PBMs, pharmacies, and insurance companies: Three legs of a many-legged stool. Or cabal.

PBMs. What are they? Pharmacy benefit managers. Oh, thanks. That clears up a lot!

Well, they are big and important in the health care industry, which should give you a clue: they are somewhere between “not about helping you” and “evil”. Unfortunately, this describes almost every big corporation (pharmacies, insurers, pharmaceutical and device manufacturers, and large health care “provider” corporations) that is involved in health care, or more realistically, sucking money out of the public (directly from you or your government) that was intended to provide health care.

But, back to PBMs. They are, as the name suggests, “managers”, in this and many other cases another word for “middlemen”, set up to be intermediaries between the pharmaceutical companies and pharmacies and insurance companies and you, the consumer (remember that last, “you the consumer”, the one entity in this calculus that has very little weight?). Much of what PBMs do, and a lot of the things that they do that make them more money (and thus could be called “abuses”, since they are not about the only important thing, maximizing the health of the people) are described in this piece from American Progress, “5 things to know about pharmacy benefit managers”. In addition to receiving payments for their services from insurance companies (presumably a legitimate fee, although perhaps for a service that benefits the insurers and not you, and as we shall see below, another scam as many of them are owned by insurance companies!), they also have other little “tricks”. Pharmaceutical companies (another huge pig at the trough of health care dollars) frequently offer discounts in the form of rebates on the cost of expensive drugs – and often, to be fair, negotiated by the PBM – intended to help the consumer. But the PBMs often keep a portion of that rebate. More insidious is that this rebate is a percentage of the price, so the higher the price, the more the PBM gets to pocket. This may (and often does) lead to their “preferred drug lists” having the most expensive drugs as preferred. While this does not cost the patient more (because it puts it in a lower tier), it does make more money for the PBM.

PBMs also engage in “spread pricing” where the amount they receive from the insurer for a drug is more than they pay the pharmacies. And they keep it. And the cost of your insurance and your co-pays can go up to “repay” the insurer for the payments that they make to the PBM. Most of us are familiar with paying for things at a discount, only to discover that the discount is from an inflated “list price”, which already includes a sizeable profit for the vendor. Nowhere is this as common as in drugs; if you have a drug plan (say, Medicare Part D) you are likely to discover that what you pay for your drugs (your co-pay) doesn’t count to your annual deductible, since the insurance company and PBM (now often one and the same) have decided you are already getting a good deal from the discounts that they have received, even when they are pocketing the spread. In 2018, Ohio discovered its Medicaid program was paying $220 million more to PBMs than the latter were paying to the pharmacies for them! Entrepreneurship? Criminal theft?

In a recent piece on his substack, Health Care Un-Covered, health insurance industry whistleblower Wendell Potter describes how ‘The PBM-insurer mafia comes for community pharmacies’. The first important item is contained in the title – “PBM-insurer mafia” – now these two entities are not in competition but in collaboration as two of the “Big 3” PBMs are now owned by insurance companies (OptumRx by United Health and ExpressScripts by Cigna), and the third (Caremark) by a pharmaceutical chain, CVS. This follow the pattern prevalent in all industries, but particularly in “health care” of increasing consolidation, vertical integration, and monopoly power. As Potter describes, one victim of this has been independent community pharmacies. Why such independents are good and of value is eloquently described by one such pharmacist quoted in his piece, so I  won’t re-quote it here; suffice it to say it is what you can imagine is lacking in corporate chains – personal service to people. The benefit to the PBMs of putting independent pharmacies out of business and shunting prescription business to the chains is obvious for CVS/Caremark, but also true for ExpressScripts since it has a deal with Walgreens. And, of course, for all in insurance companies to their owned mail-order pharmacies (which you may get regular emails urging you to use). As is always the case, the lowest income people (who often have the worst insurance coverage, or have Medicaid) are the worst hit, but increasingly insurers and their PBMs have found ways to screw all of us.

There has been increasing political pushback, finally. ‘Last year, Republican Ohio Attorney General Dave Yost said that “PBMs are modern gangsters.”’ This year, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho) tried to get new legislation passed; ‘“The time for PBM reform was yesterday,” Wyden said. “It’s past time to crack down on the shady practices of these pharma middlemen that result in higher drug prices for consumers and threaten pharmacies across Oregon and nationwide. I’ll be working around the clock to get this done as soon as possible.”’ But it hasn’t yet passed; it is hard to get consensus on anything in Congress these days, and the insurance companies and PBMs have very powerful (and generous!) lobbies. ‘In recent months, an independent pharmacy, Osterhaus Pharmacy, in Iowa, sued the major PBMs over DIR* fees. In its lawsuit against UnitedHealth, it stated, “This vertical consolidation has served OptumRx well. It now controls not just the pricing of drugs, not just the selection of the drugs covered by Part D Plans, and not just the selection of pharmacy services providers in each Part D network; OptumRx also controls access to almost a quarter of the Medicare beneficiaries enrolled in PBM‐affiliated Plans.”’

Yup. If you are convinced that such consolidation (monopolization) of our health care system is a good thing for efficiency and effectiveness, you should have a UnitedHealth poster on your wall. They are the largest “health” insurance company, control the largest share of Medicare “Advantage” clients, own the doctors’ network Optum, and, as above, control OptumRx. The last two are very big moneymakers for them, and account for much of their growth and profit. But the others are just as bad and would like to be as big.

On the other hand, perhaps you are not so convinced. In which case you should be calling your senators and representatives and letting them know that they should be supporting legislation to rein in the PBMs. And, while they’re at it, the insurance companies. And all the big profit-making corporations jacking up the cost of health care while limiting the care.

They have the dollars. But we have our voices, and our votes!

 

*DIR: Direct and Indirect Remuneration fees, which are charged to pharmacies by PBMs. A much more detailed description of them is in Potter’s piece, but in brief they are another method for the PBMs to scam more money, and to do so without any meaningful transparency.