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Consumer Alert: Paying too much for prescription drugs? A middleman may be to blame

NBC News 10 New York

Investigative Reporter Deanna Dewberry


Do you ever wonder why your prescription drugs cost so much? If you nodded yes, you're not alone. I’ve been investigating that very question for months.

I’ve learned consumers aren’t the only ones balking at the high cost of prescriptions, pharmacists are as well. Pharmacy owners tell me drugs don't have to cost as much as they do. If you want to truly understand what is driving the cost of prescription drugs, one local pharmacist says we need to look no further than what happened to Rochester's New Clinton Pharmacy.


The pharmacy was located on the first floor of St. Simon’s Terrace apartments, an eleven-story apartment complex that provides low-income housing for hundreds of folks who live in the Upper Falls neighborhood. Dr. Lekisha Griffin was the owner “It meant a lot,” said Dr. Griffin. “Representation matters. For somebody who looks like them to be in this community. I grew up in this community."


After earning a professional doctorate degree in pharmacy, she came back to give back to folks who considered her one of their own.


"They were very comfortable in talking to me,” said Dr. Griffin referring to her patients. “Sometimes it was very personal things. Sometimes it extended beyond pharmacy, stuff about their family, that sort of thing. And we had a deep bond."


But that bond with her patients was broken. Her pharmacy is now closed and driven out of business. Dr. Griffin places blame squarely at the feet of Pharmacy Benefit Managers or PBMs.


"They work with the insurance companies to provide reimbursement, but it gets to be difficult when let's say you pay $700 for a medication, and the PBM is only paying you $650 for that medication,” explained Dr. Griffin. “So you're losing $50 every time you dispense that medication to a patient."


The Pharmacy Benefit Manager or PBM is a middle man with a big role in controlling what you pay and what your pharmacist gets paid. The PBM develops a list of the medications your insurer will cover, negotiates rebates and discounts, and pays pharmacies for the drugs you buy.


Here's why their role is controversial. Let's say your pharmaceutical company charges a dollar a pill for a drug. The PBM negotiates a rebate of 50 cents. The PBM keeps a portion of that rebate. Let's say, 20 cents for itself, and passes on the rest, 30 cents, to your insurer.


And in the case of generic drugs, there's something called spread pricing. Here's how it works. Let's say the pharmaceutical company charges a buck per pill. But the PBM charges your insurer $1.20 and the PBM reimburses the pharmacy only 95 cents. That means it keeps a quarter from that drug sale for itself. And even more controversial is the fact that PBM contracts are secret.


Large chain pharmacies can absorb the cost. That’s not the case for small, independent pharmacies.


“For an independent pharmacy that may have only one location or two or three locations, it's harder for that independent pharmacy to absorb that hit," Dr. Griffin said.


And she says that’s leading to the closure of not only her independent pharmacy but also many others across the country.


While PBMs say they save money, critics say they are actually driving up the cost of drugs in America. The FTC announced earlier this month that it has launched an investigation of PBMs.


Many states have passed legislation to regulate them, including New York.


By January of next year, PBMs will have to be licensed in New York State and can lose their licenses for unfair reimbursement practices.

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