Imagine you’re going car shopping and the price you’re told you’ll pay is negotiated in secret between the dealership and the car manufacturer — who assure you they’ve “negotiated” the very best price possible.
Luckily, that’s not the way we buy cars.
We can find what the dealer paid the manufacturer — the invoice price — and we can haggle down the sticker price. It’s not perfect, but there is transparency.
Unluckily, there’s not much of that when it comes to buying prescription drugs — the unintended result of a well-intended reform that seems to have gone very much off the rails.
About 15 years ago, Congress passed the Medicare Modernization Act, a reform intended to get a handle on spiraling costs. A section of the act — Part D — created something called Pharmacy Benefits Managers (PBMs) ostensibly to negotiate lower prices with the drug manufacturers on behalf of patients. The PBMs would do this by including — or excluding — a given drug or brand of drug from its shelves, based on the manufacturer’s willingness to discount prices, especially in relation to other, similar drugs available on the market — very much as generic drugs usually cost less than the name-brand equivalent.
If a PBM did not agree to carry a given drug, it was often effectively “off the shelves” — since many insurance companies would not pay for it in that event — and many doctors would not even prescribe that particular med.
It worked — initially — because there were many PBMs and free competition almost invariably lowers prices — whether it’s cars or pills.
But consolidation just as invariably results in higher prices. Choices are fewer — and the cartel that controls those remaining can largely dictate terms favorable to the cartel. In the old Soviet Union, for example, if you wanted a car, you got on list and maybe — eventually — got whatever car the authorities deigned to sell you. At whatever price they decreed.
Unfortunately, that’s what’s happened with PBMs.
Today, there are just three. The largest and probably best-known is Express Scripts, which has annual sales of $25 billion and last year earned a reported $660 million in net profits. The other two major players are CVS Caremark and OptumRx, which is associated with the insurance giant United Healthcare.
Together, these three control 80 percent to 85 percent of the market.
This endows them with tremendous leverage — and the concern is they may be using this to do the opposite of what the Medicare reforms intended: Increase prices and decrease choices available to patients, who generally have no choice but to accept what is prescribed — and what is covered.
But the deeper issue is that no one really knows, either way — because of the opacity of the system as it is.
The PBMs oppose calls for greater transparency, claiming — in McDonald’s-ese — that the “secret sauce” (i.e., the behind-closed-doors negotiating with the drug companies) is what makes the best deals possible. But how can anyone know what the best deals are when no one on the outside is privy to the ingredients that go into the “secret sauce”?
This includes, in particular, the charging of fees to pharmacies that dispense the meds — which are then passed on to patients. These have reportedly risen to as high as 11 percent from just 3 percent a few years earlier. There is also a convoluted “rebate” system that makes it very difficult for those outside the system to understand what a given med actually costs — as well as how much money is actually being made.
Four bills have been introduced this year seeking access to the “secret sauce.”
And why would the PBMs object — if there’s nothing objectionable going?
Well, they do — and they are leveraging powerful politicians to act on their behalf, hoping to stymie efforts to cast a little sunshine on the ingredients that go into the “secret sauce.” These pols include Missouri Sen. Claire McCaskill, whose political action committee has received in excess of $150,000 from Express Script, making her the second-highest recipient of Express Scripts campaign cash.
Missouri Gov. Eric Greitens recently awarded Express Scripts a hugely lucrative no-bid contract to track opioid prescriptions — ostensibly to combat abuse of those drugs. He also appointed Express Scripts deputy counsel Julia Brncic to the University of Missouri Board of Curators.
Coincidentally — or not — Missouri just happens to be the corporate headquarters of Express Scripts.
Express Scripts is pretty open about what it’s getting for its money. If you visit the Express Scripts government relations page, you will find the following criteria for the doling out of campaign cash: “Has the candidate for or announced positions on issues important to Express Scripts … (and) demonstrated leadership on key committees of importance to our business?”
Particularly startling, though, is the fact that both McCaskill and Greitens are Democrats. Aren’t Democrats supposed to be the ones who care most about the average guy? According to a profile piece in the St. Louis Post-Dispatch, McCaskill “seems to enjoy the company” of Express Scripts CEO George Paz — who reportedly earns in excess of $10 million annually via the “secret sauce.”
Perhaps the time has come for a different recipe.
Everyone knows that what goes on a Big Mac is basically thousand island dressing. Don’t sick people — who have no choice about buying the meds they need — at least deserve to know exactly why their meds cost as much as they do?