The AARP is exercised because drug company and pharmacy benefit manager profits are up. Surely there must be something amiss if these organizations are making money, er that is “windfall profits.” On the other hand, could it be that profits are rising because Americans are taking more prescription drugs. Campbell Soup’s profit is up too (64%), but on lower sales. No doubt there is a great tomato soup plot we should all be concerned about.
The AARP report notes that PBMs (that’s pharmacy benefit managers) change patients prescriptions so they can make more money. I administered health plans for nearly fifty years using two of the largest PBMs and they never changed a prescription. They did of course call the physician and ask if another brand drug could be used or a generic substituted. They did that because that’s what the employer plan paid them to do, help manage costs.
PBMs do contract with drug companies and they do get volume discounts based on the number of scripts written for a certain drug. So, if you use PBM A you may be steered to Lipitor and if you use PBM B you may be asked to use Crestor (always with your doctor’s approval and authorization I might add). These drugs are called formulary or preferred drugs. Since they are in the same class of drugs treating the same condition, the “preferred” part is lower cost. Is that a bad thing?
PBMs do other things to manage costs on behalf of employers and insurance companies. They promote use of generic drugs, and they promote use of their mail order pharmacies both with the encouragement and at the request of the employer plan sponsors…to enable them to control costs and continue to provide the benefits to employees. You see, the idea that “the patient should be in charge of their health care and not the insurance company” is no more than political rhetoric that can not only be harmful to ones health, but to health care costs as well.
Most of the time doctors have no idea what a drug costs, may not be aware of alternatives and may be prescribing a drug based on past practice or the most recent visit by a drug company representative. PBMs help in this process with an eye toward controlling the plan’s costs. Along the way they make money doing this, they are paid by the employer to administer the plan, they make money through their mail order pharmacy and they make money through formulary drugs.
Not long ago there was controversy over the rebates provided for formulary drugs. The question was simply who was benefiting more from the rebates, the PBM, the plan sponsor or the patient. Indeed more of those discounts should have been going to the plans and hence employees as well. Subsequently employers changed their contracts so there is more transparency. That is, more or all of the rebates are passed to the employer plan and in return the PBM receives higher fixed administrative fees and in some cases additional incentives to control costs. Yes, everyone makes money along the way and that includes the hundreds of thousands of people who work for drug manufacturers, PBMs and your local pharmacy.
Your local pharmacy does not like the PBMs because they take business from them, make lower payments for drugs and pay small dispensing fees. But wait, what was life like before they PBM? Well, employees went to the local pharmacy,nearly always received a brand drug and paid 100% of the retail price while the health plan reimbursed them 80% of that retail cost. And since there was no coordination of the drugs they were taking, going to different doctors and/or different pharmacies meant there was a greater chance of adverse drug interactions, duplication or other conflicts possibly affecting health outcomes and certainly adversely affect cost. A PBM is able to track all the drugs a person takes regardless of where the prescription is filled or who wrote the script. It’s a good thing.
I have a friend who is taking a drug that costs $6,000 per month. He owes his life to that drug, but everyone wishes it cost a lot less. What’s new? You want to spend less on prescription drugs, here are a few things to check out:
- Why are US consumers subsidizing the cost of drugs that are price fixed in other countries?
- Why are drug companies allowed to advertise prescription drugs like candy thereby driving up the (sometimes unnecessary) use of drugs? Ask your doctor about this.
- Why do so many people fail to take a prescription as directed and thus waste the drug?
- Why are people so quick to ask for a quick fix prescription as opposed to changing their lifestyle?
Is all right with the world on this one, certainly not, but as is the case with so much of the discussion surrounding health care, we look for the bad guys in the most convenient place and as far away from ourselves as possible. There is no easy fix to health care costs, it is not the government, more regulation over the industry or finding the next scapegoat.
Exactly what do we want from our health care system and at what cost? Everything and at any cost is not the answer.
QUINNSCOMMENTARY 
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