Patricia Bernard of Falmouth has unwittingly become the face of American seniors facing high drug costs.
Sen. Susan Collins recently invited Bernard to tell her story before the Senate Aging Committee, which Collins chairs. Diagnosed with rheumatoid arthritis 25 years ago, Bernard worked until age 79 to keep her employer-sponsored health insurance plan that allowed her to purchase the medication she needed for between $10 and $30 a month.
“I felt so much better,” Bernard said of the medication. “It truly gave me my life back. I was no longer aching and in agony. I was finally able to live an ordinary life and I started taking the stairs just because I could.”
But upon retirement she faced a monthly out-of-pocket cost of $3,800 for the same drug. This drug price spike had nothing to do with a change in the underlying cost of the medicine, but everything to do with the insurance design. Medicare would not cover her self-injected medication, but as an alternative, Bernard is being treated for her condition with an infusion medication that Medicare does cover in an outpatient hospital. Despite the inconvenience, it’s affordable.
How can state and federal legislators lower drug prices afflicting Bernard and millions of other seniors like her across the country? One effective way is by scrutinizing the practices of pharmacy benefit managers — as several states are in the process of doing.
Benefit managers are the middlemen between drug companies and insurers, purchasing prescription drugs from the former — at substantially discounted rates — and selling to the latter, taking a cut from both sides. But benefit managers aren’t just traditional middlemen. They keep their prices hidden, so insurers don’t know what benefit managers paid drug companies, and drug companies don’t know what they are charging insurers. Patients, of course, are kept completely in the dark.
This secretive design allows benefit managers to set a minimum price they will accept from insurers and a maximum price they will reimburse pharmacies. This spread between the two prices guarantees a fat profit margin.
“Very little, if any, of that money, goes to the patients whose prescriptions make the rebate revenue happen,” Dr. Robert Goldberg, vice president of the Center for Medicine in the Public Interest, wrote in an OpEd in The Hill. “Moreover, the PBMs and insurers make the sickest patients pay between 30 and 100 percent of the retail (not rebated price) of medicines depending on the drug plan.”
Several states — including California, Nevada, Texas and North Dakota — have introduced legislation to shine a light on benefit managers, potentially exposing their conflicts of interest and demonstrating whether they are passing on cost savings from drug price rebates to insurers and patients.
While state governments work to expose benefit managers, the private sector may also disrupt this inefficient model. The recent announcement that Amazon, JP Morgan and Berkshire Hathaway are venturing into health care sent pharmacy benefit manager stocks plummeting. These companies are big enough to cut out the middleman and negotiate cheaper drug prices for their employees directly with drug companies. Eventually, these discounts may be passed along to all Americans through Amazon.com.
If Amazon can do for prescription drugs what it’s done for the rest of retail, that would not only eliminate Bernard’s trip to the hospital, but also her trip to the pharmacy. Until then, governments must probe the pharmacy benefit manager model to uncover just how much these middlemen are responsible for today’s drug prices.
Terry Wilcox is co-founder and executive director of Patients Rising, a patient advocacy group working to ensure access to vital therapies and medical services for patients with life-threatening and chronic diseases. This OpEd was first published in the Bangor Daily News on March 23, 2018.