Reducing Drug Costs – PBMs are Not Needed and Should Not be Used!

Patient experiences

• A man taking 5 medications for chronic conditions was notified that his prescription benefit plan was being changed. The revised plan would only permit two 30-day supplies of chronic medications to be obtained at a local pharmacy. Following that, 90-day supplies could be obtained from a CVS Caremark mail-order pharmacy or a CVS local pharmacy, and there would no longer be coverage for prescriptions for these medications at any local pharmacy other than CVS. In discussing this situation with his local independent pharmacist, the patient learned that he could obtain 90-day supplies of all 5 medications from this pharmacy at a cost that was lower than the co-pays he would have had to pay if the CVS mail-order or CVS local pharmacy was used.
  
  
• A 4-year old girl experienced a painful swimmer's ear infection for which antibiotic ear drops were prescribed. When the mother presented the prescription to her local pharmacy, she was informed that the prescribed product was not on the formulary of her prescription plan and that the cost would be $300. The pharmacist indicated that a generic formulation was available at a cost of $150, but further identified another alternative in which the same antibiotic was dispensed as drops and for which the usual co-pay of $15 would be applicable.
  
  
• A woman with diabetes was being treated with metformin. As a consequence of a mistake and/or a change in her prescription plan she started receiving 90-day supplies of metformin that she had not requested and resulted in her receiving quantities far in excess of what she needed.
  
  
• A woman with asthma was away on vacation and realized she had not brought enough of her Flovent inhaler. She knew that additional refills were authorized and went to a pharmacy at her vacation destination to arrange for a transfer from her home pharmacy for a prescription refill. She was informed that there was no problem with the prescription transfer but that the PBM would not authorize/pay for the refill because it was requested too soon. An override of the policy was requested but the PBM representative responded, "Your plan has no provisions for granting a refill when we calculate it's too soon." Subsequent discussions with a PBM supervisor and a representative of the health insurance company that contracted with the PBM brought the same response.
  

PBM practices/abuses

• Some PBMs own their own pharmacies that patients are required to use or are provided financial incentives to do so.
  
  
• Denial of freedom of choice for patients to choose their pharmacy – Many pharmacies are excluded from participation in certain PBM programs. Even in situations in which they are included, financial incentives are often provided to patients to use the PBM's pharmacy or another pharmacy. This eliminates or reduces freedom of choice for patients in selecting the pharmacy they choose to use.
  
  
• Restrictive formularies – Decisions to include medications on a formulary, or to designate medications as having a preferred "tier" or status on a formulary are based only on cost considerations rather than therapeutic, clinical, or convenience considerations for patients. Recent examples include decisions to offer/recommend prescription plans to clients that exclude coverage for expensive medications used for the treatment of rare diseases.
  
  
• Prior authorization – This practice is based on cost considerations and prevents or delays prescribers from exercising independent decision-making authority on behalf of their patients.
  
  
• "Take it or leave it" contracts – Contracts are developed unilaterally by PBMs without pharmacist input, discussion, or possibility of negotiation.
  
  
• "Gag clauses" – Many PBM contracts include restrictions that prevent pharmacists from identifying less expensive alternatives for obtaining medications.
  
  
• Inequitable reimbursement/compensation for pharmacists
  
  
• "Claw-back" fees and Generic Effective Rate deductions – Imposition of fees and reductions of compensation following dispensing/adjudicating of prescriptions/claims are inequitable for pharmacists.
  
  
• No transparency – PBMs refuse to provide information, explanation, or justification regarding their financial arrangements with clients and pharmaceutical and health insurance companies by claiming that it is proprietary information.
  
  
• Rebates/discounts – PBMs obtain substantial rebates and discounts from pharmaceutical companies for many drugs but clients and patients do not necessarily share in or benefit from these reduced prices of drugs to the PBM. Patients who participate in plans for which the cumulative costs of their prescription medications is a factor, are at a serious disadvantage if the list price, instead of the rebated/discounted actual cost, is used in calculating the cost of their medications.
  
  
• Patient communication – There is no opportunity for personal face-to-face communication between pharmacists and patients who have been required or incentivized to obtain their prescriptions from a mail-order pharmacy. Although patients may contact a PBM call center, one of the criteria on which call center staff are evaluated by some companies is the number of phone discussions completed in a certain period of time. In other words, the briefer the conversation, the better the evaluation.
  
  
• Waste – "Drug take-back days" have been conducted during the last several years and vast quantities (tons!) of medications have been turned in. I recommend that the appropriate government agency evaluate a representative sampling of these medications (with patient confidentiality being protected). I anticipate that a large and disproportionate quantity of the returned medications will be prescriptions from mail-order pharmacies that were not needed and not requested by patients.
  

Consequences

Recommendations

1. PBMs should not be permitted to own their own pharmacies. It is a blatant conflict of interest for PBMs to own pharmacies that they can require/incentivize clients and patients to use for the benefit and profit of the PBM.
   
   
2. Government agencies, employers, and unions should discontinue their use of costly PBM prescription benefit programs, and use companies and programs that will process/adjudicate prescription claims for low administrative fees that are a small fraction of what PBMs charge. For those who consider such an action to be impossible or difficult, it is already being done. Programs such as the Pharmaceutical Assistance Contract for the Elderly (PACE) in Pennsylvania have always, and efficiently, used a company to process/adjudicate prescription claims, rather than a PBM. In 2017, West Virginia cut out PBMs from its Medicaid prescription program and, by operating the program itself, eliminating spreads, and reducing administrative fees, it expects to save $30 million a year. A recent study in Ohio determined that PBMs were receiving $6.14 per generic drug prescription in its managed Medicaid programs, and its results suggest that PBMs, and not pharmacies, have been getting most of the markups on generic drugs. CVS manages four out of the five Medicaid managed-care plans in Ohio and it sued the state to prevent the release of a report on the amount of the spread it received from Medicaid programs there. As a consequence of its studies, Ohio has ordered managed-care plans to terminate their spread pricing contracts for 2019. A comprehensive study and commentary of these and other PBM programs is described in the article, "The Secret Drug Pricing System Middlemen Use to Rake in Millions," in the September 11, 2018 issue of Bloomberg News (by Robert Langreth, David Ingold, and Jackie Gu).
   
   
3. "Gag clauses" should be eliminated from PBM "agreements". The increased awareness of these egregious restrictions has resulted in outrage and legislative initiatives to ban such provisions in agreements. Even the Pharmaceutical Care Management Association (PCMA) that represents PBMs has now stated opposition to these restrictions, after conveniently ignoring them for many years until the public and legislators discovered how they increase the cost of medications.
   
   
4. Pharmacists should explore a class action lawsuit against the PBMs to reclaim losses from prescriptions for which they had to pay more for the drug than they received from the PBM for dispensing the prescriptions. If PBMs can protect and increase their profits by imposing claw-back fees and generic effective rates to reduce compensation to pharmacists, it is appropriate for pharmacists to be able to recoup their losses in programs in which they have been denied opportunity to discuss/negotiate terms.
   
   
5. Pharmacists and their professional organizations must persist in seeking exemptions for pharmacies from the provisions of antitrust laws. Most are not aware that these laws prevent even two pharmacists from agreeing on the amount of compensation they would determine to be fair and equitable for dispensing a prescription and providing related services. Most do not understand the distinction that permits a Walgreens to be in an excellent position to negotiate agreements because its 10,000-plus pharmacies are part of a single corporate entity.