The Games They Play
PBMs, pharmaceutical companies and health insurers play games to make money. PBMs claim they save patients money by negotiating deals. But evidence would say otherwise. These games leave patients with higher medical costs, cause them to skip doses of their medications, split their pills or force them to abandon treatment altogether. Learn more about some of the games below.
The Game: Setting High List Prices
The pharmaceutical company sets the list price of a drug. The pharmaceutical companies will say the high list prices are used to invest in research and development. But there isn’t a clear connection that high launch prices pay for the research and development. The pharmaceutical companies also use high list prices for drugs to give them flexibility to negotiate the price down with “rebates” that go to PBMs and insurers. As for patients who do not have insurance...well, they would be charged the list price, if they do not have other assistance.
Pharmaceutical companies by setting high list prices for profit.
Patients with commercial insurance by facing high prescription prices without clear insight into the reasoning, and patients without insurance by paying the list price.
The Game: Keeping Competition Away with Patent Thicketing
Pharmaceutical companies use various methods to extend their patents and keep generic competitors off the market. Meanwhile, other pharmaceutical companies may be ready and able to produce a generic version of the drug, which would lower costs for patients.
Pharmaceutical companies by making more money when they keep competitors out of the market.
Patients by paying for higher-priced brand name drugs, because cheaper competitors have been kept out of the market.
The Game: Hiding Information
PBMs claim that the deals they strike behind closed doors between pharmaceutical companies and health insurers save patients money. PBMs hide information from patients and health care providers, as well as insurers. PBMs often use “clawbacks” (also called DIR fees and GER fees), taking money from pharmacies, without clear justification about why these fees are charged months after the patient picked up the drug from the pharmacy.
PBMs by keeping their policies secret and charging unexplainable fees to make more money.
Patients by overpaying for medications.
The Game: Negotiating Rebates for Themselves
PBMs charge fees and make profits all the way down the pharmaceutical supply chain, while insisting that they pass on savings to patients from the deals they strike. How does this work? PBMs create a formulary of drugs that the insurance company may choose to use. Pharmaceutical companies want their brand-name drug on the formulary. To gain a favorable spot, they offer the PBM a rebate. The PBM will list the expensive, brand-named drugs on the formulary when cheaper, generic drugs are available, because it leads to more money in rebates. Patients then purchase the more expensive drug that is listed on their insurance company’s formulary.
PBMs and insurers by pocketing rebates. Pharmaceutical companies by making profits, even after applying rebates, due to high list prices.
Patients by overpaying for brand-named drugs due to PBMs’ shady deals.
The Game: Limiting Patient Choice of Where and How to Receive Medications
PBMs limit patient options surrounding where they receive their medications and how much supply they need. Insurers and PBMs force patients to receive medications from pharmacies they own, when the medication may be available at another in-network pharmacy. These pharmacies can sometimes be described as “specialty” pharmacies. Insurers and PBMs may also force patients or their provider to receive medications in the mail, practices called "brown bagging" and “white bagging”, respectively. PBMs may force patients to receive 90 days’ worth of medication, forcing them to pay higher copays quarterly rather than monthly. In addition to the higher costs, this may cause waste as patients may need less than 90 days of supply.
Insurers and PBMs by forcing prescriptions to be filled at the pharmacies they own.
Patients by losing their choice in where and how to obtain their medications, sometimes leading to higher copays.