The real culprit for high drug prices
Out here in Arizona, there’s always been an appreciation for the old Wild West. It’s part of our state’s character, as evidenced by popular tourist attractions like Old Town Scottsdale or downtown Tombstone. Unfortunately, some industries confuse the lawlessness of the Old West with the modern, business-friendly environment of our great state, and use a shocking lack of transparency to profit off the backs of hard-working Arizonan residents and businesses – and there’s no better example than Pharmacy Benefit Managers (aka PBMs).
PBMs are middlemen who operate in the shadows between the drug manufacturers and health insurance plans. They work without much, if any, state or federal oversight, though efforts have been made on both levels to curb their influence (notably, Senate Bill 1161 currently in the Arizona state legislature). PBMs exert enormous control over patients’ medications, from what drugs are covered by their health plan, to how they access their prescriptions and the amount they and their health plan sponsor (usually the patient’s employer) will pay at the pharmacy counter.
This is one of the many areas where PBMs take advantage and drive-up out-of-pocket costs. PBMs require drug manufacturers to pay them a rebate in order to get medications covered by an insurance plan, but charge full price to the consumer and the health plan payer, typically the patient’s employer, or taxpayers in the case of Medicaid and Medicare. Instead of passing along the savings, PBMs collect what amounts to millions of dollars in kickbacks and keep drug prices artificially high for the rest of us.
The numbers are easy to find. In 2020, Quetipine, a drug used for depression and schizophrenia, cost Arizona’s Medicaid program .75/tablet. Yet a search of Medicaid.gov showed pharmacies that were not owned by/affiliated with PBMs were reimbursed .26/tablet – a difference of .49/tablet, or $14.70 per 30-day prescription. That’s $14.70 of taxpayer dollars per prescription that PBMs kept for themselves. Worse still, later in 2020 PBMs charged Arizona Medicaid $20.14/tablet for the same medication – an increase of 7,746% per tablet, with a markup of $596.40 per 30-day prescription. If you are looking for why prescription drugs are so expensive, PBMs are where the buck stops.
One of the most egregious methods that PBMs use to hurt consumers is patient steering; where patients are often moved from their preferred pharmacy to a PBM-owned pharmacy without their knowledge or consent – an issue that Arizona State Senate Bill 1161 is attempting to combat.
Patient steering can involve everything from fraudulently contacting patients with “no-coverage” threats if the patient does not change where they receive their medication, to mail order schemes where a PBM uses loopholes to repackage the medication in order to charge higher fees, to trolling patient data by sending the patient’s medication to a PBM-owned or affiliated pharmacy for refilling without the patient’s prior knowledge.
Moreover, the three largest PBMs own or are owned by the largest health insurance companies which have in-house and/or mail-order pharmacies that PBMs unethically steer prescriptions to. It’s a practice so anticompetitive that many other states have passed legislation banning it – and it’s easy to see why. Health insurers are conspiring with the PBMs they own to inflate prices – leaving consumers out in the cold.
It’s overwhelming to even scratch the surface of how PBMs manipulate the U.S. drug market in order to put their own profit above patient care and safety. Arizona may have its roots in the Wild West but our citizens are smart enough to know when to pull the reins, which is exactly what’s needed here: rein in the unchecked power of big business PBM middlemen and bring their outdated business model into the 21st century.