The best way to stop PBMs, Prescription Drug Middlemen, from rigging prices, eliminating patient choice, ripping off taxpayers and destroying neighborhood pharmacies begins with exposing the pharmacy benefit managers (PBM) problem front and center for all New Yorkers to see. Three major PBMs (Express Scripts, CVS Health, and OptumRx of UnitedHealth Group) comprise 78% of the market and cover 180 million enrollees. “PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. For the most part, they work with self-insured companies and government programs striving to maintain or reduce the pharmacy expenditures of the plan while concurrently trying to improve health care outcomes,” According to the American Pharmacists Association.
I just wanted to emphasize that the following study was only done for the State of New York, just imagine how much in total is being stolen from other states by Prescription Drug Middlemen? In my humble estimates over $10 Billion yearly.
Today, Bloomberg released a groundbreaking story on the most comprehensive study ever conducted on New York Medicaid managed care prescription drug claims. Based on the findings of this study, PBMs, Prescription Drug Middlemen, stole more than $300 million from New York taxpayers over a 12-month period from 2017 to 2018. Read the full story here:
- Bloomberg – “Drug Middlemen Got Hefty Markup in New York, Pharmacy Group Says” (1/24/19)
According to the study, there was a 24% difference between the cost of generic drugs reported by the state and the payment for generic drugs to community pharmacies – a controversial practice known as “spread pricing,” which is a core component of the PBM business model.
By Q4 2017, PBMs, Prescription Drug Middlemen, were pocketing 39% of the state’s overall generic spend, or $5.62 per claim – up from almost 0% in Q1 of 2016.
PBMs stole this money largely by cutting pharmacy reimbursements:
- Between 2016 and 2017, PBMs cut pharmacy gross margins on generic drugs by 38%.
- In Q4 2017, PBMs paid pharmacies less than what it cost them to dispense the generic drugs 99% of the time, and less than the national average invoice cost of those drugs 46% of the time – in other words, pharmacies were underwater on nearly half of claims.
This discovery is an important first step in creating transparency for New York’s broken prescription drug distribution system.
Once the full extent of PBMs theft is understood, lawmakers can enact new safeguards to protect patients, taxpayers and neighborhood pharmacies – just as other states across the country have begun to do.
Furthermore, this is not just a problem for local pharmacist but to everyone that needs prescriptions. The major Prescription Drug Middlemen such as Express Scripts, CVS Health, and OptumRx of UnitedHealth Group want to destroy neighborhood pharmacies this will lead to problems for all consumers that have less and fewer choices nowadays in all aspects of life.