Drug Middleman Could Be Charging You More Than Your Medicine Costs

I-Team: Drug Middleman Could Be Charging You More Than Your Medicine Costs


ROCKLAND (CBS)- Amy Frostland works hard as a waitress to help support her two young boys. And even though her husband gets health insurance through his job, it still takes a big bite out of their budget.

“Health Insurance is ridiculous,” she said.

That is why Amy was stunned when she realized that expensive insurance was not helping her when it comes to paying for her medication.

iteam drug cost I Team: Drug Middleman Could Be Charging You More Than Your Medicine Costs

Amy Frostland speaking about her family’s health insurance. (WBZ-TV)

“If I run my insurance, it’s going to cost me $90 for a three month supply; if I do it without insurance, it is $10 for a three month supply,” she explained.

“It’s a huge problem,” said Todd Brown of the Massachusetts Association of Independent Pharmacists.

Brown says much of the blame lies with pharmacy benefit managers, or PMBs. They act as middlemen between insurance companies and pharmacists to process your prescriptions.

They negotiate prices with drug manufacturers and they handle all the patient claims.

Brown said these little known companies are making billions of dollars in profits.

“When you look at the profit these companies make, it’s excessive. It’s inconsistent with the rest of the health care industry,” he explained.

iteam drug cost1 I Team: Drug Middleman Could Be Charging You More Than Your Medicine Costs

Pills from a pharmacy. (WBZ-TV)

So how are they making that money? Two class actions suits, one of which was filed in Connecticut, claim it is coming from your co-payment.

“It’s really more of a “you-pay” than co-pay,” said Bob Izard, a Connecticut attorney working on both lawsuits.

Here’s an example from one of the lawsuits in which a Massachusetts woman is the lead plaintiff:

An insurance plan requires a $20 co-payment on all prescription drugs. But the price owed to the pharmacy for the medicine is on $1.75. The suit alleges the PMB pockets the change of $18.25, which is called a ‘clawback’.

“We describe it as basically a massive fraud,” Izzard said.

According to the lawsuits, this is not about high-priced designer drugs.

It involves common, relatively inexpensive drugs millions of people take every day like the antibiotic Azithromycin, the blood pressure medication Lisinopril and cholesterol drugs like the generic form of Lipitor, Atorvastatin.

iteam drug cost2 I Team: Drug Middleman Could Be Charging You More Than Your Medicine Costs

Pills being dispensed. (WBZ-TV)

Patients are largely in the dark about this and the suit alleges the PBMs go to great lengths to make sure it stays that way.

“Pharmacies are prohibited from talking to patients about how much a patient would pay if they just pay cash and didn’t go through their insurance,” Brown explained.

The I-Team reached out to an industry group, a spokesperson for the Pharmaceutical Care Management Association. They said,“Patients should not have to pay more than a network drugstore’s submitted charges to the health plan.”

But when we asked them to clarify, the spokesperson never responded.

Amy says she overpaid by hundreds of dollars for years. “I thought it was robbery, absolute robbery,” she said.

So how do you avoid overpaying? You can call your pharmacy and ask what the cash price for the drug is.

You can either pay that cash price or call your insurance company and ask why are paying more than the drug costs.

The PBM industry came on the scene in late 1969… the new UAW contract with Ford, Chevrolet, Chrysler, International Harvester and John Deere “created” this MIDDLEMAN that inserted itself in the retail/community prescription medication system.

Prior to this time, all pts paid CASH for their prescriptions or “store charge” and 2/3 of the community pharmacies (abt 45,000) were  neighborhood “independent pharmacies”.  The pt submitted their receipts to their insurance company for reimbursement.

The average prescription price was $4-$5 and there were virtually NO GENERICS and prescriptions were abt 6% of overall healthcare costs. Wholesale prices from the brand name Pharma’s were virtually “static”. Back then, Pharmacists had to manually calculate the retail price from the wholesale prices… wholesale prices were so stable many Pharmacists had memorized the wholesale cost, especially on the “fast movers”…  Pharmacy wholesalers worked on a 18%-20%  gross profit and community pharmacies worked on a 40%-50% gross profit. Everyone made money, and pts got taken care of … even if they didn’t have the money to pay on a particular day.

Won’t bore you with the details from then to now… but today… PBM industries is dominated by five major players https://www.verywell.com/top-5-pharmacy-benefits-managers-2663840  that control/manage 50%+ of all prescriptions paid for by a PBM. Today, 85%-90% of all prescriptions are paid for thru a PBM and today 85%-90% of all prescriptions are GENERICS… and the average prescription prices is pushing $60.00.

Retail/Community pharmacies are working on < 20% GROSS PROFIT and wholesalers are working on abt 6% GROSS PROFIT and prescriptions are now abt 12% of all medical care costs.

If one applies the CPI (Consumer Price Index) and/or COLA ( Cost of living adjustment) to that average Rx price back in 1970.. today one would expect the average Rx price to be in the $30 range.  That would presume that all prescriptions are brand name and all pts paid cash and submit their own claims to their insurance company for reimbursement.

Everything since 1970 was done to save pt and the system money… generics are suppose to be less expensive and the PBM’s would expedite claim processing..

So why is the average prescription price is 50% to 100% higher than would otherwise be expected ?  Back in 1970, nearly all insurance companies were “mutual companies”… they were owned by their policy holders and were not for profit entities…  During the 90’s most insurance companies – demutalized – becoming publicly held – FOR PROFIT – entities.  It is claimed today that these for profit insurance companies … 20%-30% of every premium dollar paid to them is CONSUMED by their corporate infrastructure and profit goals… to help keep the stock market and stockholders happy.

The PBM’s are also FOR-PROFIT companies… they have moved on past their original purpose…It has been reported that PBM’s tell the Pharma’s that if they want their medication on the PBM’s “approved formulary” the Pharma needs to pay a rebate/kickback to the PBM’s… some have reported that could be up to 70% of the wholesale price of the product.  The “BIG BOYS” are even suing each other over the “sharing” all of these kickbacks/rebates   http://www.npr.org/sections/health-shots/2016/03/21/471301872/anthem-sues-express-scripts-for-a-bigger-slice-of-drug-savings

Some point out how much less that the Veterans Administration pays for medications but the VA has no middlemen like insurance companies and PBM’s  and their infrastructure overhead and focus on making a profit. Some believe that the various middlemen in the pharmaceutical medication distribution system consume some 40% -50% of every dollar paid to them to support their infrastructure cost and desire to make a profit.

The reason that our healthcare system is so costly… seems quite clear ?



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