Pharmacy benefit managers make money by denying care
By Peter J. Pitts
Special to the Mercury News
Donald Trump, Hillary Clinton and Bernie Sanders all think that healthcare is too expensive. But they're looking in the wrong places for savings. In 2012, the CEO of the nation's largest pharmacy benefit manager, Express Scripts, earned about $1 million every week.
PBMs can afford such rich compensation because they increasingly refuse to pay for patients' medicines. In 2016, Express Scripts will deny coverage to 124 medicines -- up from 95 drugs this year. America's second largest PBM, CVS Caremark, announced that it will banish an additional 14 drugs from its 2016 list of covered medications, in addition to the 66 forbidden medicines in 2015.
By refusing to cover specialized drugs, Express Scripts and CVS Caremark aren't just denying patients access to lifesaving medication. They're also driving up healthcare costs for patients.
PBMs design and maintain drug formularies, the lists of medications available under particular health plans. Their influence is massive because PBM-administered plans cover more than 210 million Americans insured through employers, unions, or government programs like Medicare Part D.
PBMs can play a valuable role as middlemen in the healthcare system. They streamline the drug purchasing process by supplying thousands of pharmacies and insurers with prescription contracts. They also hold healthcare spending in check by using their immense purchasing power to negotiate large discounts from pharmaceutical manufacturers. Their profit comes from pocketing any rebates they extract from drug makers that they don't pass on to pharmacies and insurers.
However, the largest PBMs -- particularly Express Scripts and CVS Caremark -- increasingly abuse their role and pad their bottom lines by simply refusing to cover certain lifesaving drugs.
CVS Caremark, for example, recently took to the Journal of the American Medical Association to promote the use of cheaper statin medications rather than specialized new drugs that can cut "bad" LDL cholesterol levels in half. Doctors have called the new medicines a "game-changer" in the fight against coronary artery disease.
Innovative drugs are often the groundbreaking ones that revolutionize treatment of serious diseases. Consider Sovaldi, which PBMs have attacked as "unreasonable" due to its $84,000 price tag. Yet the drug cures 90 percent of hepatitis C patients in a 12-week treatment with vastly reduced side effects. Previous treatments took up to a year and cured only half of patients.
Last year, pharmacies sued Express Scripts over its "scheme to deny all claims" for certain customized medications. "The scheme is forcing patients to go without treatment," the suit stated, "jeopardizing their health and causing bodily harm, or forcing them to pay out-of-pocket sums that they may or may not be able to afford for basic healthcare needs that have been prescribed by their doctors."
Without medicine, many patients grow sicker and require more expensive care in hospitals and nursing homes.
Prescriptions are almost always the most cost-effective treatment option. The Congressional Budget Office estimates that a 1 percent increase in prescription use by Medicare beneficiaries causes Medicare's total medical spending to fall by about one-fifth of 1 percent.
So in effect, PBMs are passing the buck to insurers and government healthcare programs, which are on the hook for pricier treatment regimes.
Most people would find it shameful to withhold medications from sick patients, especially since doing so raises the financial burden on consumers and taxpayers. Unfortunately, America's pharmacy benefit managers are adopting this callous strategy with increasing frequency.