PUTT

PBMs are an administrative arm of - or in some cases, a 3rd party services provider - for insurance companies. They negotiate rebates on prescription medications with drug makers, determine formulary placement for the health insurance plans they represent, set reimbursement rates for pharmacies and physicians, and enforce patient requirements of their own making -- for example, prior authorizations.

PBMs do not have medical degrees and are not providers of healthcare, despite the prescription drug decisions they make that directly affect patients.

PBMs charge health insurance plans for every prescription that one of their members has filled. They also reimburse the pharmacy that filled each prescription. Spread pricing is when a PBM pockets the difference between what they charge the health plan and what they pay the pharmacy.

The problem is that since PBMs are not currently required to disclose the actual cost of a prescription and how much they mark up their services (even to the government), that "spread" can easily equal hundreds or thousands of dollars Per Plan. To add insult to injury, PBMs often reimburse local pharmacies at well below what it costs the pharmacy to purchase a medication then pocket that difference as well.

Spread pricing adds additional costs to what employers and governments pay on prescription drug plans, which directly affects patients and taxpayers.

"Gag clauses" in contracts between community pharmacies and pharmacy benefit managers forbid pharmacists from telling customers if they could save money on their medications by paying for them out of pocket instead of through their insurance plan. PBMs put these clauses in their contracts to keep patients from knowing about the cheaper "cash" prices. Pharmacists who break the gag clause can be fined, so they usually will not offer this information to patients unless asked. The only way around the gag clause is for the patient to ask the pharmacist if they can get a better price on their prescription if they pay out of pocket.

The term "rebate" usually means the buyer of a product receives some money back post-purchase. This is not the case for prescription drugs. In the prescription drug market, a rebate is money paid by the drug maker to the pharmacy benefit manager (PBM) for placement on a health insurance plan's formulary (a list of medications approved to be covered by a health insurance plan). Essentially, the patient buys the medication, but the PBM keeps the rebate.

​

Pharmacy benefit managers/pharmacy benefit companies (PBMs/PBCs) negotiate manufacturer rebates - which they keep in part or whole. The more expensive the medication, the higher the rebate. PBMs will often structure their contracts to allow them to collect and keep rebates as part of an “administrative fee” or “rebate sharing” arrangement with the health insurance plan instead of passing the rebate to its rightful owner - the purchaser of the prescription.

Since the largest PBMs/PBCs are owned by the largest health insurance companies, this "rebate sharing" arrangement is a funnel directly back into the corporation's own pockets. Patients never see a dime.

PBMs work with drug makers to determine the list of medications to be covered by health plans they represent. In the process PBMs negotiate, and are incentivized by, manufacturer rebates - which they keep in part or whole. The more expensive the medication, the higher the rebate.

While the term “rebate” usually means the buyer receives money back post-purchase, this is not the case for prescriptions. The patient buys the product but the PBM receives the rebate. PBMs will often structure their contracts to allow them to collect and keep rebates as part of an “administrative fee” or “rebate sharing” arrangement with the health plan instead of passing the rebate to its rightful owner - the purchaser of the prescription.

National chain pharmacies (think CVS, Walgreens, Rite Aid) are owned and operated by billion-dollar conglomerates that in many cases also own or have ties to health insurance companies and their PBMs. Since their parent companies are publicly-held corporations, their first priority is to their shareholders - not to patients.

Community pharmacies are locally owned and operated by small business owners. Their first priority is to their patients. Most community pharmacies offer local prescription delivery, vaccinations, patient counseling - everything that national chains claim to offer - but with a community pharmacy, the money a patient spends on prescriptions stays in the community.

Community pharmacies also usually have lower cash prices on prescriptions than their giant chain counterparts, and because they are local residents themselves, they many times have personal relationships with the area doctors and hospitals so communication between all parties on behalf of patients is a common occurrence.. Patients filling their prescription at a community pharmacy can rest assured that they are a valued person who is being cared for - not a number without a name.

Pharmacies are dependent on having patients. Most patients depend on having a prescription drug plan to help offset the cost of expensive medications. Because of this, pharmacies are left business-wise in a “take it or leave it” situation. Pharmacies contract with PBMs because they are in the business of providing care and the PBMs have the patients.

A formulary is the list of prescription drugs that a health insurance company has agreed to cover on behalf of their plan members. PBMs determine these "approved drug lists" for each healthcare plan they represent and update or change them on a regular basis.

Almost all PBMs own -- or are affiliated with -- mail-order specialty pharmacies. PBMs attempt to force or "steer" patients to those pharmacies in an effort to keep all the money 'in-the-family' (so to speak). Imagine you have a membership at a big box store that offers delivery. You want to purchase your favorite cereal from the local grocer that's 1 block from your house and offers a better price, but the big box store will penalize your membership & raise prices on what you buy if you don't use their store and delivery service. Not exactly ethical, right? That's the same as "steering" or forced mail-order.

Express Scripts (ESI), the PBM contracted for TRICARE, made the decision to eliminate the majority of independent pharmacies in their network and force the use of mail-order by TRICARE beneficiaries.

Here at PUTT, we strongly disagree with this move and are calling on Congress to investigate the factors that led to the decision to cut 15,000 pharmacies out of the TRICARE network, to restore veterans’ right to access affordable medication, and community pharmacies’ right to serve their military patients.

We urge all TRICARE beneficiaries and their families to contact their Congressional legislators regarding this matter.

Investigations in multiple states have uncovered serious questions about the level of profiteering PBMs that manage Medicaid are engaged in. As with private health plans, PBMs provide prescription drug benefit plans to Medicaid and Medicare enrollees and bill the government for their services. State governments pay for services with money raised by local taxes and receive matching federal funding (also taxes) to cover costs.

For Example: In Ohio, an independent investigation by the Columbus Dispatch has shown CVS Caremark charged the state as much as 9 times the cost of a prescription drug while reimbursing local pharmacies below cost - meaning taxpayers are grossly overpaying for common medications - while the PBM CVS Caremark pockets the difference in a practice known as "spread pricing".

Issues of this nature have been proven to exist with the largest PBMs at both state and federal levels.

Several things.​

​

1. Visit your local independent community pharmacy and talk to your local pharmacist to understand how your drug plan influences the price you pay for medications.

2. Ask your local community pharmacist about any price difference between what you pay for your medications through your insurance plan, and what you would pay without insurance (the cash price).

3. If you manage an employee benefit plan, ask your broker or PBM representative to provide a detailed explanation of your fee structure or contact PUTT for information on switching to a transparent “pass-through” PBM.

4. File official complaints with your state Department of Insurance, the Federal Trade Commission if you feel your health plan's PBM is violating your rights as a patient. The Department of Justice Antitrust Division also has a Healthcare Violations portal for patients & healthcare providers to file complaints if you feel your insurance company and/or their PBM is operating in an anticompetitive on non-transparent manner.

5. Contact your state and federal legislators to let them know you support legislation that reins in PBM abusive practices, promotes transparency in the prescription drug market, and puts patients and local healthcare providers first.