a PBM says to their self-owned insurance company, if we mandate that all of our members get mail-order prescriptions, we will only charge $9.95/Rx vs $10. That is a 5% saving for the insurance company so a no brainer right?? But now by giving up 5% PBM captures the whole market…an easy tradeoff. Next year the PBM will increase rates to insurance by 5% and then keep both market share and money. On the other hand, the patient has less access to pharmacist expertise, gets meds delivered automatically even when not needed or discontinued, meds can get damaged/lost in the mail. Above all the mail-order pharmacy can get reimbursed HIGHER than a local pharmacy, is mail order really saving insurance money….no way to know cause PBM’s are not regulated. Thanks to inaction by legislators around the country, they have grown to be the “TOO BIG TO FAIL” monsters.
The above points are just a teaser…many more anti-competitive practices are happening daily. “About IPMD” page will give you more details of the PBM abuses/practices. Join our Newsletter to get updates on our activities and events near you. Follow our Facebook page and go to links from our resources page to learn more about why drug prices are going up in this country and why PBM’s are one of the major causes. We hope that once you have understood our causes your will call on your Maryland state & national legislators, Governor, MD House speaker & Minority leader, MD Senate president & Minority leader to support PBM transparency legislation.
A Video from the National Community Pharmacists Association (NCPA) explains the PBM story.