Q & A in the aftermath of lawsuit vs. Express Scripts

Last month, Ohio Attorney General Dave Yost filed a lawsuit against Express Scripts, accusing the pharmacy benefit manager (PBM) of multiple contract breaches that helped the company “silently pocket millions of dollars in overcharges to the state,” according to a statement from the Attorney General’s office.

It was the second such lawsuit filed by Yost in the state’s ongoing investigation of the practices of PBMs, private companies that contract with state agencies to manage prescription drug benefits for the clients of those agencies.

“It’s no secret that PBMs have been keeping secret their prescription pricing in order to evade public scrutiny and rake in revenue,” Yost stated. “I intend to shed light on their business model and bring true transparency to the process – they need to answer the tough questions and repay what is owed.”

For the average person, though, what does it all mean?

HealthWarehouse.com CEO Joseph Peters recently answered questions to shed light on this complex, confusing corner of health care and health insurance, which has implications for Houston-area residents--in fact, all American residents.

Q: What is a Pharmacy Benefit Manager (PBM) and what are they supposed to do?

A: Put simply, PBMs decide what patients pay and are tasked with negotiating better prices so the patient pays less.

Q: How does a PBM work with insurance?

A: They handle claims, drug tiering, what's covered, and what's not covered. They manage your prescription coverage while insurance pays the remaining bill after your copay.

Q: How does a PBM work with manufacturers?

A: They negotiate rebates with manufacturers. For the manufacturers, this helps position their medication in a better tier so that the drug has increased utilization. The insurance company and the PBM share the rebate. To afford these rebates, manufacturers often inflate the "list price" of their drugs.

Q: How does a PBM work with pharmacies?

A: A PBM decides how much a pharmacy is paid to dispense a drug. PBMs are paid a fee by the pharmacy.

Q: What impact does a pharmacy benefit manager (PBM) have on the average person’s prescription drug costs?

A: Pharmacy Benefit Managers were created to help insurance companies process the high volume of prescription drug claims. Over time, these PBMs have grown astronomically and now have direct control over medication prices and coverage.

PBMs serve as the middleman between patients and pharmacies. PBMs determine which medications are covered, how much the pharmacy is paid to dispense a medication, and how much the patient pays for the medication.

For a PBM to be profitable, the cost to you as a patient may be inflated to cover their service. Pharmacies are paid by the PBM at the rate of their cash price if it is lower than the contract price, so pharmacies often inflate their cash price to afford the fees paid to PBMs. Without this concern, pharmacies could more easily offer fair cash prices to every patient.

Q: Why do pharmacies bother working with PBMs, then?

A: Because that is where the customers are. If you don't accept that insurance coverage, then the customer will go somewhere else. This is why many independent pharmacies are struggling to stay in business, because they need the PBM to get customers, but they cannot afford the PBM fees.

Q: So, are PBMs inherently bad?

A: Not necessarily, because at their core they are the ones handling prescription insurance. Some drugs really are that expensive and Americans who end up needing these drugs will inevitably need help paying for them.

Q: How does all of this affect cash pricing?

A: It creates double inflation, from the manufacturer and then from the pharmacy. Both must maintain high “list pricing” to effectively “negotiate” with PBMs so that they can win their business.

Q: What about coupons and savings cards?

A: These are often run by, owned by, or powered by PBMs.

For many of these drugs, if the PBM simply didn't exist, then the price of the drug would not be artificially inflated, and the drug would then be affordable at the flat cash price.

Q: What can Americans do?

A: Start educating yourself now—don’t wait until you need your medication to begin your research. That way, you won’t be held hostage at the pharmacy. If you don’t need your medication right away, you can walk away. Of course, if you do need it, consider a temporary supply until you finish your research.

The bottom line: people should empower themselves through education, but more than anything they should opt for cash pricing on low-cost medications.

Joseph Peters is President and Chief Executive Officer of HealthWarehouse.com, the longest-running American online pharmacy (since 2007) and the first nationally licensed online pharmacy.

Through honest and transparent pricing (not so-called “discounts”), the company has helped over 500,000 Americans afford their medication, providing a (conservatively estimated) savings of $30 million in that time.

Based in Florence, Kentucky, HealthWarehouse was recognized for three consecutive years (2016-2018) by a leading consumer magazine as having the lowest cost for prescription drugs that were randomly price-checked. To learn more, visit www.HealthWarehouse.com.