Some consumers who use health insurance copays to buy prescription drugs are paying far more than they should be and would be better off paying with cash, especially for generics.
The added cost runs as high as $30 or more per prescription, say pharmacists, and the money is largely being pocketed by middlemen who collect the added profit from local pharmacies.
Cash prices started to dip below copays a decade ago when several big box stores started offering dozens of generics for as little as $4 per prescription. But as copays have risen and high-deductible insurance plans become more common, more consumers are now affected.
The phenomenon illustrates the complexity of how drugs are priced in the U.S. and has led to finger-pointing about who is benefitting or who’s to blame.This KHN story also ran on CNN.com. It can be republished for free (details).
Pharmacists say large pharmacy benefit management (PBM) firms that handle benefit clams for millions of Americans are pocketing the difference, while those firms say pharmacists themselves are being greedy.
“In some cases, consumers are blaming high drug prices on manufacturers, but really the cause of their costs may be the insurance company or the pharmacy or the pharmacy benefit manager,” said Adam J. Fein, who follows the drug industry for management advisory firm Pembroke Consulting in Philadelphia. “It’s very hard to figure this information out.”
‘A Bewildering Array Of Factors’
How much consumers pay at the pharmacy counter depends on a bewildering array of factors, including health insurance policies that set copayments and deductibles, the pharmacies they choose, and which behind-the-scenes PBM their employer or insurer hires to manage claims and negotiate prices with pharmacies and drugmakers.
The back-and-forth between pharmacists and PBMs is part of a long-running feud between the two groups. Not every PBM negotiates prices that allow for these overpayments, the pharmacists say, and not all drugs are affected.
Still, here’s how pharmacists say consumers are getting squeezed. At the pharmacy counter, patients pay their share of the cost — the copay — as set by their PBM and insurance plan.
Days or weeks later, the PBM firm takes back a portion of that patient payment from the pharmacy after the PBM determines what it will actually pay for the drug — a practice sometimes called a “clawback.” That money does not go to the consumer but is generally kept by the PBM.
“It’s a fraudulent misrepresentation to the patient of what is the cost of the drug,” said Susan Hayes, principal with Pharmacy Outcomes Specialists, which audits pharmacy programs on behalf of insurers.
In a survey by the National Community Pharmacists Association taken in early June, members provided examples. None of the pharmacists would talk on the record for fear of being kicked out of the PBM networks, so their responses could not be independently verified.
One told surveyors that a major PBM required the pharmacy to collect a $35 copay for a generic allergy spray, then took $30 back from the pharmacy. Another said a PBM charged a $15 copay for insomnia drug Zolpidem, then took back $13.05. Patients were charged $30 above the cash price for a generic cholesterol medication at another pharmacy.
In effect, the customer has paid more for the drug than the PBM ultimately pays even though “they assume what they are paying is the cost of the drug,” said Susan Pilch, vice president for policy and regulatory affairs with the pharmacists’ group.
In response, the CEO of the benefit managers’ trade association blames pharmacists, whom he says should simply offer customers the cash price of the drugs — if cheaper — bypassing their insurance plans altogether.
“Not everything has to go through the plan,” said Mark Merritt, president and CEO of Pharmaceutical Care Management Association. “The only reason [for pharmacies] to process the claim is to keep the copay for themselves.”
While agreeing that in some cases consumers could get their drugs for less if they paid cash, Pilch said pharmacists are specifically barred from discussing the cash price under terms set by contracts between them and the PBMs. Its June survey of 650 pharmacists found that more than 38 percent said they were unable to tell patients about cheaper cash prices 10 to 50 times in the previous month.
“We are required to run it through insurance and we do not have the option of advising the patient regarding matters of the terms of their plan or their options, or we run the risk of being cut from the network,” she said.
For their part, PBMs say patients pay the amounts specified by their insurance plan benefit design. And the amounts they take back, they say, can help hold down cost and slow future premium increases to the insurers and employers who hire them.
Still, Louisiana lawmakers this month passed legislation to rein in the practice by directing pharmacists to tell patients about all their options — including less expensive alternatives.
Arkansas lawmakers last year passed a law that bars PBMs and pharmacies from collecting more from customers for medications than the pharmacy will ultimately be paid.
The laws “should eliminate these consumer clawbacks, which I believe are rare, but are an example of bad behavior by a PBM making a drug more expensive than it should be,” said Pembroke’s Fein.
OptumRX, a PBM that is part of UnitedHealth Group, was cited as a firm engaged in such efforts by the national pharmacy association and its affiliates in Arkansas and Louisiana.
UnitedHealth spokesman Matt Wiggin said only a small portion of claims were affected, although he could not give a specific percentage. The firm, he said, is moving to change its contracts to avoid the situation in the future.
At Cigna, another firm called out by the pharmacists, spokeswoman Karen Eldred would not say if it takes back a portion of the customer’s payments from pharmacists. But she said customers “would not pay more than the retail price (cash price) reported to Cigna by the pharmacy.”
A spokesman for Express Scripts, one of the nation’s largest PBMs, said the firm does not engage in the practices which “are not in the best interest of patients or the country,” said spokesman David Whitrap.
Market experts agree that shopping around and doing some legwork are tactics that will help consumers avoid paying too much because of the clawback.
Cigna, Express Scripts and other insurers also have apps and websites where members can check drug prices at multiple pharmacies and decide for themselves how best to proceed. But if a health plan or PBM doesn’t offer an app, consumers can check the cash price for prescriptions through one of the online websites like GoodRX or Blink health before heading to the pharmacy.
In some cases, it might be less expensive to pay cash. But experts caution that such cash payments don’t always count toward annual drug deductibles. Consumers who expect a lot of drug costs might want to think twice about paying cash. But others may still find it saves them money, even if they never hit their deductible.
“The safest thing to do is always know what the pricing is in the marketplace,” said Mike Miele, an area president who advises employers on benefits for consulting firm Arthur J. Gallagher. “There are literally thousands of generics that are below $10.”
California’s insurance commissioner on Thursday recommended that federal officials block Aetna Inc.’s proposed $37 billion acquisition of Humana Inc., saying the deal would suppress market competition and harm consumers.
The official opinion of Dave Jones came just three days after California’s other health insurance regulator, the Department of Managed Care, approved the planned transaction. Just a week ago, Jones urged the federal government to block another mega-merger, Anthem Inc.’s $54 billion offer for Cigna Corp, also on competitive grounds.
Jones said an Aetna-Humana tie-up would reduce competition in commercial health insurance markets that are already highly concentrated.
“The Aetna and Humana merger has anticompetitive impacts that will likely result in increased prices, decreased availability of health insurance products, and decreased quality and access to healthcare,” Jones said.
He said the merger would combine the nation’s third and fifth largest health insurance companies, by market value.
Aetna officials downplayed the recommendation by Jones.Use Our Content This story can be republished for free (details).
“We received approval earlier this week from the Department of Managed Health Care, the only regulatory agency in the state with official oversight of our acquisition,” said Anjie Coplin, an Aetna spokeswoman.
Jones does not have the authority to block the national insurance merger, but his recommendation could influence the U.S. Department of Justice, which has the final say.
When the Department of Managed Health Care signed off on the Aetna-Humana merger Monday, it noted Aetna’s agreement to keep rate increases to a minimum and improve the quality of patient care.
As a condition of the DMHC’s approval, Aetna also promised to spend nearly $50 million on community investment projects, which include expansion of its Fresno-based service center and support of dental services for low-income communities.
“But these undertakings do not eliminate the anti-competitive effects of the merger,” said Jones, who is a candidate for state attorney general in 2018.
He noted that the DMHC‘s merger reviews do not weigh anti-trust concerns and are limited to managed care policies in California.
Jones said the deal would also have a serious negative impact on millions of seniors who rely on commercially-administered Medicare insurance policies, known as Medicare Advantage plans. Combined, Aetna-Humana would have 26 percent of all Medicare Advantage enrollees in the country. That’s more than any other insurer, Jones said.
The commissioner also cited his concern that Aetna and Humana officials have not guaranteed consumers will see any of the $1.25 billion the companies expect to save annually as a result of the merger.
Consumer advocates, who have actively spoken out against the mergers, are urging the U.S. Department of Justice to accept the commissioner’s recommendations and reject the transaction.
“There is no upside for consumers from this deal,” said Carmen Balber, executive director of Santa Monica-based Consumer Watchdog. “Aetna has overcharged policyholders millions, just in the last few years,” she said, pointing to the company’s 11 rate hikes since 2012. “Yet Aetna and Humana won’t commit that future rates would be justified.”
Aetna officials expect the deal, if approved by federal regulators, to close in the second of half of this year.
When Speaker Paul Ryan releases the House GOP tax plan tomorrow, a key question is whether it’s closer to the plan from presumptive GOP presidential nominee Donald Trump or to a very different one from then-Ways and Means Chairman Dave Camp in 2014, the last time the House GOP presented a comprehensive tax reform plan.
The number of Americans struggling to afford their rent has risen sharply in recent years, with low-income renters bearing the biggest cost burdens, a new report from Harvard’s Joint Center for Housing Studies finds. But most federal housing spending goes to higher-income homeowners with little need for help, as our updated chart book explains.
The following is a guest post by Clare Feikert-Ahalt, foreign law specialist for the United Kingdom and a number of Commonwealth jurisdictions at the Law Library of Congress.
The United Kingdom joined the European Economic Community (EEC – now the European Union) in 1973. It had sought entry twice in the 1960s only to be blocked in both instances by France. Despite the apparent desire to join the EEC, the Conservative Party led the push for a referendum in 1975 that asked voters whether the UK should leave and the result of this referendum was an overwhelming “no,” with 67.2 percent of the voters electing to stay within the EEC.
1. Why hold a referendum?
The Conservative Party promised in the 2015 general elections that it would hold a referendum on whether the UK should remain in the European Union if it were elected. The party fulfilled this promise with the European Union Referendum Act 2015, which provided for a referendum that will occur on June 23, 2016. This referendum has commonly been referred to as “Brexit.” The referendum ballot paper will contain one simple question: “Should the United Kingdom remain a member of the European Union or leave the European Union?”
2. Who can vote in the referendum?
The vote is open to British, Irish and Commonwealth citizens who are over the age of 18 years and are resident in the UK. UK nationals living overseas who have been on the electoral register in the UK during the past fifteen years are also eligible, along with Commonwealth citizens in Gibraltar, Malta and Cyprus.
3. What is the public opinion about the EU?
The reason for the original campaign promise was the repeated frustration expressed by British citizens over many things that they claim membership in the EU has brought. For example, rules and fees imposed by the EU on small to medium businesses, which many claim provide little in return, have caused a lot of frustration. Some have also argued that the UK is one of ten member countries that pay more into the EU than they get out. There have been assertions that leaving the EU will result in the creation of thousands of new jobs in the UK. Freedom of movement of people and immigration, a key tenant of the European Union, have also caused much contention in the UK, with many British citizens frustrated that the borders have been opened, claiming that citizens of poorer EU countries have flocked to the UK en masse to take advantage of their generous benefits system.
Arguments for remaining in the EU include the ease of selling UK goods to other EU countries, and the freedom of movement across the EU. Some assert that the majority of EU immigrants who come to the UK are young and eager to work, rather than benefit seekers, which serves to fuel the UK’s economy. Furthermore, “remain” supporters claim that leaving the EU will result in the loss of thousands of jobs, rather than new jobs being created. Concerns have also been raised that exiting the EU will damage and weaken the UK’s global status.
Prime Minister David Cameron and a number of his cabinet members want the UK to remain a member of the EU. Other major political parties in the UK also want to remain in the EU, as do many EU countries, including France and Germany.
4. What will happen if the UK votes to leave the EU?
Unlike the certainty provided if the UK votes to remain in the EU, the details of what will happen if the UK votes to leave are unclear. It would have to negotiate new trade treaties. And a Treasury report indicates that leaving the EU will throw the UK into a recession and result in long-term costs across the UK.
If the result is in favor of the UK leaving the EU, it would need to notify the EU in accordance with article 50 of the Lisbon Treaty, which describes the process of withdrawal. Article 50 requires the EU to negotiate the arrangements for withdrawal, including the status of future relations between the EU and UK.
5. What will happen if the UK votes to remain in the EU?
The Prime Minister has negotiated the terms of the UK’s continued membership in the EU, which the Prime Minister states will take effect immediately upon a “yes” vote to remain in the EU. The points negotiated include a reduction in the amount of child benefit and welfare payments that migrant workers receive; retention of the British currency without discrimination from other EU countries; special protection for the financial services industry in the City of London; and reimbursement if British money is used to bail out EU nations that experience financial troubles.
The latest opinion polls show that, this time, voters are split as to whether to remain in or leave the EU.
June 23, 2016
9:00 AM - 11:15 AM EDT
Saul Room/Zilkha Lounge
1775 Massachusetts Avenue NW
Washington, DC 20036
An American Enterprise Institute-Brookings/USC Schaeffer Initiative Event
For most of the last five decades, the most-discussed finding by the Medicare trustees has been the insolvency date, when Medicare’s trust fund would no longer be able to pay all of the program’s costs. Last year’s report projected that the hospital insurance trust fund would be depleted by 2030 – just 14 years from now. The report also predicted a more immediate and controversial event: the Independent Payment Advisory Board (IPAB), famously nicknamed “death panels,” would be required to submit proposals to reduce Medicare spending in 2018, with the reductions taking place in 2019. Do we remain on this path to automatic Medicare cuts next year?
The American Enterprise Institute and the Schaeffer Initiative for Innovation in Health Policy, a collaboration between the USC Leonard D. Schaeffer Center for Health Policy & Economics and the Brookings Institution, will host a discussion of the new 2016 trustees report on June 23. Medicare’s Chief Actuary Paul Spitalnic will summarize the key findings followed by a panel of experts who will discuss the potential consequences of the report for policy actions that might be taken to improve the program’s fiscal condition. You can join the conversation at #MedicareReport.Event Materials