In evaluating the cost of a medical benefits program, prescription drug costs and in particular, specialty drugs, stand out as the fastest growing and the most difficult to manage cost. As I review programs with clients, I find myself often pointing out that pharmacy is where all the profits are hidden. This has been no more apparent than now as evidenced by Anthem’s $15 billion lawsuit filed against its contracted Pharmacy Benefits Manager (PBM), Express Scripts. The suit alleges that the PBM breached its contract by not performing its obligations in a prudent and expert manner. Anthem estimated that its damages amount to $3 billion per year.
This winds its way down the market, as I often see when competing against large national firms that have “pharmacy coalition” products. I recently became broker on an account which has an “ironclad” contract with one such coalition. I learned that the pricing terms and even the contract itself is more highly guarded than the combination to the safe at the U.S. Mint. The industry rumor mill is full of pharmacy coalition pricing stories with large fees to get in and non-transparent compensation to the sponsoring broker. And witnessing this firsthand, I can’t believe how true this is.
In the past few years, the market has become more skeptical and more transparent, but creative pharma-minds have come up with dubious, I will call them scams, to keep profitability up for drug manufacturers and PBMs. I have written about several: couponing, where patients get duped into using higher cost medications which are about to go off patent. They will fight their employer tooth and nail to keep the drug on the lower cost formulary despite rising costs and compound pharmacies which mix ingredients in order to charge usurious prices for the blended meds. There are others like re-packaging larger quantities into smaller amounts while still charging higher prices for less medicine.
I work with two firms, spawned by former top executives of a large PBM, who seek to demystify pharmacy pricing and advocate for the plan sponsors. If the largest health insurer in the country gets duped by their PBM, how can the average employer hope to get a fair deal? Some brokers are concerned about our industry getting disintermediated – not me and others like me that help our clients stay ahead of the games.