States fight back against unfair prescription pricing practices

March 05, 2018 06:49 PM

No one argues that prescription drugs are expensive. However, you may be overpaying and your pharmacist isn't allowed to tell you that.

Because of something called a "clawback," your co-pay, usually for a generic drug, may be more than the actual cost of the drug.

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The difference is pocketed by a middleman who's supposed to be saving your insurance plan money -- the pharmacy benefit manager.

Slowly, states are fighting back. I wanted to know what New York is doing.

You probably feel fortunate if your health insurance includes prescription coverage. Truth is, it may be costing you money because of a deal made between the pharmacy benefit manager, PBM, hired by your insurer or employer.

"Many of the PBM contracts have gag clauses, confidentiality clauses which prohibit pharmacists from discussing the true reimbursement of their prescription items," explained Pharmacist John Croce.

He is taking a chance talking about the gag rule and practice known as "clawback." That's when the PBM pockets the difference between what your drug costs and your co-pay.

Say the actual drug cost is $20, but your co-pay is $40. The difference goes to the PBM -- less what it contracted to pay the pharmacy. If the drugmaker offers a rebate on the drug, the PBM often pockets all that too. So as Croce points out, the pharmacist can't tell you that by paying cash you could save money, because if they do and they're caught, they can be blackballed.

"I will admit, we freely signed those contracts, because without it, most people will not come to us without having us as a provider in their insurance," explained Croce.

"If you violate the contract, you're out of the network. If you're out of the network, you're out of business," he pointed out.

Assemblyman John McDonald, who's also a pharmacist, says the gag rule has to go. He says sharing price information isn't just a pocketbook issue, but one of health.

"Price matters for many people. It does make a difference when they're looking at, ‘Do I pay $40 for this or do I pay the heating bill,’" he acknowledged.

WEB EXTRA: Assemblyman and Pharmacist John McDonald on gag clause

In early February, the state Assembly unanimously passed a bill ending the gag rule. Now, it's in the hands of the Senate and no opposition has surfaced.

"That's not appropriate. It's not a good status quo. It's going to go by the wayside. In New York, it's just a question of what else we need to do. Are people getting taken advantage of by the PBMs," pointed out Sen. Kemp Hannon.

Once the Senate votes and if as Hannon expects, it's approved, then the governor has to sign it. New York would join five other states outlawing the gag rule.

In the meantime, consumers should always ask if the cash price is cheaper than the co-pay. The pharmacist can give you that information if you ask.

The power of PBM'S has grown from when they started as intermediaries to help process claims for health plans and let insurers combine their customer bases for greater leverage in negotiating with drugmakers. New York's civil service employees are under direction of a PBM.

As both McDonald and Hannon point out, PBMs are unregulated players with virtually no transparency. Once the gag rule has been dealt with, that may be the next battlefield. As McDonald says, it should be since the government funds 75 to 80 percent of every prescription through Medicaid and Medicare.

"Because they operate with a black box, it's impossible to get them accountable and we've been trying in the state to try to figure out how to make them accountable. But it's difficult ‘cause they're not creatures of the state. They're not located in the state. Even other states, the most they’ve been able to do is to simply get them to register," acknowledged Hannon.

I reached out to a couple of the PBM's doing business in the Capital Region including CVS Caremark, which denies the practice of clawbacks. Hannon tells me CVS changed its practice about three years ago after being sued over the practice with other companies -- including UnitedHealth Group, which runs the benefit manager OptumRx, Cigna Corp -- which contracts with OptumRx and Humana, Inc.

The cases are pending.


Benita Zahn

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