Gretchen Liu, a 78-year-old patient, was prescribed telmisartan two years ago to manage her blood pressure after a transient ischemic attack, also known as a mini stroke. A 90-day supply cost her $285 with insurance, when the drug itself was just $40, according to PBS News Hour.
Ms. Liu's experience of finding a copay higher than the cost of the drug is not uncommon. In fact, insurance copays are higher than the drug itself about 25 percent of the time, according to a study published in March by the University of Southern California's Schaeffer Center for Health Policy and Economics in Los Angeles.
"You have insurance because your belief is, you're paying premiums, so when you need care, a large fraction of that cost is going to be borne by your insurance company," Geoffrey Joyce, PhD, a USC economist who co-authored the study, told PBS. "The whole notion that you are paying more for the drug with insurance is just mind boggling."
Since paying more for a drug with insurance is not uncommon, why does this practice occur?
Digging deeper into Ms. Liu's experience, a few reasons come to light.
Ms. Liu and her husband Z. Ming Ma are insured through an Anthem Medicare plan. Mr. Ma ordered the blood pressure treatment through Express Scripts, the pharmacy benefit manager for Anthem. The drug, which is a generic version, cost $285 for a 90-day supply with insurance.
The couple didn't know going through insurance would cost them more until they were about to take an extended vacation and wanted to stock up on the drug. Since 90 days had not passed since refilling the prescription, Anthem refused to cover the drug and the couple asked the pharmacist what it would cost out of pocket. The pharmacist told him it would cost just $40.
One reason behind inflated copays and the lack of price transparency is the role pharmacy benefit managers play in the pharmaceutical supply chain. Insurers contract with PBMs to manage prescription drug claims. The PBM determines which drugs will be covered by a health insurance plan and how much the copay will be. Rebates, also known as the discounts drugmakers pay to PBMs, usually determine the insurer's list of covered drugs, known as formularies. These formularies often have tiers that determine the cost of a copay. A tier one drug is the cheapest, compared to the higher tiers, which are more expensive.
A large rebate to a PBM could mean placement on the lowest tier with a low copay, which drives patients to use that drug. For PBMs, it is financially advantageous for patients to take a lower tiered drug they negotiated a higher rebate on, since they get a sliver of the rebate each time.
"It's financially in [a PBM's] benefit that you take the other drug," said Dr. Joyce. "But that's of little consolation to the person who just goes to the pharmacy with a prescription that their physician gave them."
In Ms. Liu's case, Express Scripts said the generic telmisartan was designated a nonpreferred brand, which places it on one of the highest tiers with a high copay.
Even when patients choose the nonpreferred brand, PBMs may profit from the high copay using a controversial industry practice called "clawbacks," Dr. Joyce said.
The industry has been criticized in recent years over the practice, which happens when pharmacists collect a copay at the cash register that is higher than the cost of the drug and the PBM takes most of the difference.
While most PBMs, including Express Scripts, CVS Caremark and Optum Rx, claim they do not engage in clawbacks, several pharmacists have come forward to say otherwise.
Howard Jacobson, PharmD, a pharmacist at Rockville Centre Pharmacy in Long Island, N.Y., showed PBS several examples of clawbacks. In a recent transaction, a PBM told Dr. Jacobson to collect a $10.84 copay from a patient and it took $8.91.
As for the three large PBMs' contention that they don’t engage in clawbacks, USC economist Karen Van Nuys, PhD, lead author of the study, said it's a matter of semantics. "Whenever the copay is higher than the cash price, and the difference isn’t reimbursed to the patient, someone else must be pocketing the difference," she said. "Maybe it isn't technically called a clawback, but the principle is the same."
Complicating price transparency efforts further at the pharmacy counter are gag clauses, which insurers and PBMs often write into their contracts. These clauses prohibit pharmacists from telling consumers when they could save money by paying for prescriptions with cash rather than using their insurance.
While there are bills in the Senate looking to ban these clauses, for now, they are keeping consumers in the dark about their healthcare spending.
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