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A Few Clouds

Information on PBMs from your local pharmacist

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There is a dirty little secret in the healthcare system that most folks are unaware of, and it may impact your ability to go to the pharmacy of your choice. I am speaking of the reimbursement rates for medications that are being paid to pharmacies, mostly independent pharmacies, around the state. That may not seem that important but let me explain.

Our society has allowed monopolies to take over the system of delivering drugs to patients in the name of cutting the cost of healthcare. In the pharmacy world, those monopolies are called PBMs, or Pharmacy Benefits Managers. In many cases, the PBM, the chain pharmacy, and the wholesaler are all wrapped into one. This means that a company sells drugs to itself, pays whatever it wants to its own subsidiary and charges patients what they want for needed medications. This has created a situation where a PBM effectively controls all aspects of an industry, apart from manufacturing of drugs. But, why let this get in the way of profits? They simply go to manufacturers, and without regard to safety or efficacy, tell them that if they do not give the wholesaler (owned by them) a deep discount, then their drugs will be nonformulary, or require prior authorization, dampening sales.

Independent pharmacies are also a target of these tactics. The PBMs create contracts that require pharmacies to accept minuscule profits, or even losses for medications. They hide behind the fact that pharmacies are under no obligation to sign these contracts, but when 75 percent of the population is covered under insurance, this is akin to suicide for a pharmacy. They have been systematically lowering reimbursements over the last decade and like a frog in slowly warming water, pharmacies have adjusted by lowering staffing and making it up in other services, never quite getting fed up enough to jump out. Unfortunately, the boiling point is getting close.

The power of PBMs exploded when the quest to lower healthcare costs came to the forefront of politics. They swooped in and promised to lower costs and to keep the system in check, and to save taxpayers and companies money. What happened was that the cost of healthcare did not go down at all, in fact it exploded. PBMs profits have also exploded. In fact, nationwide, PBMs generated 315 billion dollars in revenue last year. If they were generating this profit by making the system more efficient, or offering better customer service, I would not be writing this. The truth is that they generated much of this profit by forcing others to take losses.

If a big box store came to a small town, opened a location, and undercut their competition with the sole purpose of putting them out of business, I might encourage others to shop locally and I would support the small business as much as I could. I would never be in favor of legislation that would keep a company from competing on price. That is unAmerican and antithetical to our principles. What if that same company opened a store in a small town and through some mechanism, not only undercut their prices, but forced their competition to accept even less for the same product? What if they then threatened the small business with retaliation if they complained about the situation? I think that everyone would agree that the company in question would be overstepping its bounds. I think that most folks would support legislation that would prohibit that practice.

I recently billed a PBM for a diabetes medication, which is only available in brand name, with a wholesale cost of $948.00 for a 1-month supply. The PBM set the customer’s copay at $125.00 and paid my pharmacy $776.00, for a loss of $47.00 to my pharmacy. This is not only common, its routine. I do not think that most people know that a company has the power to force a business owner to take a loss for a medication. When I explain this practice to people who are not familiar with the situation, they often react with, “isn’t that illegal”? Pharmacists have not been particularly good at communicating about this problem. If you have ever wondered why pharmacies are out of stock more often than they used to be, or your pharmacist may bypass your insurance and give a better deal, or for that matter, Doctor’s do not order labs that used to be routine, it is because of a broken system where middle men have convinced the government and large companies that they can lower costs, haven’t done so, and become incredibly wealthy in the process.

In the most recent legislative session, HB1265 failed to make it out of the conference committee and back to the floor for a vote. This bill would have brought transparency, prevented PBMs from paying their own pharmacies more than they pay other pharmacies, and place the State Board of Pharmacy over more regulatory control of PBM practices. Many other states are passing laws that regulate PBMs and have found that they save money while supporting independent pharmacies which are often pillars of their community and sometimes, the only source of life-saving medications for 50 miles.

I would encourage everyone to investigate this for themselves. PBMs are exceptionally good at yelling from the rooftops that any threat to their bottom line will cause skyrocketing prices for consumers. It is a shell game. They are the magicians. Think about your local pharmacy owner. Do you think that they have teams of people sitting around thinking up the next way to make themselves rich at the expense of their neighbors? They are most likely figuring out how to make their next payroll, or how to pay the charge backs from the last draconian audit that they received from a PBM, which often results in PBMs taking back money on technicalities which have no bearing on whether the patient got the right medication.

The end goal of the PBMs is that you go to their pharmacies, get the drugs that they tell you to, and pay the price that they dictate. If something is not done to reign in the power of these companies, the main street and neighborhood pharmacies who have served the population of Mississippi for, in some cases, a century will cease to exist. What will they do once they do not have any competition? If the history of these companies is any guide, that is when they will really start putting the squeeze on the consumer. You will be the last place for them to pull their increased profits from.