Important: Behind-the-scene look at how people get discounts on prescriptions
A Chicago drugstore, J& S Community Pharmacy, just filed a federal antitrust suit seeking $1.5 billion in damages.
The allegation? That Prime Therapeutics, the nation’s fourth-largest pharmacy benefit manager (PBM), has conspired to drive local drugstores out of business.
J& S Community Pharmacy faces an uphill battle. But patients everywhere should pay attention to the suit, as PBMs are a big reason why drug prices have become so burdensome.
PBMs are employed by health plans, private and public alike, to administer prescription drug benefits.
By sitting between pharmacies and drug manufactures, PBMs can leverage their negotiation power to secure steep discounts for patients — in theory, at least.
Increasingly, though, PBMs are extracting discounts solely to boost their own profit margins.
Patients hardly benefit from these discounts at all.
PBMs do a great job negotiating steep discounts or after-sale rebates on drugs.
More than a third of the list price of brand medicines ends up going back to PBMs and other supply chain members, according to a recent study by the Berkeley Research Group.
But those savings rarely reach patients. Many insurance plans require patients to pay coinsurance on drugs, or a pre-determined percentage of the drug’s cost.
The problem, though, is that many beneficiaries’ out-of-pocket spending is based on the drug’s full list price, not the negotiated price secured by PBMs.
Consider this example.
A patient’s heart disease medicine has a list price of $100. Her insurance requires her to pay 40 percent of that price, or $40.
But the PBM negotiated a rebate of 30 percent on the list price, making the actual price of the medicine $70.
The patient still pays $40, which means that she’s paying 57 percent of the medicine’s real price — not the 40 percent to which she agreed.
Or consider a patient whose insurance plan requires him to pay $20 copays on all of his prescription pills, regardless of the pills’ price. If the PBM negotiated a price that’s less than $20, the patient still pays $20. The PBM simply keeps the savings for itself.
With pricing strategies like this, it’s no wonder why PBMs are joining forces with giant pharmacy chains; there’s a lot to be said for the efficiency offered by an existing, giant customer base. Already, CVSHealth and Rite Aid act as their own PBMs.
High drug costs don’t just impact finances; health also suffers. High out-of-pocket costs prompt patients to abandon their prescriptions or delay picking them up. Poor adherence leads to a host of medical issues.
Patients shouldn’t be deterred from taking their medications because of their cost. It’s time that ! pharmacy benefit managers start passing savings onto patients.
Garth Reynold is executive director of the Illinois Pharmacists’ Association.