This isn’t the first post about pharmacy benefit managers on METAR but it’s a topic (like private equity) that bears repeating due to its widespread malevolent influence in driving up the cost of drugs.
the middlemen
The Opaque Industry Secretly Inflating Prices for Prescription Drugs
Pharmacy benefit managers are driving up drug costs for millions of people, employers and the government.
“Reed Abelson”)](Reed Abelson - The New York Times)
By Rebecca Robbins and Reed Abelson, The New York Times, June 21, 2024
…
The three largest pharmacy benefit managers, or P.B.M.s, act as middlemen overseeing prescriptions for more than 200 million Americans. They are owned by huge health care conglomerates — CVS Health, Cigna and UnitedHealth Group — and are hired by employers and governments. Because of recent mergers, they are becoming more dominant, collectively processing roughly 80 percent of prescriptions in the United States.
The job of the P.B.M.s is to reduce drug costs. Instead, they frequently do the opposite. They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees…
Drug price savings claimed by the PBMs appear to be largely a mirage, a product of a system where prices have been artificially inflated so that major P.B.M.s and drug companies can boost their profits while taking credit for reducing prices…
- P.B.M.s sometimes push patients toward drugs with higher out-of-pocket costs, shunning cheaper alternatives.
- They often charge employers and government programs like Medicare multiple times the wholesale price of a drug, keeping most of the difference for themselves. That overcharging goes far beyond the markups that pharmacies, like other retailers, typically tack on when they sell products.
- The largest P.B.M.s recently established subsidiaries that harvest billions of dollars in fees from drug companies, money that flows straight to their bottom line and does nothing to reduce health care costs…
- The P.B.M.s, which are responsible for paying pharmacies on behalf of employers, are driving independent drugstores out of business by not paying them enough to cover their costs. Small pharmacies have little choice but to accept these lowball rates because the largest P.B.M.s control an overwhelming majority of prescriptions. The disappearance of local pharmacies limits health care access for poorer communities but ultimately enriches the P.B.M.s’ parent companies, which own drugstores or mail-order pharmacies.
- P.B.M.s sometimes delay or even prevent patients from getting their prescriptions. In the worst cases, patients suffer serious health consequences… [end quote]
This is a very long article which describes how the PBM industry developed and how drug pricing is negotiated. The PBMs have created group purchasing organizations, or G.P.O.s which can be located overseas to save taxes. The system is dizzyingly complex but the bottom line is that the PBM profits while everyone else is ripped off.
Regardless of your insurance (whether employer, Medicare Part D, etc.), never, ever order a drug until you have compared the insured price with one of the competing non-insurance providers: GoodRx.com, Blinkhealth.com, costplusdrugs.com and Amazon.com. Also check Globaldrugsdirect.com which is a Canadian pharmacy. In many cases the savings will be significant.
The Federal Trade Commission and state attorneys general are becoming interested in this topic because it’s costing governments so much. Every household in the country is touched by this issue.
Wendy