For some reason Google thought this Slate article would interest me.
I can't imagine why.
Maybe it's because they know how universally adored PBMs are for sticking it to the greedy pharmacies, doctors, drug manufacturers, investors, and other stakeholders. They bring down healthcare costs by the billions! Now this sneaky little upstart The Pill Club is trying to smear their beloved name by using hot button issues like women's access to healthcare to curry outrage! How dare they!!
That poor record just got scratched. Hard.
Well, I'm here to straighten out the record. Pun intended.
The author of this Slate article may have had the best of intentions. It seems she wanted to provide the broader picture of what's happening behind the scenes to prove this issue isn't about women's healthcare access, but rather a business spat. The problem is, she didn't go broad enough. She needed to back up a bit farther, because this ISN'T just about women's health in America. It's about EVERYONE'S health. Yours, mine, your neighbor's, and their dog's.
Her subtitle says "The dispute over birth control has everything to do with corporate profits and little to do with health care."
Fact is, it has everything to do with both.
She goes on to say, "In fact, far from necessitating a boycott of CVS, I’d suggest, the company’s pharmacy benefit manager is doing consumers a favor."
Ms. Botella, I understand why you would say so, and it's because the PBM industry has done an excellent job of protecting their secrets and misrepresenting their actions to the public. They've pulled the wool straight down over your eyes, and if you aren't deeply involved in the world of pharmacy benefits or pharmacy in general, you'd never know the difference. You say, "Insurers turn to pharmacy benefit managers to help them negotiate lower prices for drugs." Which is exactly what every PBM wants you to believe. Unfortunately, it's not the whole truth.
In order to explain this, we have to go on a little history trip down memory lane. Where did PBMs come from?
Over 20 years ago, how did pharmacies and drug manufacturers and wholesalers get paid for the medications they provided? Overwhelmingly, medications were paid for out of pocket, by patients. Some could submit receipts to their insurance for reimbursement, but it was a slow and cumbersome process by today's standards.
2003 came along, and the Medicare Modernization Act of 2003 came with it. Suddenly, prescriptions were a covered benefit of Medicare Part D plans. Technology had greatly advanced at that point and the days of submitting paper receipts were over, as all claims were submitted electronically. The process was faster, more efficient, and you would immediately know whether the adjudication was successful (aka, did the insurance cover the claim, or would you have to pay out of pocket for this medication?).
PBMs developed as a link between pharmacies and insurers or "plan sponsors" (like employers). They provided the electronic processing service that allowed that instant communication.
That's awesome, right!?!?! Efficiency, speed, on-demand cost and copay information??
That is awesome.
Unfortunately, that's not the way this rodeo remained.
PBMs gradually learned that they could insert themselves in this space by taking on more of a policing role. They controlled the communication of claim adjudication (approval of payment). They began to market themselves to insurers as a way to control drug spending by managing which drugs would be paid for and which would not. They also began to control what doses, quantities, and versions of medications your insurance would pay for.
How do they do this? In an ideal world, the altruistic PBM would cause the insurance companies to pay for the most cost-effective therapeutic options. They'd limit covered quantities to scientifically supported courses of therapy. They'd pay pharmacies fairly for the medications and care they provide to patients, and keep medication costs down by reducing overspending on unnecessary or excessively expensive medications.
Well, there went that poor record again. I hope it's not irreparably damaged.
Here's what they actually do:
1) They cause the insurance companies to pay only for their "preferred drugs". Which drugs do they prefer? The answer: whichever drug manufacturer gives them the biggest rebate in exchange for placement on the list of covered drugs.
2) They keep part (or all) of that rebate for themselves each time a claim is paid by the insurer for that drug.
3) They also keep what's called the "spread" - an arbitrary amount they decide to pay to themselves out of the amount they tell the insurer that they paid to the pharmacy. This amount is not disclosed to either the insurer or plan sponsor that's paying the bill, nor to the pharmacy, the patient, OR the government. See: http://gatehousenews.com/sideeffects/cost-cutting-middlemen-reap-millions-via-drug-pricing-data-show/site/dispatch.com/
4) They pay pharmacies unfairly. How so, you may ask? As Ms. Botella mentions in her article, CVS/Caremark has numerous types of business. One is a PBM. One is a pharmacy chain. This is called "vertical integration" and means PBMs control the income of their own competitors (at the pharmacy level). CVS/Caremark (and other PBMs) can pay their own pharmacies more than the other pharmacies they are contracted with. And I don't just mean they can pay other pharmacies a little less. I mean they often pay independent pharmacists and smaller chain pharmacies LESS THAN THE DRUG COSTS THE PHARMACY TO BUY. Can you imagine if your business was regularly paid less than the cost of goods for your service or product?
Want proof of #4? See below (although this graphic at least accounts for "cost to dispense" while rulemaking processes often do not).
5) To add insult to injury, PBMs then charge their competitors fees! These fees can be massive and are called DIR fees. PBMs claim that DIR fees are an "important tool for keeping independent drugstores accountable for doing their part" in America's health system (notice they say drugstores here, not pharmacies, in a subtle attempt to downplay the role of America's most accessible healthcare professionals, who provide free consultations and healthcare services to patients in need every single day across America). What DIR fees actually do however, is increase spending on Medicare Part D plans, drive competitor pharmacies out of business, push Medicare patients into the "donut hole" faster, and represent a statistically invalid use of performance data (per my recent discussion with Dr. Brad Tice, President of APhA).
6) PBMs then claim that these other pharmacies should simply buy cheaper drugs at the "MAC" prices (a term for "maximum allowable cost" for generic drugs). However, the list of MAC prices is not based on any clear-cut reference, and the prices shown on it often have no basis in realistic drug prices. They simply allow the PBM to decide what they will pay, and again, it's often less than what the pharmacy paid for the medication. Not to mention the cost of actually operating their pharmacy.
7) PBMs also say independent pharmacies should "negotiate better" for better PBM contracts. Problem is, that's not actually possible. While PBM-owned pharmacies obviously get the benefit of the best deals (since they are in-house), pharmacies across America cannot unite to demand the same - or they'd be accused of price-fixing in the market (since they are disparate businesses rather than the diminutives of a conglomerate). They do have something called PSAOs, but largely those contract agreements are the same across the board - take it or leave it contracts. Problem is, as an independent pharmacist, you often can't "leave it", or half your little town won't be covered at your pharmacy (which is why you see so many independent pharmacies across America simply closing down).
For those who don't believe PBMs pay one pharmacy more than another, see this telling graphic:
8) In another terrible conundrum of disregulation (or, well, NO regulation), PBMs are free to use their position between insurers and pharmacies to collect patient data. They can then engage in a practice called "steering". This means they either suggest or straight up tell you to use their own pharmacy. They do this via patient-specific messaging, telling you that your medicine won't be covered at your choice of pharmacy or that your copay will be less if you use their pharmacy, or any number of other shady things, like leading people to believe that an insurance card that says CVS/Caremark at the top can only be used at a CVS pharmacy (which is not true).
9) PBMs funnel the highest grossing medications to their own "specialty pharmacies" and do not allow the other pharmacies they are contracted with to provide these medications. There is no recognized definition of a "specialty pharmacy" or "specialty pharmacist". It's code for expensive, sensitive, sometimes uncommon drugs. However, all pharmacists are licensed to legally provide these medications, provided they enroll in the relevant "REMS" or "Risk Evaluation and Mitigation Strategies" programs required by the FDA.
10) They ruin the patient-pharmacist-provider relationship and fail to fulfill the requirements of many states' Pharmacy Practice Acts (or equivalent statutes and regulations). In many states, a dispensing pharmacist is legally beholden to provide "counseling" to every patient that receives a new prescription from them, and be available for future questions and concerns. Patients can walk up to the counter and reach a Doctor of Pharmacy in seconds to minutes - try that with a mail order pharmacy. How many pharmacists would they have to have on staff just to provide all the new Rx counseling requirements for the thousands of Rxs mailed out each week? WAAAAAAAAAY more is the only answer I can give you. And they still wouldn't be your neighborhood face-to-face pharmacist that can help you decide quickly between OTC treatments or a visit to the urgent care (yes, we're trained for that).
What does the sum total of all this mean? It means PBM practices actually incentivize HIGHER DRUG COSTS.
How? Check out this graphic:
This is what PBMs don't want anyone to realize. Manufacturers (like Eli Lilly) have to provide rebates to the PBMs to be allowed on the formulary of a drug plan. In order to do that, they increase the list price of the drug. The PBM gets a rebate to bring that back down to the original price of the drug...and guess who keeps the money?? The insurer, to help bring down premiums? The patient, to help bring down costs?
NOPE.
The PBM. They take it (or at least part of it, and laugh all the way to the bank, siphoning literally billions of dollars out of our healthcare system every year).
On paper, it looks like they're saving millions and they get to call themselves the hero, while they contribute to serious healthcare endangerment, such as:
1) Intentionally causing "pharmacy deserts" by forcing their competitor pharmacies (like The Pill Club!!!!!!!) out of business, so that consumers have no choice but to use their affiliate pharmacies, thus funneling even more money into their machine.
2) Forcing mail-order pharmacy which can be dangerous in many cases (due to uncontrolled temperatures during shipping of sensitive drugs) and only extremely wasteful in others (when they keep sending drugs after you no longer need them, but still get paid and increase their sales, because, well, they sent them!). BTW, the "entity" referred to in the linked tweet - it's a mail-order pharmacy parented by a PBM.
3) Inflating drug prices so that uninsured patients and those with high-deductible plans (who don't have any rebates between them and the manufacturer) end up saddled with the full, inflated price.
4) Causing delays to time-sensitive therapy by forcing cancer patients to wait for drugs to be shipped from their own facilities, when the medication is available locally. Or because they decided the patient should use a different drug entirely.
***I have to take a pause here to tell you all that the link above in number 3, quite literally has me in tears as I am writing this. First because I read it, and I thought about the horror, fear, and heartbreak of the patients and their helpless family members in these examples shared by the Community Oncology Alliance. And then I see that this is installment #5 of their compiled horror stories. Number FIVE.
Anyway. Since I'm a human being with a conscience and I've now taken a breather to recover, let's continue.
5) They treat their pharmacy employees like hot garbage, which in turn causes the quality of patient care provided in pharmacies to decline. CVS is well known among pharmacists to be the single WORST company to work for due to inhumane working conditions that you probably wouldn't believe could actually exist in the US if I told you all about them, but I'll direct you here anyway. Any company bad enough to be commonly referred to as "Come Visit Satan" and the "Company that Values Slavery" clearly has an act to clean up. Pharmacists unlucky enough to work for this disaster of an institution have even come forward to say they feel that they are a "danger to the public" in their positions working for "the three letter devil" (yet another nickname). See this editorial at the free newsletter, The Pharmacist Activist.
So, Ms. Botella, I appreciate you trying to tell the rest of the story, if in fact that was your intention. Lord knows the PBMs have enough money and influence to pay for an article like yours in the wake of a Twitter PR disaster. I'm not saying they did, but it also would not surprise me in the least if they had. Most pharmacists these days are not business owners, we're employees who sacrifice years of our lives and hundreds of thousands of dollars in personal debt to learn how best to care for and serve our patients. So, the next time you want to write about how we need PBMs to keep us in check, how about sharing that PBMs have NO GOVERNMENTAL OVERSIGHT into their practices (except in a few states that have very recently enacted licensing requirements), and are fighting tooth and nail to keep it that way. If they are so beneficial and benign, they shouldn't need to hide behind anti-transparency policies.
I can't even begin to tell you the literal hell that would rain down on any healthcare professional that engaged in anything resembling these practices. But somehow, existing in a free-for-all unregulated vacuum, PBMs do all of the above and more with impunity, all while blaming "big pharma" and "local drugstores and doctors" for rising healthcare costs.
So no, "If too many pharmacies balk at CVS Caremark reimbursement rates, customers will get fed up when they realize their insurance is only accepted at a few pharmacies and try to switch plans" is not a valid description of this "delicate juggling act" when there is essentially, no alternative to CVS - which as you said, controls the pharmacy benefits of 92 million Americans and is the 8th largest U.S. COMPANY - not healthcare company - COMPANY. Full Stop.
And no, "If [PBMs] don’t put pressure on drug prices, health insurance will be even more expensive than what it is today" is also not valid - owing to the numerous above reasons and lots of numerical data compiled by actual healthcare providers showing that PBMs actually INCREASE healthcare spending. See: NY Medicaid Managed Care Analysis which was cited in this excellent and thorough report by New York's COMMITTEE ON INVESTIGATIONS AND GOVERNMENT OPERATIONS chaired by NY Senator James Skoufis which states:
"It is the opinion of the Committee that PBMs are significantly overcharging New York Medicaid managed care organizations for providing pharmacy benefit services through the use of spread pricing...[...]...Recent studies and audits performed in other states are illuminative, and show how much other state Medicaid programs are paying PBMs solely in spread pricing fees. In Ohio, State Medicaid managed care was charged $224.8 million solely in spread pricing fees to PBMs in less than one year. In Kentucky, PBMs reaped $123.5 million in profit from the State’s Medicaid managed care organizations through spread pricing fees. In Michigan, state Medicaid plans paid PBMs more than $64 million in spread pricing fees from 2016 to 2018. In 2016, PBMs nationwide received $1.3 billion of the $4.2 billion private Medicaid insurers spent on 90 of the most common generic drugs used by Medicaid managed care plans."
Here's one example:
That big orange slice? That didn't go to the company who developed the drug, the doctor who diagnosed and treated the patient, or to the pharmacist who accurately interpreted the prescription, screened for drug interactions, and counseled the patient on proper use, benefits, risks, storage, and monitoring. It went directly to the middle man. That's 65% of what New York state's medicaid program spent in 2017, just on this ONE drug, in one year. Just under $5 MILLION taxpayer dollars, for absolutely NO increase in the value, quality, or quantity of patient care provided in the state of New York, and this is happening all over the country.
Ms. Botella also says, "if insurance companies thought they could do a better job of negotiating prices, they’d have already taken on that role themselves." Too bad West Virginia actually did just that, by moving its benefit management into the hands of their state's School of Pharmacy, which is estimated to have saved the state $30 million dollars in just one year.
"And remember, the people who are suffering as a result of CVS Caremark’s decision aren’t the consumers—it’s the company that sells pills for profit. Pill Club will make a little less profit now, which is why it’s upset." I don't know how many times I have to say this - the CONSUMERS ARE SUFFERING. You are simply wrong, Ms. Botella. Pharmacists are healthcare providers who have sworn to "consider the welfare of humanity and relief of suffering my primary concerns." PBMs have no such professional charge.
Where else is Ms. Botella wrong?
"Most important for consumers is the fact that even if Pill Club decides to stop serving CVS Caremark customers, you will still be able to get your birth control delivered for free...[...]... And of course, CVS Caremark is happy to do the delivery itself—shipping is free with CVS Caremark’s mail-order delivery service." Ah, there's the rub. The competitor (CVS Pharmacy) controls the reimbursement of its competitor (The Pill Club), who it has every incentive to drive out of business with below cost reimbursement.
Welcome to the rodeo, Pill Club. Sorry it has to be this way. Hopefully you can harness some outrage on behalf of women, meanwhile, I'm trying to stir up the whole population. You and I both know they just want your business for their own. They probably want to pay you less than the drug costs you to buy and watch you go under. Funny how that happens when your competitor gets to control your income.
So, unless you want to see a future where the ONLY pharmacy is CVS or another PBM-owned mail order pharmacy, yes, you SHOULD #BoycottCVS