ICYMI: Hidden markups at mail-order pharmacies increase costs for employers

A new in-depth report by the Wall Street Journal shows that mail-order pharmacies, often owned by big pharmacy benefit managers (PBMs), are driving up costs for employers when they were supposed to do the opposite.

Employers have been encouraged to utilize mail-order pharmacies over brick-and-mortar retail or community pharmacies by the firms that manage their prescription drug benefits. These firms, who reports have shown are also being paid by PBMs and may pocket up to $5 per prescription, argue employers can drive significant savings this way. However, a new analysis shows the opposite. Employers often face higher costs. Here’s what we know from the WSJ report:

• “Markups were as much as 35 times higher than what other pharmacies charged, according to a recent analysis of millions of prescriptions in Washington state.”
  
  
• “Branded drugs filled by mail were marked up on average three to six times higher than the cost of medicines dispensed by chain and grocery-store pharmacies, and roughly 35 times higher than those filled by independent pharmacies, according to the analysis…”
  
  
• “Generic prescriptions dispensed by mail pharmacies were marked up on average more than three times higher than prescriptions filled by bricks-and-mortar pharmacies...”
  
  
• “Mail-order drug sales have increased to more than $206 billion from $86 billion over the past decade, though the number of prescriptions filled by mail has risen only 11%.”

Why are the costs for employers going up?

PBMs can extract additional profits when employers use pharmacies owned by PBMs.

• “That is partly because of price markups on prescriptions filled by mail-order pharmacies—especially those owned by the pharmacy-benefit managers, or PBMs, themselves—according to employers and consultants who have reviewed businesses’ drug spending.”

How are PBMs using mail-order pharmacies to drive up costs?

PBMs steer clients to their own pharmacies and markup medicines at the expense of patients and employers.

• “Many PBMs, including the three largest, also own a mail-order pharmacy. In those cases, the PBM effectively sells a drug to itself. They can make a larger spread by marking up how much the health plan pays to the PBM, employers and benefits consultants said.”
  
  
• “That is partly because of price markups on prescriptions filled by mail-order pharmacies—especially those owned by the pharmacy-benefit managers, or PBMs, themselves—according to employers and consultants who have reviewed businesses’ drug spending.”

How do PBMs and the PBM-owned mail-order pharmacies get away with this?

They continuously evade transparency about their practices. As the WSJ reports:

• “Many businesses can’t see the spread because most PBMs don’t tell them, even when employers ask, how much they reimburse pharmacies. That can prevent employers from determining why they are spending more on drugs and how they can fight it, businesses and consultants said.”

As another blockbuster report recently showed, PBMs and their corporate affiliates are driving up costs for employers and patients. This comes amidst federal and state probes into PBM and insurer practices. It’s clear that policymakers need to pass reforms that protect patients and rein in these middlemen.