PBMs cash in on contract loopholes

Each year, PBMs swindle governments, employers and insurance companies out of big bucks by deliberately misleading clients in their contracts.

Do you know what a “branded generic” is? It’s a clever term invented by PBMs. We all think “generic” means cheaper—right? Well, yes. But, no, not when it’s a branded generic.

Say what? Exactly. It’s an intentionally misleading term in contracts that bilk unsophisticated, trusting clients.

Manipulating the way they categorize drugs enables PBMs to line their wallets by charging higher brand prices for generics, classifying generic drugs as brand drugs in order to keep rebates/kickbacks from drug manufacturers rather than passing them on to employers or insurance companies, and essentially lying about generic drug utilization rates so they can attract more customers.

Most payers are unaware of this issue until after the fact, when they find out through an audit they’ve been bamboozled. At that point, there’s little they can do to resolve it. [We need to point out that too few employers know how to audit a PBM contract. More to come on this problem!]

The large PBMs’ response to this issue is that their manipulative behavior is the industry’s standard.  Well, no kidding, if by industry standard they mean always looking for a profit on the backs of those they are supposed to serve.

PBMs prey on the desperately ill

There is only one drug available to save your child’s life and only one seller. What price would you be willing to pay for it?

PBMs like ExpressScripts actually interviewed pediatric neurologists to determine how much they money they could get by with charging for a specialty drug for which they have exclusive distribution rights. Where’s the Federal Trade Commission? Or an even better question: What ethical compass guides the guys at ExpressScripts?

As reported by the New York Times, ExpressScripts arbitrarily raised the price of a vial of H.P. Acthar Gel, a drug used to treat a rare, severe form of epilepsy from $1,600 a vial to an astonishing $23,000!

The drug in question is part of a category called “specialty drugs,” medicines needed by relatively few people but are critical to the health of those people. So who picks up the tab for this extraordinary cost? Employers and patients, of course.

A PBM is supposed to negotiate with manufacturers to obtain drugs as discounted prices on behalf of employer-sponsored health plans. But when PBMs begin acting as exclusive drug distributors for lifesaving drugs, it’s an obvious conflict of interest. Along with rebates they get from manufacturers, this is just another way PBMs control access to medications, not because it’s actually best for patients, but because it is best for the PBM’s bottom line.

While these profit-mongers claim to keep healthcare costs down for their customers, exclusive drug distribution deals pose an obvious conflict of interest. Since specialty drugs have no generic equivalent and an ever-increasing chunk of PBM revenues comes from the monopolization of specialty drugs, it is hard for these companies to argue that they are looking out for the people they are supposed to serve.

PBMs profit at cost to employers and beneficiaries

While patients and employers pay the consequences, PBMs wallow in profits. If you're looking for a profitable investment and don't have any qualms about where your money comes from, take a look at pharmacy benefit management corporations. While patients and employers try to figure out how to cover soaring healthcare costs, the Big Three PBMs - CVS/Caremark, Medco and ExpressScripts - continue to profit.

CVS/Caremark reported a whopping $748.5 million in first quarter net income, an 83 percent surge over last year's first quarter.

ExpressScripts' net income of $178.3 million for the first quarter increased 35 percent over last year.

While Medco's net income of $270.2 million dropped 1.7 percent since last year, their first quarter 2007 figures may only have been higher because a popular drug that boosted last year's numbers has since been taken off the market. That said, their net revenue still increased 16 percent to $12.96 billion.

So how do they do it, especially when the rest of the economy seems to be stuck in a downward spiral? Mostly at the expense of patients and employers.

By hanging on to payments meant for pharmacists and hiding deals with drug manufacturers from employers,

the big three PBMs are only growing stronger as they spend their money lobbying to keep lenient regulations in place.

And why not? The current system only stands to benefit these greedy corporate middlemen.

PBMs weasel out of paying bills on time

If the companies known as pharmacy benefit managers were like the rest of us, they’d have lousy credit. But because they make so much profit by holding onto employer and patient money intended to reimburse pharmacists, the PBMs are fighting legislation to make them pay their bills on time.

PBM lobbyists claim that paying pharmacists within 30 days would be costly and hinder antifraud efforts. This argument—made by those who rake in record profits while facing lawsuits for unethical business practices—makes no sense. But when you take a look behind the scenes, it’s easy to see why they want to maintain the status quo. PBMs earn interest on the money they owe pharmacists, so as they see it, the longer they can hang on to it, the better. Meanwhile community pharmacies sometimes wait up to 90 days to be paid, and are forced to take out loans to pay their own bills.

Pharmacists electronically verify insurance coverage with a PBM at the time a doctor sends in a prescription or a patient brings in a prescription. So it stands to reason that the PBM can electronically transmit reimbursements to the pharmacy on time. But the PBMs are hanging onto every penny as long as they can.

Pharmacists are trying to cure this problem of slow pay through congressional action on legislation (HR 5182) that would require drug plans to pay all electronic clean claims within 14 days and to notify pharmacists within 10 days of problems in submitted claims.

Ultimately, patients will pay for this system of slow pay that only benefits greedy middlemen. When community pharmacies are forced out of business, patients will lose access to their local pharmacists, who offer lower-cost drugs and face-to-face care. And while patients end up in the emergency room for problems that could be avoided through commonsense prescription drug policy, PBMs will be laughing all the way to the bank.   

Mail order drugs contribute to teen prescription drug abuse

If you were watching the Super Bowl commercials, you saw the announcement of a White House task force to address the abuse of legitimate prescriptions While applauding this initiative, the National Community Pharmacists Association points out "one problem associated with abuse of prescription drugs is the routine shipping of 90-day supplies through the mail from facilities owned by pharmacy benefit managers. "In most parts of the world, a 30-day supply is the norm-also the maximum amount that these same pharmacy benefit managers allow community pharmacies to dispense. "With so many pills delivered in mailboxes or on front door steps, placed in the medicine cabinet or on the kitchen counter, it is very difficult for consumers to account for every painkiller (Vicodin), sleeping aid (Ambien), or anti-anxiety medication (Valium), increasing the risk for teenagers or other family member to experiment with medications not prescribed for them." "Medications often are discontinued well before all of the medication has been taken. Even if it is not an 'abusable' drug, the potential for accidental poisoning is always present. "In addition, disposal of unneeded prescription drugs is a major environmental risk for our waterways and landfills." Rather than resolving the problem head on, health plans and PBMs contacted by Drug Benefit News say they are working with states to help combat the diversion of prescription drugs, while taking steps of their own to intervene when unusual prescribing patterns are identified. One PBM is dumping the responsibility onto state Rx tracking efforts.

Oh, what a tangled web we weave….

The dizzying array of Medicare Part D plans is confusing to anyone, but especially to our seniors or disabled who cannot ferret out the differences in the plans. They are particularly susceptible to phone calls from kind, concerned individuals who want to make sure the Part D beneficiary is “saving all the money” he or she can.

U.S. House Ways and Means Health Subcommittee Chairman Pete Stark ( D-Calif.) is calling for more consumer protections in Medicare Part D. He said the private insurance companies that administer Part D prescription drug benefits are taking advantage of the number of coverage options “to bamboozle seniors.”

Even when seniors settle on a plan that may not be their best choice, they stay with it out of inertia and fear of trying something new—even when the medicine their doctor prescribes is not permitted by the Part D plan.

How to protect our seniors and disabled? Congressman Stark says regulations are called for to bring some order to the tangled mess of Part D. What would you suggest to help bring order to Medicare Part D?

PBM CEO Salaries: Whose Money Is it?

Pharmacy Benefit Manager CEOs are pulling down some serious bucks! Why should we care? Because it’s our healthcare $$$ funding those salaries and other compensation—as much as $6.5 million a year!

If you believe they deserve those incomes, do nothing. If you believe they’re taking home more than their share, talk to your human resources managers and state elected officials to demand transparency in their contracts with PBMs. Shine some sunlight on how PBMs make their money, and your employer and fellow taxpayers will save some money.

Or will you shed a tear for those CEOs?

Pity the Poor PBMs: Their Record-Breaking Profits Are at Risk

Medco Health Solutions Inc., (MHS) the nation’s largest pharmacy benefit manager, reports a six-fold jump in first-quarter 2007 earnings. Revenue reached $11.16 billion, up 5.6 percent from $10.56 billion.

Express Scripts (ESRX) is doing so well it announced a two-for-one stock split. Adjusted gross profit for the first quarter increased 21 percent to $417.1 million from $344.6 million last year. Adjusted gross profit per adjusted claim was a record $3.26, a 28 percent increase over $2.55 for the same quarter last year.

CVS/Caremark is both a retailer and a PBM now. They’re now the alpha and omega of PBMs, so other than noting they too had record profits, it’s not exactly comparing apples and oranges.

These strong profits are in some peril, as they note in their “safe harbor” statements to investors. They are afraid of government efforts to demand transparency and auditing rights. These are the same guidelines adopted by the HR Policy Association representing more than 250 of the nation’s largest employers. Medco, CVS/Caremark and Express Scripts all have signed on to these requirements, but the weight of the “white hat” approach may throw them off their horses in the long run. As more employers, both private and government, enter into new contract negotiations, the PBMs can see their profits sinking.

PBMs also face a lawsuit that could subject them to claims under ERISA if they are found to be a fiduciary of a health benefit plan governed by ERISA.

The writing is on the wall for PBMs if they continue to operate in their current fashion. But they’re known for their adaptability and ability to siphon health care dollars. We’ve already seen the CVS/Caremark merger. What do you think their next incarnations will be?

How Do We Disclose the Secret About Pharmacy Benefit Managers?

Try this. Ask the next 10 people you encounter if the know what a pharmacy benefit manager is. Your humble Blogmaster is willing to wager no more than nine will know. Now, don’t cheat and talk to people in the industry! But even that may not be a guarantee they will know what a PBM is.

Last spring we conducted a series of focus groups to determine just this question. Well, out of three groups—one with human resource managers, one with small to medium business owners, and one comprised of seniors—not a single person had heard of a PBM!

What should be done to make people aware that their access to medications is being controlled by a third party with pockets stuffed with our healthcare dollars?

PBMs Don’t Play Fair With All Employers

Nearly 50 percent of the pharmacy benefit managers now are certified by the HR Policy Association as promising to conduct business with full transparency. Well, that’s good for the nation’s biggest employers, but do employers and governments who are not members of the association get the same deal? Not unless they know how to negotiate the same contracts. Some are seeing the light and demanding transparency, some are considering laws requiring transparency, others are waiting for the tooth fairy.

Do you know what your employer and local government are doing? As far as that goes, do you know what transparency in PBM contracts means?