Politicians oppose Medco merger – for all the wrong reasons

The following is from a resolution of the NJ. Assembly urging the governor to oppose the merger of Medco, the pharmacy benefit manager, and Express Scripts:

“This market dominance will leave customers with limited bargaining power, allowing pharmacy benefit managers to charge more for their services. The increased cost will inevitably be transferred to the patient. The merged entity would also have greater power to steer plan participants to its own mail-order pharmacy by providing incentives such as lower co-payments, by limiting the pharmacies in the participant’s network or by requiring mandatory mail-order prescriptions, thereby preventing the patient from using the pharmacy of their choice and restricting their access to community pharmacists,” the resolution said. “Lastly, the merged entity would have a greater ability to drive down the reimbursement rates for community pharmacies, forcing pharmacies to raise prices and cut back on hours, services and employees, thereby threatening the existence of community pharmacies.”

Once again politicians miss the point and in the process don’t help the health care cost situation. Pharmacy benefit managers (PBMs) such as Medco work for insurance companies and large employers (the customers) who are the entities that determine the design of their benefits such as use of mail order, co-pays, penalties for not using generics, etc. Employers negotiate for these services and encourage use of mail order, formulary drugs and overall the least expensive prescription possible and appropriate. The big players in the PBM field must have a large number of participating pharmacies to make their plans work. True, small local pharmacies will struggle especially as there is a squeeze on the wholesale price of a drug and the dispensing fee paid by the PBM on behalf of the health plan to fill a script. Those who cannot survive with ever lower fees will not exist.

However, the same is true for hospitals and doctors as Medicare and others seek to reduce fee payments. This is exactly why you are seeing more and more consolidation and more doctors seeking employment in hospitals. Lower payments to all health care providers whether it be for each fee or by paying for fewer services is how you lower health insurance premiums … period.

So, what exactly are our priorities and goals in all this? Do we want the lowest possible price for drugs from whatever source, do we want lower health insurance premiums, do we want lower cost-sharing options for patients or do we want to preserve the existence of community pharmacies that may provide highly desirable personal service but cannot compete on cost just as your local market cannot compete with the Walmart’s of the world? Heck your local pharmacy cannot compete with a Walmart pharmacy.

All the political rhetoric in the world will not change the hard facts. The self-serving organizations trying to preserve the status quo (quite understandably of course) are working against the very kind of changes we need …. that is, if we really do care about health care costs.

The Affordable Care Act expanded coverage and increased benefits, but it did not change the fundamental system.

Here is the real question. Is America up to that challenge?