Pharmacy benefit managers (PBMs) are driving up drug costs for millions of people, employers and the government. That’s what The New York Times found after reviewing court documents and patient records and interviewing more than 300 individuals – experts, insiders, patients, physicians and others.
The Times’ new investigation gives an unprecedented look behind the curtain of middlemen who operate with little transparency but are “driving up drug costs for millions of people, employers and the government.” As the Times notes, PBMs “touch virtually every American family,” and while they claim their job is to lower drug prices, they “frequently do the opposite.”
Here are a few excerpts from the Times’ investigation and the disturbing details it uncovers:
Controlling what people pay
- “The PBM negotiates with drug companies, pays pharmacies and helps decide which drugs patients can get at what price.”
Driving up prices
- “They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees…”
Preferring high-priced medicines
- “Even when an inexpensive generic version of a drug is available, PBMs sometimes have a financial reason to push patients to take a brand-name product that will cost them much more. …The higher the original sticker price, the larger the discounts the PBMs can finagle, the fatter their profits — even if the ultimate discounted price of the brand-name drug remains higher than the cost of the generic.”
Offshore subsidiaries and fees
- “The largest PBMs recently established subsidiaries that harvest billions of dollars in fees from drug companies, money that flows straight to their bottom line and does nothing to reduce health care costs. … In 2022, PBMs and their G.P.O.s pocketed $7.6 billion in fees, double what they were bringing in four years earlier, according to Nephron, a consulting firm.”
Steering patients
- “The three PBMs push, and sometimes force, patients to use their pharmacies, whether mail-order or, in CVS’s case, the physical drugstores. One common strategy is to not allow patients to receive 90-day supplies of drugs if they fill prescriptions at outside pharmacies. These pressure tactics drive people crazy. … But the tactics are profitable.”
Self-dealing
- “One of the clients to whom Caremark recommended Hyrimoz was the health insurance program for state employees in North Carolina. Caremark didn’t tell state officials about the company’s stake in Hyrimoz. They only learned of it when an official, Dr. Peter Robie, stumbled upon an online mention of the partnership.”
Anti-competitive practices
- “In Washington and state capitals, lawmakers, regulators and attorneys general have suggested that the benefit managers may be inflating drug prices and engaging in anticompetitive behavior. ‘They’re seeking to extract from the system, without creating any corresponding value for the system,’ said Dave Yost, the Republican attorney general in Ohio …”
Shifting the blame
- “The PBMs also say that tightfisted employers are to blame when patients are charged high out-of-pocket costs or can’t get their medications. … They say they’re just doing what their clients, the employers, want. The PBMs recommend different options, but the employers have the final say.”
While PBMs profit, their abusive tactics make it harder for patients to access and afford the medicines they need:
- “In New Jersey, Cigna’s PBM, Express Scripts, wanted Joseph Kaplan, a 77-year-old retiree, to pay $211 for a three-month supply of his allergy drug when he could have paid $22 at Costco. ‘It’s just nuts,’ he said.”
- “In Illinois, a woman with cancer paid hundreds of dollars more than she should have for her pain medication because Caremark required her to use a more expensive version.”
- “In Oklahoma, for example, CVS’s PBM, Caremark, overcharged the health plan for state employees by more than $120,000 a year for one patient’s cancer drug, according to his insurance documents.”
- “The disappearance of local pharmacies limits health care access for poorer communities but ultimately enriches the PBMs’ parent companies, which own drugstores or mail-order pharmacies.”
As one cancer survivor summed it up: “We were getting ripped off.”
The reaction from the PBM industry? Of course, they defended their tactics, with one PBM executive boasting, “We’re really, really good at what we do.” There’s a lot to take from the Times’ investigation, but one thing is clear: policymakers need to pass reforms that protect patients and rein in PBM abuses.
