The Golden Rule of Healthcare

  • by: |
  • 09/10/2014

From today’s edition of the Washington Examiner …

Cheaper drugs can also mean less choice without savings for patients

Peter J. Pitts

The economics of American healthcare are dictated by the Golden Rule: "He who has the gold makes the rules.” And those rules reward corporate greed at the expense of physician empowerment and patient care.

The gold in this case is the money leveraged by pharmacy benefit managers (PBMs) to reimburse patients for their medicines. And it’s a golden hammer used to negotiate lower prices from pharmaceutical companies. But where do those savings go, and what is the impact on a physician's ability to practice medicine and — most importantly, therapeutic outcomes for patients?

PBMs are large organizations responsible for not only processing and paying prescription drug claims, but developing and maintaining an insurance company’s formulary (the list of prescription drugs covered by a particular drug benefit plan), contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers. Today, whether or not they know it, more than 210 million Americans nationwide receive drug benefits administered by PBMs.

But the savings garnered through bare-knuckle negotiations are not being passed down to patients. Lower drugs costs negotiated by payers are being used to fatten the corporate coffers of those same organizations. Consider the 2010 comment of George Paz, chairman and chief executive of Express Scripts (one of our nation’s largest PBMs), “The cheapest drugs is (sic) where we make our profits.” And just who is “cheaper” better for? "Our whole model is switching people to lower-cost drugs. The more money my shareholders make, the more money I make."

Paz ranked sixth on the 2012 Forbes CEO compensation list, with $51.5 million in total compensation the preceding year, and $100.2 million over a five-year period.

More money for George and Co., but less choice and no savings for patients. This has been the case with brand vs. generic medicines for years. But at least these often resulted in lower out-of-pocket co-pay expenses for patients. Today, the same fatten-George’s Wallet schemes are being used for drugs for evermore serious and life-threatening conditions. Consider Multiple Sclerosis, an autoimmune disease that affects the brain and spinal cord of over 400,000 Americans.

Express Scripts has decided to only reimburse for some MS treatments — and the differentiator isn’t paying for “better” ones. The ones they chose are generally newer medicines with the highest market share. Why? Consider the math. The higher the volume, the bigger the cudgel, the larger the cumulative discount.

But what about those patients whose disease is being well managed on older therapies with smaller market share? Sorry, no dice. Physicians are being told (told!) by Big Payer to monkey with successful therapies because they don't add enough to the bottom line. This is particularly galling in the case of MS, where the ability to successfully manage any given patient’s disease with any given medicine cannot be predicted. There is no way to determine ahead of time which drug works best for any given patient. And one drug (say an older treatment with a single-digit market share) is not necessarily interchangeable with a newer drug (which has double-digit penetration).

Another frightening fact is that upwards of 20 percent of MS patients, when forced to switch from successful treatments to payment-dictated ones simply stop taking their medicines or opt for “drug holidays” because of new and unpleasant side effects.

If patients are in an uproar, physicians are furious — and frightened. If a doctor is forced to change a patient’s therapy because of Big Payer pressure, what happens when something goes wrong and a malpractice suit gets filed? Is there any validity to “the payer made me do it” defense? Nobody wants to be the test case.

PBM’s will say they’re negotiating on behalf of the employer health plans they serve, that their tactics reduce employer costs. Not true. Higher co-pays for off-formulary medicines lead to dramatically higher rates of non-adherence. Data from one large employer with over 60,000 insured workers shows that in the first few months since the implementation of PBM drug exclusions, nearly 50 percent of “rejected” prescriptions remain unfilled. Non-adherence is the major cause of poor health outcomes. That’s a pyrrhic trade-off.

This is healthcare reform? Indeed it is, since the basic tenet of Obamacare is to reduce costs rather than expedite appropriate care. In fact, the drug formularies of most state exchanges are equally if not more draconian than those designed by Express Scripts. Unfortunately, no two patients have the same biochemistry and no two medicines are exactly equivalent. But if your primary goal is to minimize short-term costs so that you can maximize your quarterly profit (in the case of Express Scripts) or keep premiums low but co-pays high (the goal for state healthcare exchanges), that's an inconvenient truth.

The repercussions of choosing short-term thinking over long-term results, of cost-based choices over patient-based care, of “any-medicine-will do,” over the right medicine for the right patient at the right time are pernicious to both the public purse as well as the public health.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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