The prescription drug cartels have infiltrated the average American employer’s healthcare plan. Many are unaware, but our broker partner, John Sbrocco of Questige, is exposing this epidemic through his philosophy that people lie, but numbers do not.
In his latest Expert Session, John’s message is clear. If you want to cut your health spend, you must attack the costs coming from your pharmacy benefit manager. If an employer is working with any of the ‘Big Three’ PBMs, Sbrocco says leave them today. “You won’t beat them at their own game. I don’t care if you have a PBM consultant, preferred pricing or a coalition because you will not win.”
The health insurance industry is riddled with so many conflicts of interest including spread pricing, hidden rebates, manufacturer’s revenue and kickbacks. These interests are aligned with the pharmacy benefit managers, not the employer. The result is a company unable to perform their fiduciary responsibility and what’s in the best interest of their plan members.
“Employers let the legal drug cartels manage employee prescription dispensing and the cost of prescriptions,” Sbrocco says. “A lot of you should probably be embarrassed for what you’re allowing to happen to your employees; not just from a price standpoint, but from a health standpoint as well.”
Drug price hikes
Acthar Gel is an adrenocorticotropic hormone used to treat relapsing multiple sclerosis. In 2001 this drug cost $40 per vial. In 2018 this drug was raised to $40,000 per vial.
How do price hikes like this occur? The drug manufacturer buys out the competition allowing him or her to charge whatever they want. There might be a fine involved for making such an egregious price increase, but the money the drug manufacturer is making is 25 times the fine.
When one very well-known PBM was questioned on the increase in price on these drugs, they responded saying they are not contractually obligated to contain the employer’s costs.
When sharing this story, Sbrocco put it back into perspective. “Employers are signing these contracts year-over-year, but are they even reading them?’ “Has the broker even read the contract?”
Many of the large insurance carriers list on their websites that the terms of the drug cost are determined by the drug manufacturer. This allows them to determine what is needed to maximize their rebates for the drugs the PBM signs off on for the employer.
Ways PBMs get more third party revenue
These rebate amounts are determined by the exclusivity of the drugs provided by the carrier. If there is only one drug option for treatment the carrier receives a larger rebate. The more drug options the member has the smaller the rebate the carrier receives from the drug manufacturer.
Same goes for the number of restrictions a drug has before the member can acquire them. If the drug requires preauthorization the rebate is reduced.
PBMs are also discouraging employers and employees from importing personal use drugs from outside the United States even though the majority of drugs used in America are not made in the country.
The cartels don’t want to lose money so they make up excuses like it’s too unsafe or you could get hurt. However, we can buy our fish in Japan and our lettuce in Mexico, but we can’t buy our prescriptions in Australia, New Zealand or Canada?
PBMs and big pharma have a responsibility to earn profits for their shareholders. Their actions one hundred percent conflict with the employer’s fiduciary responsibility to do what’s in the best interest of the plan and its plan members.
Solutions employers are trying already
Employers are trying to beat the PBMs at their own game by attempting to claim the rebates for themselves by including it in their contract. However, as Sbrocco said at the beginning, they cannot be beaten at their own game.
If a drug like Harvoni – used to treat Hepatitis C – costs $94,000 and the PBM makes $30,000 off the manufacture revenue, the pharmacy benefit manager is more than happy to give up a thousand dollar rebate if they are collecting the revenue from another source.
“Third party revenue can take on endless numbers of forms and descriptions,” Sbrocco says. “Their contracts are 120 pages, while mine are only 12.”
These forms of revenue can take the form of administration fees, data processing fees, grants, access fees, selling employer information to drug manufacturers or basically any money not identified as rebates.
The contract should not say the employer receives 100% of rebates, but instead say the employer receives 100% of third party revenue. If the contract says this the PBM will not agree to it.
Pharmacy coalitions and business groups on health are other routes employers are taking to avoid higher drug costs. These employers are once again being duped by the administrator or broker running the coalition or the business group by taking money from the pharmacy drug manufacturers.
Not to mention that many of the business groups on health conferences are sponsored by carriers and PBMs that they are supposed to be fighting against.
Employers are also claiming they receive a better price on their prescription drugs because their PBM tells them so. Like Sbrocco said in the beginning: people lie, but numbers don’t so, show me the numbers.
If the drug cost is $93,000 and the PBM says they can find it for $90,000, they are beating the original price but are they finding the lowest price? Cut away the rebates and the third- party revenue and that same drug or a generic version of the drug could end up being $375.
The name brand is not always the best option for the employee. Employers can find lower cost equivalents through brand to brand alternatives, brand to generic alternatives and generic to generic alternatives to find the best price with the highest quality.
What’s the problem then? The PBM will not make these comparisons because if there are competing drugs in the market the rebate is reduced by the drug manufacturer as mentioned before.
The PBM may also continue to approve drugs that were only meant to be taken for a set amount of time. Yet the employee continues to take the drug passed the allotted time because there is no preauthorization restricting the patient from refilling the drug under the employer’s plan.
If there is a lower cost drug on the market than the one an employee is currently taking, we can send a letter to the doctor notifying them of this different drug. Once the drug is approved by the doctor, the pharmacy is contacted to inform the member of this lower cost drug. The employee can then decide if they want to continue using the more expensive drug or try the more affordable drug to see if it provides the same result.
Final thoughts after airing all this dirty laundry? It simple – There is so much corruption in our industry. Employers need to find the right guidance (from the right consultant) to find the right vendors with the exact same objective as them.
If you missed this Expert Session, catch the on-demand replay here.