The evermore-increasing health costs have become more than just a concern to patients. The issue is now so inflated that there is a nationwide call for policymakers and health facilities to step in and address it. The sky-high medication prices are mainly caused by mediators in the drug supply, otherwise known as Pharmacy Benefit Managers (PBMs). These groups decide how much insurance pays for treatment and how much the customer pays at the dispensary. Recent information shows that PBMs are taking advantage of the market, making vital medications more expensive and complicated. With this in mind, examining how they operate and their role in driving up consumers’ financial burden is crucial.
Who Are the Middlemen, and What Do They Do?
Most insurance companies and healthcare organizations hire pharmacy benefit managers to handle the costs of prescriptions. As mentioned above, PBMs act as middlemen between insurers, drug manufacturers, and apothecaries. They further act as negotiators with fees and discounts with pharmaceutical producers. They decide what treatments are included in each policy and how much customers must pay. PBMs ask for rebates and other concessions, which range from a 50% cut on the billing of brand-name medication. However, these savings rarely reach the patient or their family.
On the other hand, they often charge the total cost of therapy, even though they acquire the medication at a much lower value. If individuals rely on co-pay assistance to reduce these outlays, PBMs can retain those savings or fail to apply them toward the person’s deductible. Such lack of transparency and failure to relay the savings have attracted the wrath of lawmakers, care recipients, and healthcare consumers. The following section examines their practices and explores what can be done to reduce their influence and bring more transparency to the system.
PBM Practices That Inflate Drug Prices
The power of PBMs should by no means be underestimated. According to the current information reports, 80% of the prescription business in the United States is controlled by three prominent players – CVS Caremark, Express Scripts, and Optum Rx. They are typically connected with large health insurance companies and drugstores, which creates a monopoly-like situation. They dictate what the medicine is worth and which pill is available on the market. With rates going up and negotiations out of plain view, care receivers are bearing the brunt of higher out-of-pocket fees when buying their necessary remedies.
In addition, some concerns about conflicts of interest arise from a lack of competition. For example, PBMs often incite consumers to use their pharmacies, even if it isn’t beneficial for the patient. The Federal Trade Commission (FTC) has noted that this has adverse effects on independent chemists and can increase the cost of services to recipients. So, is there a way out of this vicious cycle?
How Drug Pricing Monopoly Drives Up Costs for Patients
The report prepared by the FTC earlier this year details how prescription drug middlemen profit at the expense of recipients by inflating costs and squeezing out apothecaries from the main street. They are currently influencing the supply of pharmaceuticals to benefit themselves financially rather than helping wards.
Some research shows that PBMs stop offering cheaper treatments to promote expensive ones. This helps them earn more money from rebates given by drug manufacturers. Many patients have to pay copayments for their medications, even if their benefits include third-party reimbursements. For example, this can mean paying a flat fee of $10 for every medication at some point. Patients can now get more pills, but they may have to pay up to 100% of the cost due to deductibles or a fixed percentage through coinsurance.
Additionally, the portion of drugs having coinsurance increased from 35% in 2014 to 58% in 2016. The trend is particularly observed in expensive specialty products such as therapies for cancer, hepatitis C, and rheumatoid arthritis, among others, as seen in commercial health plans. Such a state of affairs can cause serious issues, as it was revealed that nearly 30 percent of Americans surveyed have either rationed their medications or skipped doses because prescribed pills are too expensive.
Why It’s Time for More Transparency
Because so much control has been concentrated in so few hands, the system is widely perceived to be stacked against patients and independent apothecaries. As pointed out in the FTC report, PBMs participate in several self-serving activities, including self-favoring, excluding competition from smaller chemists, and setting up hidden fees.
To counter these issues, the 117th Congress’s Accomplishments include the Pharmacy Benefit Manager Transparency Act, which brings transparency to drug pricing. Lawmakers are pressing for additional changes to create an environment that fosters accountability and get medication plan administrators to explain their stand within the supply chain networks.
Options for Prescription Drug Cost Reform
Prescription drug rebates by pharmacists show that tying out-of-pocket expenses in the list price of medications is not practical. Two key approaches to address this issue are:
1. Lowering Patient Out-of-Pocket Costs
One idea is to lower coinsurance and increase flat copayments for patients, with higher copayments for nonpreferred therapies. Another way is contract-based patient cost using the net price over rebates as opposed to the list price. Of course, point-of-sale rebates are permitted, but they are not obligatory. Such rebates or drawing attention to plans with them during sign-up might aid in challenging pharmacy expenses for patients right away.
2. Realigning Incentives to Reduce Spending
In 2016, the Medicare Payment Advisory Commission aimed to reduce high prescription costs and lessen the financial burden on patients. The particular suggestion of the proposal is that sponsors should be expected to finance 80% of the costs of expensive medication, not 20%. It also discourages out-of-pocket expenses that patients make. As set by the Affordable Care Act or Obamacare, this plan would remove the ‘carrot stick’ that currently encourages more cost shifts to the plan sponsors as a way of accessing costly medications.
Both approaches need better information about individual drug rebates, which are currently non-existent. Some of the important data includes new ideas like point-of-sale rebates. These may help reduce costs for patients and society overall.
Conclusion: Putting Patients First
It is now apparent that the current structure, in which PBMs and other intermediaries get rich while people suffer, will not work. As much as they boast of offering lower prices for the most vital medicine, they do not relay those rates to the recipient. Instead, private entities still have to pay a percentage of the cost while the brokers benefit from the billing situation.
For better healthcare provision, Congress and policymakers ought to act to dismantle PBMs’ overpowering and monopolistic role in the market and ensure that expenditure reductions on medicine get passed to the consumer. Changing the current procedures can help lower costs for patients and make the health sector fairer. This involves altering the roles of middlemen in the process. In conclusion, by moving the focus from PBMs and their revenues to the actual care receiver, insurance companies can participate in designing a more ethical ecosystem for all included parties.
