Big PBMs also sometimes own pharmacies. Miller does not, and he says Meridian avoids this practice because it gives PBMs "an incentive to fill inappropriately."
So what would he do with the industry to fix this high-cost mess?
"You need true pricing transparency from everyone in the industry, including wholesalers, drug companies, pharmacies, and PBMs. Outlaw drug commercials, outlaw co-pay coupons," said Miller.
Customers shop in the pharmacy department of a Target store in the Brooklyn June 15, 2015. REUTERS/Brendan McDermid Customers in the pharmacy department of a Target store in the Brooklyn, New York. Thomson Reuters
Doughnut holes The real danger of taking Nexium, at least for millions of Medicare Part D patients, is that it can put them in something called a doughnut hole.
That's when your out-of-pocket expenses start unexpectedly skyrocketing as a result of the structure of the Part D program. Unexpectedly, because most of the time patients don't know how much drugs cost insurers, they just know what they have to pay as a co-pay.
Here's how the doughnut hole happens: Most Medicare Part D patients have what's called a coverage gap. That means after Medicare Part D pays a certain amount (say, $2,000) the patient's co-pays go up from between $5 and $20 to half of what the drug costs.
"This means patients may find themselves in a situation where their initial co-pay of $10 for a 90-day supply of Nexium will exponentially increase to an out-of-pocket cost of $350 or more," said Melissa Kiguwa, a spokeswoman for Pharmacists United for Truth and Transparency, or PUTT. For a lot of Americans, that $350 is a lot of money, especially if they don't see it coming because they thought Medicare Part D was taking care of the full cost of Nexium.
PUTT sees no difference between Nexium and EpiPen, the life-saving antiallergy drug that has gone from costing $100 in 2007 to $608 in 2016. The drug's cost has caused a nationwide uproar, and in an interview with CNBC, CEO Heather Bresch placed part of the blame on "middle men" — on PBMs.
More from PUTT:
"The EpiPen drug hike exposed part of the problem when Mylan Pharmaceuticals CEO attempted to expose how PBMs, brokers, and insurers pocketed more than $280 per prescription within the drug supply chain. The payer pays more in the end, the patient pays a higher copay or higher cost of the medication, and the rebates may or may not go back to the ultimate payer. Yet, in standard contracts with PBMs, providers are forbidden to discuss these tactics and pricing abuses with the ultimate payers or to any one else.
While the Nexium or EpiPen story is not unique in healthcare today, PBMs are quick to refute claims that they are adding to the overall prices of expensive brand drugs with Rx rebates. However, PUTT believes this is happening for most expensive brand drugs— including insulin, inhalers and even expensive specialty medications. Interestingly enough, these are also the fastest growing part of Rx drug plans."
Just look at Nexium's list price. While it has gone up year after year, it isn't close to $700. In fact, the wholesale acquisition cost, or WAC, set by AstraZeneca has topped out at about $250. And the generic competition means the company's revenue from Nexium is falling. Sales declined by 18% to $1 billion in the first half of the year.
This is possible because WAC isn't even close to the whole story when it comes drug pricing. It's just the price of the drug before manufacturers do their deals with insurers and PBMs.
Ask the PBM That is why AstraZeneca's representative suggested over email that we ask the many PBMs running Medicare Part D plans why the drug costs so much (emphasis added):
"AstraZeneca does not disclose specific details in regards to rebates for any of our products. The best determinant of a patient’s out of pocket cost is their individual insurance plan and the respective formulary placement for a medicine.
Nexium is currently covered for about 60% of Medicare Part D patients. Preferred drug lists are often made publicly available by PBMs, and it may be helpful to inquire with them as to the tier coverage of Nexium and/or generics, which will give you a better sense of the out of pocket cost for an individual patient on a plan managed by that PBM."
For what it's worth, we did ask the PBM lobby about Nexium, and they gave us the same response they always give: They encourage lower cost drugs, but clients ultimately pick what they want.
And with that we should add that PBM clients have been getting mad at them lately. Earlier this year, some of America's biggest employers — including American Express, Macy's, and Coca-Cola — created an organization called the Health Transformation Alliance with the aim of breaking with "existing marketplace practices that are costly, wasteful, and inefficient, all of which have resulted in employees paying higher premiums, copayments, and deductibles every year."
Other clients are just flat out suing. Anthem Insurance, a client of the largest PBM in the country, Express Scripts, is suing the PBM for failing to negotiate its 10-year contract "in good faith" and is seeking $15 billion in damages.
congressman doug collins Congressman Doug Collins (R-GA). YouTube Meanwhile, in Washington Pharmacists aren't the only ones concerned about the lack of transparency. A number of people in Congress have grown tired of the PBMs and are calling for more transparency in their dealings.
OmnicareRx, owned by UnitedHealth, is the largest PBM managing Medicare Part D formularies, and congressman Doug Collins (R-GA) called them out for anticompetitive actions in a congressional hearing last year.
"Tricare" — the Defense Department's healthcare program — "did a study where it found that, if it eliminated PBMs from the Tricare program, it would save roughly $1.3 billion per year," he said. "We are up here arguing about problems in our budget, and we could save this much money?"
He — along with Rep. Buddy Carter (R-GA), the lone pharmacist in Congress — believes the PBMs are especially targeting small pharmacies. They wrote a letter to the Center for Medicare and Medicaid Services (CMS) warning of predatory pricing driving small pharmacies out of business. They accused insurer Humana, which owns a PBM, of amending its pharmacy provider agreement to squeeze out little guys.
"Under this proposal, a pharmacy could meet most of the CMS benchmarks, provide quality customer care, and still not be reimbursed by Humana," the letter read. "Humana’s criteria has little to do with patient care, and everything to do increasing their profit and driving community pharmacies out of the market. Some of these metrics, including 'patient adherence' are beyond the control of the pharmacists. Pharmacies already compete for customers and business, let’s not set a precedent to make them compete for reimbursement by insurance companies as well."
But that's exactly what they're doing, and it's driving some decades-old family businesses around the country to the brink.
"I love being a pharmacist, I love living in the community that that I grew up in, I love taking care of people that took care of me when I was a kid here," Mitchell said by phone on his way to pick his kids up from football practice.
"But I may not be around forever. I may have to go work for a big chain ... I love what I do, but the PBMs are taking that away from me. I think the time has come for small pharmacies and large pharmacies to stand up to big PBMs and make a difference for our profession and in our patients lives."
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