Starter Comment: If you are like me, you pride yourself in being SOMEWHAT literate and current on medical topics and healthcare economics. However, I have remained flummoxed on just WHAT PBMs are supposed to be or do. I even listened to an hour long podcast where the host remained confused 40min in and [the expert guest had to draw a conspiracy-like web map on a white board](https://i.kym-cdn.com/entries/icons/original/000/022/524/pepe_silvia_meme_banner.jpg) to illustrate. And I still didn't get it.
I feel like this NYT article does a great job summarizing the situation, and **here is my summary of that summary:**
Most Americans insurance is two types--care and prescriptions. Care is handled via insurance. PBMs oversee scripts by negotiating with drug companies, pays pharmacies and helps decide which drugs patients can get at what price. In theory, everyone saves money. But those savings appear to be largely a mirage, a product of a system where prices have been artificially inflated so that major P.B.M.s and drug companies can boost their profits while taking credit for reducing prices simultaneously.
It is confusing because they want it to be.
**Highlights:** NYT interviewed more than 300 current and former P.B.M. employees, patients, physicians, pharmacists and other industry experts, and reviewed court documents and patient records. They found that PBMs:
1. push patients toward drugs with higher out-of-pocket costs, shunning cheaper alternatives
2. charge employers and government programs like Medicare multiple times the wholesale price of a drug, keeping most of the difference for themselves
3. recently established subsidiaries that harvest billions of dollars in fees from drug companies, money that flows straight to their bottom line while avoiding attention and pushback for taking a cut of rebates
4. drive independent drugstores out of business by not paying them enough to cover their costs. Small pharmacies have little choice but to accept these lowball rates because the largest P.B.M.s control an overwhelming majority of prescriptions
5. limits health care access for poorer communities but ultimately enriches the P.B.M.s’ parent companies, which own drugstores or mail-order pharmacies
6. delay or even prevent patients from getting their prescriptions.
7. negatively affect even healthy people. Those who don’t take prescription drugs end up paying higher insurance premiums and taxes as a result of inflated drug costs
**Market share:** P.B.M.s have been around since the late 1950s. They initially handled requests mailed in by pharmacies and patients seeking reimbursement for the costs of prescription drugs.
1. Because of recent mergers, they are becoming more dominant, collectively processing roughly 80 percent of prescriptions in the United States. In 2012, the figure was less than 50 percent.
2. The modern P.B.M. emerged in 2018. The giant health insurers Aetna and Cigna were trying to achieve the growth demanded by Wall Street. They sought to merge with the P.B.M.s, whose profits were soaring. Aetna and CVS combined. Cigna bought Express Scripts. (UnitedHealth had built its own P.B.M.). *The result was octopus conglomerates that operate pharmacies, insurance, PBMs, and even entire healthcare systems.*
**How it works now:** drug companies generally agree to reduce prices on brand-name medications by giving rebates and other payments to the P.B.M.s. The P.B.M.s then share most of that with employers. But they also pocket a portion — sometimes about 10 percent — for themselves. Because of the huge national volume of drug spending, that adds up.
1. Greater discounts do not necessarily benefit patients. Some out-of-pocket costs are set as a percentage of the original sticker price. So when sticker prices are higher, patients pay more.
2. PBM's demands for greater discounts often lead drug companies to increase sticker prices so that they can maintain their profit margins
3. it is common for a drug’s final price after discounts to plateau even as patients’ out-of-pocket costs for that drug go up
4. **EX: Eliquis:** P.B.M.s are delivering big rebates on Eliquis to employers. But because some out-of-pocket costs are a percentage of the sticker price, many patients are now paying hundreds of dollars more per year
5. “P.B.M.s save money off bogus inflated prices that should not exist in the first place,” said Antonio Ciaccia, a consultant hired by Ohio and other states that are investigating the benefit managers. “They are the arsonist and firefighter of high drug prices.”
**Overcharging:** Overcharging seems to be the primary goal rather than unfortunate biproduct, doing the opposite of PBMs' proposed reason for existing in the first place
1. Caremark, overcharged the health plan for state employees by more than $120,000 a year for one patient’s cancer drug
2. 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
3. Express Scripts and Optum Rx defended their business models. Some executives acknowledged that there were times when they overcharged for specific drugs, but the companies said they offered the lowest overall prices to their clients. (The system’s opacity makes that claim impossible to verify.)
4. even when an inexpensive generic version of a drug is available, P.B.M.s sometimes have a financial reason to push patients to take a brand-name product that will cost them much more.
5. higher the original sticker price, the larger the discounts the P.B.M.s 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
6. generic drugs, which represent the overwhelming majority of American prescriptions, don’t get rebates (and therefore PBMs don't get a cut)
7. the steepest markups often involve generic versions of expensive medications for conditions like cancer.
8. P.B.M.s 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.
9. one surefire way for the P.B.M. or its in-house pharmacy to profit is to charge thousands of dollars more than what a drug costs. The Times identified repeated instances of P.B.M.s doing just that.
10. a pharmacist, Russell Hobbs, made a startling discovery. Mr. McKinley’s insurance paperwork showed that CVS was charging Oklahoma $138,000 a year for Mr. McKinley’s everolimus. But the online portal that Mr. Hobbs used to buy drugs from wholesalers indicated that he could procure everolimus for about $14,000.
**The messed up concept of GPOs (I had no idea these were a thing):** Emisar and similar subsidiaries established by Express Scripts and Caremark are known as group purchasing organizations, or G.P.O.s. They were created, starting in 2018, amid growing pressure from employers to share with them more of the manufacturers’ discounts
1. The creation of the subsidiary GPO, Emisar, has allowed UnitedHealth to retain billions of dollars of those savings, without having to share them with employers.
2. G.P.O.s also began imposing new fees on drug manufacturers, which do not pertain to the rules/regulations of rebates. Because those were fees, not rebates, and because the fees were technically collected by a different company, the P.B.M.s weren’t contractually obligated to share them with their clients
3. P.B.M.s could truthfully say that they were returning to employers almost all of the drug companies’ rebates. They didn’t have to mention the fees
4. “The intention of the G.P.O. is to create a fee structure that can be retained and not passed on to a client,” said Kent Rogers, a former Optum Rx executive who helped set up Emisar. “A P.B.M. has to keep some level of income for them to grow and satisfy stockholders.”
5. In 2022, P.B.M.s and their G.P.O.s pocketed $7.6 billion in fees, double what they were bringing in four years earlier
6. P.B.M.s had an additional reason to create the G.P.O.s. The Trump administration was pushing for a rule that would classify rebates as kickbacks. Many in the industry feared that the rule would make the rebate system illegal
7. GPOs negotiate on behalf of not only the big P.B.M.s but also independent smaller ones. That structure was designed at least in part to allow them to escape the proposed rule, which has not been finalized.
8. A former executive of a major drug company, whose responsibilities included negotiating with G.P.O.s., said that he had a set pool of money to cover fees to G.P.O.s and rebates to employers. When he paid more in fees, he offered less in rebates.
9. **EX: Humira:** A big example of gouging involves Humira. Collectively, employers, insurance programs and patients stood to save up to $6 billion a year by switching to copycat drugs, according to the data company IQVIA. But P.B.M.s would lose money from switching. Humira had become a big moneymaker for P.B.M.s, in large part because its manufacturer, AbbVie, was shelling out hundreds of millions of dollars in fees to the benefit managers’ G.P.O.s. Those fees would vanish if the P.B.M.s switched patients off Humira.
10. PBMs moved slowly. In March, 14 months after the first cheaper version became available, 96 percent of prescriptions for the drug in the United States were still for the brand-name version
11. P.B.M. executives denied that this was motivated by greed. CVS Caremark officials, for example, said that they had struck all-or-nothing arrangements with AbbVie. If Caremark steered some of an employer’s workers toward cheaper versions of the drug, that employer would not receive any rebates from AbbVie for patients who stayed on Humira.
Cont:
**GPOs are purposefully internationally outsourced:** Emisar operates mainly in Ireland, and Express Scripts’ Ascent is in Switzerland, which means their profits are taxed at much lower rates than if they were generated in the United States. (CVS’s Zinc is in Minnesota.)
**Employers/Employment Related Insurance Part to Blame:** PBMs say they’re just doing what their clients--employers and their employment related insurance policies throughout the US--want them to be doing.
1. The P.B.M.s recommend different options, but the employers have the final say. Employers actually prefer the use of brand-name drugs, even when a generic is available, because their final costs can be lower once discounts are taken into account — even if the costs go up for their employees
2. Employers are none the wiser with how GPOs, rebates, and fees work. They receive rebates. But they can’t see the billions of dollars in fees that the G.P.O.s take for themselves.
3. Employers often don’t know they are being overcharged. Nor do they have much say over which pharmacies are available to their workers. “We do not have insight into the individual pricing of certain medications,” said Christa Helfrey, a spokeswoman for the agency that oversees Oklahoma’s insurance program for state employees.
4. Caremark uses Medicare’s money to pay pharmacies, including its own, roughly $2,000 per month for a generic blood cancer drug, imatinib, according to a pricing tool on the SilverScript plan’s website. Because that payment is so high, the out-of-pocket cost for Medicare patients is also high — $664 most months. *That is x10 what imatinib sells for generic.*
5. “Our interests were not aligned,” said Linda Gulbrandsen, who oversees benefits for the retailer Foot Locker. It replaced Optum Rx with a smaller competitor, Navitus.
**It's creating a monster:** P.B.M.s’ parent companies often have another powerful lever: health insurance.
1. In 2022, Milano Restaurants International picked UnitedHealth to handle insurance for 85 employees and their family members. To the frustration of executives at the restaurant company — which operates dozens of pizzerias and burger joints in California and Arizona — UnitedHealth forced Milano to use Optum Rx as its P.B.M. Price shopping for a different P.B.M. was not permitted.
**The FTC and Both Republican and Democrats Are Catching On:** “We’ve heard a lot of complaints about the rebate system and whether the rebates may effectively be functioning as kickbacks that are diverting people to more expensive medicines at the expense of lower-cost generics,” Lina Khan, the F.T.C. chair, recently told reporters.
1. The Times shared the details of Mr. McKinley’s case with Oklahoma’s attorney general, Gentner Drummond, who has been looking into the P.B.M.s. He called the case “alarming and concerning.”
**Meddit Contributions:**
u/worriedrph: "Even all this leaves out some of the most absurd abuses of PBMs. They set minimum copays on drugs have the pharmacy collect a $15 copay for a $5 drug and have the pharmacy pay the PMB the $10 difference. They make it a breach of contract for the pharmacy to inform the patient this is happening or to charge the $5 and bypass the insurance. The total lack of anything even approaching ethnics is absurd."
I was still confused (how do PBMs "push" more expensive drugs, for example. This was helpful to me: [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10441264/](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10441264/)
I work at a big pharma. One of our newest drugs is having unexpectedly shitty sales because PBMs enjoy the massive margins on the current leader, which is inferior in just about all metrics. I heard our competitor upped the kickback to the PBMs too, but can't verify. So we have a marketplace where a superior product can't compete because its competitor is... more expensive.
The irony is that so many regulations have been established to prevent providers from exploiting the system—while the flood gates remain wide open for corporate exploitation.
At least doctors presumably have some interest in caring for our patients. At least we look those patients in the eye regularly while advising and prescribing.
Faceless corporations that exist to be middle-men and rent-seekers don’t have any fiduciary duty to any participant (but they might to shareholders), don’t have any normal human feelings of caring, and do not, in any apparent way, add value. Hence rent-seeking.
Also notable that all of this bullshit wastes a ton of (expensive!) prescriber, pharmacy, and front-office time. The PBMs and their constantly shifting rules and classifications force everyone else to waste hours massaging the system to find reasonably affordable care solutions. It's a huge externality and source of waste.
As a practice consultant/administrator, administration of insurance and *some* regulations are a huge waste of time and money. They almost seemed designed to make private practice unsustainable.
Corporations aren’t typically held liable—they pay a fine, admit nothing and move on. Providers lose their license and their livelihood, which was the basis against the corporate practice of medicine
But that is the way everything works in other sectors too.
The IRS goes after small individuals tax cheats but ignores rich ones who can afford expensive lawyers.
There’s an added “bonus” in health care that providers can have their licenses attacked in multiple ways—malpractice, civil penalties, criminal penalties, board actions, insurance actions and hospital actions—and the provider’s license is their livelihood. This is in addition to all the negatives of being a small fish.
My first thought…let’s do this analysis with hospital systems, insurance, nursing homes, devices, etc.
The whole healthcare ecosystem is set up to get big, squash the competition, and extract as much wealth as possible.
I think antitrust laws should be used to force PBMs to be decoupled from both pharmacies and Health Insurance. Just as they were used decades ago to break up telecom and auto companies with too much vertical integration, PBMs and these other entities have WAY too much vertical integration and need to be broken up.
Antitrust laws need to be used aggressively in a lot of spheres and this is one of them.
Also kickback laws need to be aggressively used where appropriate.
There is a much easier solution that doesn't require creating 200 new laws. Just force price transparency. Force drug makers to advertise the selling prices of their drugs, and enforce price discrimination laws. Force insurance and PBM companies to advertise the drug prices if purchased through insurance or PBM. Everybody should be paying the same price. And if not, everyone should be allowed to find out if they can pay a lower price.
I don't disagree with this but enforcing antitrust laws already on the books which have already been used to effectively do the same thing in other industries decades ago is hardly writing 200 new laws.
The mind blowing part to me is that the vertical integration wasn’t present from the start and as the companies got bigger all parts of the business got bigger. The FTC specifically allowed every step of the vertical integration through mergers and acquisitions and all approved in the last 2 decades and most in the last decade. It has been so obvious the anti trust concerns with every merger throughout the healthcare industry for the last couple decades but they keep approving almost every one.
Even all this leaves out some of the most absurd abuses of PBMs. They set minimum copays on drugs have the pharmacy collect a $15 copay for a $5 drug and have the pharmacy pay the PMB the $10 difference. They make it a breach of contract for the pharmacy to inform the patient this is happening or to charge the $5 and bypass the insurance. The total lack of anything even approaching ethnics is absurd.
[https://www.youtube.com/watch?v=NWJ9ZqxssWw](https://www.youtube.com/watch?v=NWJ9ZqxssWw)
This is a little long but the new game. Often cheaper generics are going through insurances (LOOKIN AT YOU CAREMARK/EXPRESS SCIRPTS) with approx $10 copays that are almost completely taken away from the pharmacy with a clawback ($4-8) that goodrx and the pbm splits. PBMs added a clause in their contracts where they can now just run discount cards and pay nothing, while taking a fee from the patient THROUGH the pharmacy copay.
Oh yeah we're losing money on dispensing them too.
Lets be real here.
Tax dollars are being siphoned by sociopaths and when they can't do that they'll take it directly from your pocket. They have built this system in order to enrich themselves at the cost of everyone else's health.
We need to change this. These businesses should not exist.
That was a gorgeous write-up, EmotionalEmetic! I feel like I need to ready it a few more times but it was super insightful. Thank you!
I don’t know what to do about it as a lonely individual. My only approach thus far is that I tell my patients straight up that the hospital system I’m working for (which also happens to often be their insurer, lab, and pharmacy) has been raked over the coals for their dishonesty and that it’s pulling in billions by screwing them and people routinely die for lack of care.
Aside from constantly throwing the system under the bus, I’d love to hear other ways people try to effect change when it comes to our HC system.
State level legislation has been slowly challenging PBMs and we’ve had some small wins recently. My state has created a requirement that a PBM must be issued a license to practice in the state, and the license can be revoked/suspended if enough complaints are filed by pharmacies. The PBMs then sued the state and eventually the Supreme Court ruled against the PBMs. The practice has slowly been implemented after the several year process it took to be escalated to the Supreme Court.
Obviously, there is major pharmacy support regarding these legislative opportunities, but having other peers in medicine show support means a lot. I encourage you to look into any pending legislation in your state and maybe throw your voice behind it!
Thank you for posting this. My insurance recently switched to Optum and it has been a nightmare. I have medications that I need to call around to “price check.” I have found it is often cheaper to go to the Walmart pharmacy and not use my insurance.
I have a prescription that insurance won't cover that's 800/month or more almost everywhere but Walmart is 31 with goodRx.
The entire insurance industry needs more regulation, the shit they do to people would drive them out of business in any other industry.
I agree. We learn the intimate details of the process in school, but I was surprised when so little of the extended medical community doesn’t know more about this, let alone the average citizen
Knowing the history and how this has only taken off at an exponential rate in the last 10yrs or so of massive mergers, price gouging help me understand it. I think.
Because it is health insurers (or managed care organizations)? There's no reason to separate them.
UNH has OptumRX, CVS has Caremark, Cigna has Express Scripts, Elevance has Carelon, Humana has Humana Pharmacy Solutions, the other BCBS plans have Prime Therapeutics, etc.
It's just a long winded way of saying the department of health insurers that negotiates pricing for medicine plays a lot of games that result in pharmacies not earning "enough" money, and/or costing excess administrative work.
Glad this is getting the attention it deserves. Pharmacists have been pushing for reform while seeing all the consolidation and lost of independents.
Also as much as the pharma industry can be critized at least they produce something. PBMs provide no product or value and only take money from all other parties.
Also good: [https://content.naic.org/sites/default/files/inline-files/Sood-NAIC-August2019.pdf](https://content.naic.org/sites/default/files/inline-files/Sood-NAIC-August2019.pdf)
NAIC is the National Association of Insurance Commissioners. Based on a very quick glance, they are currently in the process of drafting guidelines for, I think, model state laws. Based on perusing their site, they are in the process of developing a white paper to guide model legislation regarding PBMs.
I thought I had read on this sub there is also a thing where the pharmacy has to pay the PBM back some money? Is this part of the entire rebate structure? Pay to play?
The headline should extend with "...in the United States." Generics are way cheaper overseas or even from Canada. Most patients I meet now with chronic conditions import their prescriptions from legit sources. Who can blame them? The domestic drug market is robbing us blind and hindering health care.
They are just the medicine price negotiation department of the health insurers.
UNH - OptumRX
CVS - Caremark
Cigna - ExpressScripts
Elevance - Carelon
Humana - Humana Pharmacy Solutions
Prime Therapeutics - all the other BCBS plans
Do big hospitals usually have insurance with good PMBs? My dr prescribed an $800 inhaler but a 3 month supply. So I picked up $2400 with of inhalers. At the hospital pharmacy my copay was $0, same as always. I have to go to work on my off day occasionally. But, it’s worth it.
Pharmacist can probably give better insight. But our big hospital chain pharmacies likely have deals, needs, and logistics that CVS/Walgreens don't prioritize and the few small, independent pharmacies can't negotiate or bargain for.
That’s what I’m guessing. Admin probably does something good there. I see I’m getting floor versions of drugs sometimes. Blister packs/syrup cups etc instead of pill bottles or syrup bottles. They prob bargained hard to reduce the cost of stays since drugs aren’t charged individually. Makes me scared to go work at a smaller hospital though.
Your comment has some merit--but you're ignoring the rage inducing aspect of PBMs.
1. PBMs were made originally to tackle the problem you describe. They were then bought out and now make it worse.
2. As opposed to drug makes who MAKE the drugs, PBMs do... nothing to improve healthcare. Nothing.
Starter Comment: If you are like me, you pride yourself in being SOMEWHAT literate and current on medical topics and healthcare economics. However, I have remained flummoxed on just WHAT PBMs are supposed to be or do. I even listened to an hour long podcast where the host remained confused 40min in and [the expert guest had to draw a conspiracy-like web map on a white board](https://i.kym-cdn.com/entries/icons/original/000/022/524/pepe_silvia_meme_banner.jpg) to illustrate. And I still didn't get it. I feel like this NYT article does a great job summarizing the situation, and **here is my summary of that summary:** Most Americans insurance is two types--care and prescriptions. Care is handled via insurance. PBMs oversee scripts by negotiating with drug companies, pays pharmacies and helps decide which drugs patients can get at what price. In theory, everyone saves money. But those savings appear to be largely a mirage, a product of a system where prices have been artificially inflated so that major P.B.M.s and drug companies can boost their profits while taking credit for reducing prices simultaneously. It is confusing because they want it to be. **Highlights:** NYT interviewed more than 300 current and former P.B.M. employees, patients, physicians, pharmacists and other industry experts, and reviewed court documents and patient records. They found that PBMs: 1. push patients toward drugs with higher out-of-pocket costs, shunning cheaper alternatives 2. charge employers and government programs like Medicare multiple times the wholesale price of a drug, keeping most of the difference for themselves 3. recently established subsidiaries that harvest billions of dollars in fees from drug companies, money that flows straight to their bottom line while avoiding attention and pushback for taking a cut of rebates 4. drive independent drugstores out of business by not paying them enough to cover their costs. Small pharmacies have little choice but to accept these lowball rates because the largest P.B.M.s control an overwhelming majority of prescriptions 5. limits health care access for poorer communities but ultimately enriches the P.B.M.s’ parent companies, which own drugstores or mail-order pharmacies 6. delay or even prevent patients from getting their prescriptions. 7. negatively affect even healthy people. Those who don’t take prescription drugs end up paying higher insurance premiums and taxes as a result of inflated drug costs **Market share:** P.B.M.s have been around since the late 1950s. They initially handled requests mailed in by pharmacies and patients seeking reimbursement for the costs of prescription drugs. 1. Because of recent mergers, they are becoming more dominant, collectively processing roughly 80 percent of prescriptions in the United States. In 2012, the figure was less than 50 percent. 2. The modern P.B.M. emerged in 2018. The giant health insurers Aetna and Cigna were trying to achieve the growth demanded by Wall Street. They sought to merge with the P.B.M.s, whose profits were soaring. Aetna and CVS combined. Cigna bought Express Scripts. (UnitedHealth had built its own P.B.M.). *The result was octopus conglomerates that operate pharmacies, insurance, PBMs, and even entire healthcare systems.* **How it works now:** drug companies generally agree to reduce prices on brand-name medications by giving rebates and other payments to the P.B.M.s. The P.B.M.s then share most of that with employers. But they also pocket a portion — sometimes about 10 percent — for themselves. Because of the huge national volume of drug spending, that adds up. 1. Greater discounts do not necessarily benefit patients. Some out-of-pocket costs are set as a percentage of the original sticker price. So when sticker prices are higher, patients pay more. 2. PBM's demands for greater discounts often lead drug companies to increase sticker prices so that they can maintain their profit margins 3. it is common for a drug’s final price after discounts to plateau even as patients’ out-of-pocket costs for that drug go up 4. **EX: Eliquis:** P.B.M.s are delivering big rebates on Eliquis to employers. But because some out-of-pocket costs are a percentage of the sticker price, many patients are now paying hundreds of dollars more per year 5. “P.B.M.s save money off bogus inflated prices that should not exist in the first place,” said Antonio Ciaccia, a consultant hired by Ohio and other states that are investigating the benefit managers. “They are the arsonist and firefighter of high drug prices.” **Overcharging:** Overcharging seems to be the primary goal rather than unfortunate biproduct, doing the opposite of PBMs' proposed reason for existing in the first place 1. Caremark, overcharged the health plan for state employees by more than $120,000 a year for one patient’s cancer drug 2. 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 3. Express Scripts and Optum Rx defended their business models. Some executives acknowledged that there were times when they overcharged for specific drugs, but the companies said they offered the lowest overall prices to their clients. (The system’s opacity makes that claim impossible to verify.) 4. even when an inexpensive generic version of a drug is available, P.B.M.s sometimes have a financial reason to push patients to take a brand-name product that will cost them much more. 5. higher the original sticker price, the larger the discounts the P.B.M.s 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 6. generic drugs, which represent the overwhelming majority of American prescriptions, don’t get rebates (and therefore PBMs don't get a cut) 7. the steepest markups often involve generic versions of expensive medications for conditions like cancer. 8. P.B.M.s 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. 9. one surefire way for the P.B.M. or its in-house pharmacy to profit is to charge thousands of dollars more than what a drug costs. The Times identified repeated instances of P.B.M.s doing just that. 10. a pharmacist, Russell Hobbs, made a startling discovery. Mr. McKinley’s insurance paperwork showed that CVS was charging Oklahoma $138,000 a year for Mr. McKinley’s everolimus. But the online portal that Mr. Hobbs used to buy drugs from wholesalers indicated that he could procure everolimus for about $14,000. **The messed up concept of GPOs (I had no idea these were a thing):** Emisar and similar subsidiaries established by Express Scripts and Caremark are known as group purchasing organizations, or G.P.O.s. They were created, starting in 2018, amid growing pressure from employers to share with them more of the manufacturers’ discounts 1. The creation of the subsidiary GPO, Emisar, has allowed UnitedHealth to retain billions of dollars of those savings, without having to share them with employers. 2. G.P.O.s also began imposing new fees on drug manufacturers, which do not pertain to the rules/regulations of rebates. Because those were fees, not rebates, and because the fees were technically collected by a different company, the P.B.M.s weren’t contractually obligated to share them with their clients 3. P.B.M.s could truthfully say that they were returning to employers almost all of the drug companies’ rebates. They didn’t have to mention the fees 4. “The intention of the G.P.O. is to create a fee structure that can be retained and not passed on to a client,” said Kent Rogers, a former Optum Rx executive who helped set up Emisar. “A P.B.M. has to keep some level of income for them to grow and satisfy stockholders.” 5. In 2022, P.B.M.s and their G.P.O.s pocketed $7.6 billion in fees, double what they were bringing in four years earlier 6. P.B.M.s had an additional reason to create the G.P.O.s. The Trump administration was pushing for a rule that would classify rebates as kickbacks. Many in the industry feared that the rule would make the rebate system illegal 7. GPOs negotiate on behalf of not only the big P.B.M.s but also independent smaller ones. That structure was designed at least in part to allow them to escape the proposed rule, which has not been finalized. 8. A former executive of a major drug company, whose responsibilities included negotiating with G.P.O.s., said that he had a set pool of money to cover fees to G.P.O.s and rebates to employers. When he paid more in fees, he offered less in rebates. 9. **EX: Humira:** A big example of gouging involves Humira. Collectively, employers, insurance programs and patients stood to save up to $6 billion a year by switching to copycat drugs, according to the data company IQVIA. But P.B.M.s would lose money from switching. Humira had become a big moneymaker for P.B.M.s, in large part because its manufacturer, AbbVie, was shelling out hundreds of millions of dollars in fees to the benefit managers’ G.P.O.s. Those fees would vanish if the P.B.M.s switched patients off Humira. 10. PBMs moved slowly. In March, 14 months after the first cheaper version became available, 96 percent of prescriptions for the drug in the United States were still for the brand-name version 11. P.B.M. executives denied that this was motivated by greed. CVS Caremark officials, for example, said that they had struck all-or-nothing arrangements with AbbVie. If Caremark steered some of an employer’s workers toward cheaper versions of the drug, that employer would not receive any rebates from AbbVie for patients who stayed on Humira.
Cont: **GPOs are purposefully internationally outsourced:** Emisar operates mainly in Ireland, and Express Scripts’ Ascent is in Switzerland, which means their profits are taxed at much lower rates than if they were generated in the United States. (CVS’s Zinc is in Minnesota.) **Employers/Employment Related Insurance Part to Blame:** PBMs say they’re just doing what their clients--employers and their employment related insurance policies throughout the US--want them to be doing. 1. The P.B.M.s recommend different options, but the employers have the final say. Employers actually prefer the use of brand-name drugs, even when a generic is available, because their final costs can be lower once discounts are taken into account — even if the costs go up for their employees 2. Employers are none the wiser with how GPOs, rebates, and fees work. They receive rebates. But they can’t see the billions of dollars in fees that the G.P.O.s take for themselves. 3. Employers often don’t know they are being overcharged. Nor do they have much say over which pharmacies are available to their workers. “We do not have insight into the individual pricing of certain medications,” said Christa Helfrey, a spokeswoman for the agency that oversees Oklahoma’s insurance program for state employees. 4. Caremark uses Medicare’s money to pay pharmacies, including its own, roughly $2,000 per month for a generic blood cancer drug, imatinib, according to a pricing tool on the SilverScript plan’s website. Because that payment is so high, the out-of-pocket cost for Medicare patients is also high — $664 most months. *That is x10 what imatinib sells for generic.* 5. “Our interests were not aligned,” said Linda Gulbrandsen, who oversees benefits for the retailer Foot Locker. It replaced Optum Rx with a smaller competitor, Navitus. **It's creating a monster:** P.B.M.s’ parent companies often have another powerful lever: health insurance. 1. In 2022, Milano Restaurants International picked UnitedHealth to handle insurance for 85 employees and their family members. To the frustration of executives at the restaurant company — which operates dozens of pizzerias and burger joints in California and Arizona — UnitedHealth forced Milano to use Optum Rx as its P.B.M. Price shopping for a different P.B.M. was not permitted. **The FTC and Both Republican and Democrats Are Catching On:** “We’ve heard a lot of complaints about the rebate system and whether the rebates may effectively be functioning as kickbacks that are diverting people to more expensive medicines at the expense of lower-cost generics,” Lina Khan, the F.T.C. chair, recently told reporters. 1. The Times shared the details of Mr. McKinley’s case with Oklahoma’s attorney general, Gentner Drummond, who has been looking into the P.B.M.s. He called the case “alarming and concerning.” **Meddit Contributions:** u/worriedrph: "Even all this leaves out some of the most absurd abuses of PBMs. They set minimum copays on drugs have the pharmacy collect a $15 copay for a $5 drug and have the pharmacy pay the PMB the $10 difference. They make it a breach of contract for the pharmacy to inform the patient this is happening or to charge the $5 and bypass the insurance. The total lack of anything even approaching ethnics is absurd."
I was still confused (how do PBMs "push" more expensive drugs, for example. This was helpful to me: [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10441264/](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10441264/)
I work at a big pharma. One of our newest drugs is having unexpectedly shitty sales because PBMs enjoy the massive margins on the current leader, which is inferior in just about all metrics. I heard our competitor upped the kickback to the PBMs too, but can't verify. So we have a marketplace where a superior product can't compete because its competitor is... more expensive.
And this is not even touching on copay maximisers, their new fresh hell.
The open looting of American healthcare continues, under ever-changing names and acronyms. They don't even try that hard to conceal it.
The irony is that so many regulations have been established to prevent providers from exploiting the system—while the flood gates remain wide open for corporate exploitation.
At least doctors presumably have some interest in caring for our patients. At least we look those patients in the eye regularly while advising and prescribing. Faceless corporations that exist to be middle-men and rent-seekers don’t have any fiduciary duty to any participant (but they might to shareholders), don’t have any normal human feelings of caring, and do not, in any apparent way, add value. Hence rent-seeking.
Also notable that all of this bullshit wastes a ton of (expensive!) prescriber, pharmacy, and front-office time. The PBMs and their constantly shifting rules and classifications force everyone else to waste hours massaging the system to find reasonably affordable care solutions. It's a huge externality and source of waste.
As a practice consultant/administrator, administration of insurance and *some* regulations are a huge waste of time and money. They almost seemed designed to make private practice unsustainable.
Corporations aren’t typically held liable—they pay a fine, admit nothing and move on. Providers lose their license and their livelihood, which was the basis against the corporate practice of medicine
But that is the way everything works in other sectors too. The IRS goes after small individuals tax cheats but ignores rich ones who can afford expensive lawyers.
There’s an added “bonus” in health care that providers can have their licenses attacked in multiple ways—malpractice, civil penalties, criminal penalties, board actions, insurance actions and hospital actions—and the provider’s license is their livelihood. This is in addition to all the negatives of being a small fish.
My first thought…let’s do this analysis with hospital systems, insurance, nursing homes, devices, etc. The whole healthcare ecosystem is set up to get big, squash the competition, and extract as much wealth as possible.
I think antitrust laws should be used to force PBMs to be decoupled from both pharmacies and Health Insurance. Just as they were used decades ago to break up telecom and auto companies with too much vertical integration, PBMs and these other entities have WAY too much vertical integration and need to be broken up. Antitrust laws need to be used aggressively in a lot of spheres and this is one of them. Also kickback laws need to be aggressively used where appropriate.
There is a much easier solution that doesn't require creating 200 new laws. Just force price transparency. Force drug makers to advertise the selling prices of their drugs, and enforce price discrimination laws. Force insurance and PBM companies to advertise the drug prices if purchased through insurance or PBM. Everybody should be paying the same price. And if not, everyone should be allowed to find out if they can pay a lower price.
I don't disagree with this but enforcing antitrust laws already on the books which have already been used to effectively do the same thing in other industries decades ago is hardly writing 200 new laws.
The mind blowing part to me is that the vertical integration wasn’t present from the start and as the companies got bigger all parts of the business got bigger. The FTC specifically allowed every step of the vertical integration through mergers and acquisitions and all approved in the last 2 decades and most in the last decade. It has been so obvious the anti trust concerns with every merger throughout the healthcare industry for the last couple decades but they keep approving almost every one.
Even all this leaves out some of the most absurd abuses of PBMs. They set minimum copays on drugs have the pharmacy collect a $15 copay for a $5 drug and have the pharmacy pay the PMB the $10 difference. They make it a breach of contract for the pharmacy to inform the patient this is happening or to charge the $5 and bypass the insurance. The total lack of anything even approaching ethnics is absurd.
This was the dirt I was looking for. Thank you.
[https://www.youtube.com/watch?v=NWJ9ZqxssWw](https://www.youtube.com/watch?v=NWJ9ZqxssWw) This is a little long but the new game. Often cheaper generics are going through insurances (LOOKIN AT YOU CAREMARK/EXPRESS SCIRPTS) with approx $10 copays that are almost completely taken away from the pharmacy with a clawback ($4-8) that goodrx and the pbm splits. PBMs added a clause in their contracts where they can now just run discount cards and pay nothing, while taking a fee from the patient THROUGH the pharmacy copay. Oh yeah we're losing money on dispensing them too.
Lets be real here. Tax dollars are being siphoned by sociopaths and when they can't do that they'll take it directly from your pocket. They have built this system in order to enrich themselves at the cost of everyone else's health. We need to change this. These businesses should not exist.
Thank youuuuu I’m not a dummy but I couldn’t explain PBMs with a gun to my head
That was a gorgeous write-up, EmotionalEmetic! I feel like I need to ready it a few more times but it was super insightful. Thank you! I don’t know what to do about it as a lonely individual. My only approach thus far is that I tell my patients straight up that the hospital system I’m working for (which also happens to often be their insurer, lab, and pharmacy) has been raked over the coals for their dishonesty and that it’s pulling in billions by screwing them and people routinely die for lack of care. Aside from constantly throwing the system under the bus, I’d love to hear other ways people try to effect change when it comes to our HC system.
State level legislation has been slowly challenging PBMs and we’ve had some small wins recently. My state has created a requirement that a PBM must be issued a license to practice in the state, and the license can be revoked/suspended if enough complaints are filed by pharmacies. The PBMs then sued the state and eventually the Supreme Court ruled against the PBMs. The practice has slowly been implemented after the several year process it took to be escalated to the Supreme Court. Obviously, there is major pharmacy support regarding these legislative opportunities, but having other peers in medicine show support means a lot. I encourage you to look into any pending legislation in your state and maybe throw your voice behind it!
Thank you for posting this. My insurance recently switched to Optum and it has been a nightmare. I have medications that I need to call around to “price check.” I have found it is often cheaper to go to the Walmart pharmacy and not use my insurance.
I have a prescription that insurance won't cover that's 800/month or more almost everywhere but Walmart is 31 with goodRx. The entire insurance industry needs more regulation, the shit they do to people would drive them out of business in any other industry.
It is quite impressive that this giant industry of middlemen that extracts hundreds of billions from the system has not been in the spotlight sooner.
I agree. We learn the intimate details of the process in school, but I was surprised when so little of the extended medical community doesn’t know more about this, let alone the average citizen
Knowing the history and how this has only taken off at an exponential rate in the last 10yrs or so of massive mergers, price gouging help me understand it. I think.
Because it is health insurers (or managed care organizations)? There's no reason to separate them. UNH has OptumRX, CVS has Caremark, Cigna has Express Scripts, Elevance has Carelon, Humana has Humana Pharmacy Solutions, the other BCBS plans have Prime Therapeutics, etc. It's just a long winded way of saying the department of health insurers that negotiates pricing for medicine plays a lot of games that result in pharmacies not earning "enough" money, and/or costing excess administrative work.
Glad this is getting the attention it deserves. Pharmacists have been pushing for reform while seeing all the consolidation and lost of independents. Also as much as the pharma industry can be critized at least they produce something. PBMs provide no product or value and only take money from all other parties.
[A picture to match the post](https://www.reddit.com/r/funny/s/95YeZP1jLF)
Seems like an easy fix would be banning charging copays for medications anything more than wholesale out of pocket costs available
Also good: [https://content.naic.org/sites/default/files/inline-files/Sood-NAIC-August2019.pdf](https://content.naic.org/sites/default/files/inline-files/Sood-NAIC-August2019.pdf) NAIC is the National Association of Insurance Commissioners. Based on a very quick glance, they are currently in the process of drafting guidelines for, I think, model state laws. Based on perusing their site, they are in the process of developing a white paper to guide model legislation regarding PBMs. I thought I had read on this sub there is also a thing where the pharmacy has to pay the PBM back some money? Is this part of the entire rebate structure? Pay to play?
The headline should extend with "...in the United States." Generics are way cheaper overseas or even from Canada. Most patients I meet now with chronic conditions import their prescriptions from legit sources. Who can blame them? The domestic drug market is robbing us blind and hindering health care.
PBMs are the robber barons of modern American medicine. I would love to see their political donor list. Money is speech. Corporations are people.
They are just the medicine price negotiation department of the health insurers. UNH - OptumRX CVS - Caremark Cigna - ExpressScripts Elevance - Carelon Humana - Humana Pharmacy Solutions Prime Therapeutics - all the other BCBS plans
Burn them all down.
Do big hospitals usually have insurance with good PMBs? My dr prescribed an $800 inhaler but a 3 month supply. So I picked up $2400 with of inhalers. At the hospital pharmacy my copay was $0, same as always. I have to go to work on my off day occasionally. But, it’s worth it.
Pharmacist can probably give better insight. But our big hospital chain pharmacies likely have deals, needs, and logistics that CVS/Walgreens don't prioritize and the few small, independent pharmacies can't negotiate or bargain for.
That’s what I’m guessing. Admin probably does something good there. I see I’m getting floor versions of drugs sometimes. Blister packs/syrup cups etc instead of pill bottles or syrup bottles. They prob bargained hard to reduce the cost of stays since drugs aren’t charged individually. Makes me scared to go work at a smaller hospital though.
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Your comment has some merit--but you're ignoring the rage inducing aspect of PBMs. 1. PBMs were made originally to tackle the problem you describe. They were then bought out and now make it worse. 2. As opposed to drug makes who MAKE the drugs, PBMs do... nothing to improve healthcare. Nothing.
PBMs don't buy drugs