“Cardiologists once again are expressing their frustrations and anger toward the maintenance of certification (MOC) process overseen by the American Board of Internal Medicine (ABIM), saying it wastes their time and money but offers little in the way of meaningful benefits. …” (read full article from TCTMD.com)
Practicing Physicians of America, and the the Free2Care coalition are staunchly against the passage of the highly partisan Inflation Reduction Act (IRA). Like many health care measures before it, there are consequences in the bill that will decrease access and innovation, and increase consolidation and costs for all patients, all while disproportionately harming those with cancer and chronic disease.
Free2Care experts prescribe four major issues with the bill and legislative priorities that would actually address the issues of affordability and accessibility of health care.
- Pharmaceutical middlemen—Pharmacy Benefit Managers aka PBMs— collect legalized kickbacks and are responsible for 80% of the cost of insulin, get a gift in the Inflation Reduction Act.
Almost 50% of what is called “deficit reductions” come from repealing the Trump Administration’s ‘rebate’ rule. The rebate rule would have forced PBMs to pass on the ‘rebates’ they collected to seniors at the prescription counter instead of pocketing the rebates themselves.
Rebate is not the appropriate word for the money collected by the PBMs from the drug manufacturers: the PBMs were granted an exemption from the anti-kickback statute in 2003, and thus rebates are actually kickbacks. . Remarkably, the kickback collecting PBMs get to create the formularies—the lists of drugs covered by the insurance companies. A bigger kickback lands a drugmaker on the formulary, so more expensive medications are preferred for the PBMs and the insurers who have now consolidated with the PBM, and in some cases, even the big box pharmacies. The cost of the kickbacks is in the range of $200 Billion per year, all of this is explained elegantly by attorney David Balto.
By denying the “rebate rule” and declaring it to “pay for” new spending, the Inflation Reduction Act is a win for PBMs at the expense of seniors’ savings at the pharmacy counter. Former DNC chair Howard Dean, himself a physician, recognized the gimmick behind using the “rebate” rule as a pay-for.
Furthermore, Pharmacy Benefit Managers have been the driving force behind the cost of many medications necessary to sustain life for patients with chronic diseases or pre-existing conditions. Like Insulin.
A 2019 bi-partisan report, produced by Senators Wyden and Grassley, found that PBM fees and rebates were responsible for 80% of the cost of the inflated cost of insulin.
2. Chronic disease and cancer patients will lose access, consolidation will increase, and costs will rise down the road.
A new Avalare study has found that part of the Build Back Better Act, now folded into the Inflation Reduction Act, will reduce payments for Medicare providers that furnish Part B drugs (drugs that are given by infusion and therefore delivered in a clinical setting ) by an average of 40%. Drugs for cancer, immunodeficiencies, and rheumatologic diseases such as rheumatoid arthritis fall into this category.
Remarkably, the payment reduction is substantially higher for physicians in independent practices as opposed to those owned by hospitals. Besides the fundamental unfairness, the increased reduction will lead to the early retirement of independent oncologists and rheumatologists, and the continued consolidation of medical practices into ownership by hospitals.
Consolidation has been shown to increase costs in a Stanford study. Worse yet, quality of care, and the all-important personal and attentive care required by the vulnerable, especially among the elderly are decreased when independent practices are forced to sell out to hospital systems.
3. Fewer cures and treatments for patients with cancer, chronic and rare diseases.
The bill before the house imposes a 95% excise tax on innovative drug manufacturers unless they accept a price set by the HHS Secretary.
This is not negotiation, it is price controls.
A Univ. of Chicago September 2021 study estimates up to a 60 percent decrease in R&D and up to 342 fewer new medication approvals. Loss of life from loss of innovation over the next decade is conservatively estimated as 20 times more than COVID-19 deaths at the time of their study. There is no measure in loss of quality of life as many new meds have immeasurable improvement on quality of life.
Oncology patients will be the hardest hit as half of the medication pipeline is for cancer medications. Innovative research for cancer sufferers will decrease by nearly ten times the amount that the cancer moonshot increased it.
Small and emerging companies in California alone will have an 88% reduction in new medications brought to market according to the California Life Sciences Association. This will fundamentally shift the formation of small emerging bio markets across the United States.
4. Higher prices for other medications will lead to higher premiums and overall health care costs.
The Inflation Reduction Act would control the prices of a chosen set of medications. On August 4, the CBO confirmed that price controls will lead to higher prices for new prescription medications.
In turn, all Americans will pay higher insurance premiums and out-of-pocket costs at their pharmacies. Only the wealthiest Americans will be able to afford many cures.
PPA and Free2care have been supportive of the Lower Costs, More Cures Act, with bipartisan provisions to lower drug prices while increasing transparency for PBMs and preserving innovation. We are supportive of Senator Wyden’s call to have both CMS and the FTC intervene in the practices of corrupt PBM middlemen.
We are strongly supportive of Chairman Pallone’s HR-7666, which increases access for mental health and substance use disorder among other measures while reining in PBM. HR-7666 has the added benefit of having passed the house by more than 400 votes, thus demonstrating the call for the bipartisanship that America craves.
The Inflation Reduction Act will be harmful to the long-term health of Americans, especially those with chronic and pre-existing diseases. We call on all house members to reject this bill and ask the Senate to get back to the drawing board, this time reaching across the aisle.
PPA is part of Free2Care, a coalition of member organizations dedicated to the doctor-patient relationship and making healthcare affordable, accessible, and of high quality. The 34 member organizations represent over 8 million Americans and include over 70 thousand physicians.
In the recent request for comment by the Federal Trade Commission, the Free2Care Coalition represented approximately 75% of the 24,100 comments calling for a thorough investigation into the anti-competitive practices and behavior exhibited by pharmacy benefit managers.
HHS called for comments on the behavior of GPOs and Free2Care submitted comments representing 80% of the 11,930 submitted
For media inquiries contact firstname.lastname@example.org
Marion Mass, M.D. and Christina Dewey, M.D.
Would you like to lower healthcare costs, restore quality and improve choice? Yes? Then you MUST learn about Pharmacy Benefit Managers (PBMs).
If you look on the Fortune 500 top 12 companies, you will find three companies who own PBM. Dig deeper, and you’ll discover these companies are CVS health, who owns the PBM CVS Caremark, United Healthcare who owns the PBM Optum Rx, and Cigna, who owns the PBM Express Scripts. These three PBM control 85% of the prescription drug market, and are the biggest revenue generators for their parent companies.
For example, when the insurance company Cigna, purchased Express Scripts in 2019, their revenues tripled. Take a peek under the hood of CVS Health, and you will discover that CVS’s PBM CVS Caremark is, to put it frankly, its prize cash cow, its biggest source of revenue. Moo.
Until recently, many Americans had no idea what a PBM was, and blamed insurance and pharma and physicians for the high cost of care. The truth is much more complicated, and those making the money don’t want you to pull the mask off the villain of high healthcare costs. They aim to prevent the Scooby Doo denouement and keep Americans from discovering the biggest, richest, most devious villains in the healthcare space are the PBM.
Some really important clues to why we should suspect that the PBM are villainous profiteers:
– The PBM and insurance companies now own one another, and some, like the CVS Health empire, also own pharmacy chains
– The PBM controls the pharmaceutical companies, by creating the formularies, aka the list of medications that the insurance companies will “cover”. Physicians play no part, nor have any say in this choice.
– The PBM can collect legalized kickbacks, called ‘rebates’ from pharmaceutical companies because the PBM were granted an exemption from the anti-kickback statute in 2003 by GW Bush’s HHS secretary. This anti-kickback exemption allows pharmaceutical companies to simply pay for placement on the formulary. Americans are not necessarily getting the best medication, but the best med a legal bribe can buy.
– There is no transparency for these kickbacks (aka rebates) but sources have revealed that in 2020, the total amount of kickbacks approached $200 BILLION (yes with a B).
– PBM like CVS Caremark are now facing charges of preventing elderly Medicare patients, including those with End Stage Kidney Failure from access to affordable life sparing medications.
– In multiple states, PBM have been found to be helping themselves to Medicaid money… not a small helping, either: In Ohio alone, the PBM subsidiary of Centene as well as CVS and Optum were pocketing $244million per year.
– In an NBC News exclusive with Cynthia McFadden, the PBM mail order pharmacies were found to be delivering ineffective medications. One young pediatric patient with cystic fibrosis was hospitalized after wasting away because of medications delivered by PBM giant Express Scripts, whose agent pooh poohed the concerns of the patient’s mother.
Do you need to hear more?
Yes, you need to understand who is granting more favors to the behemoth companies responsible for the maleficent behavior noted above.
Let’s look at several recent congressional bills in chronological order of passage.
The Affordable Insulin Now Act was passed by the House and Lingers in the senate
Although those who support the bill claim to have lowered the cost of insulin, Lloyd Dogget, a Texas Democrat correctly stated that the bill does not lower the cost of insulin by even a penny. He’s correct. It lowers the co-pay, but the uninsured, and those who pay insurance ( whether they be employer or independent purchaser) will continue to pay the full bloated cost of insulin, 80% of which is flowing to the PBM via kickbacks and fees. In other words, this bill simply ensures that the taxpayers keep paying the PBM in the form of kickbacks.
Worse yet, the bill grants a delay of the rebate rule for PBM. The rebate rule was an Executive Order introduced in 2020 and demanded that the kickbacks (aka rebates) would flow to the patient at the point of sale and not the PBM and the insurers. PBMs are continually telling Americans that they pass on the rebates, yet when the rebate rule was suggested, they have threatened to increase Medicare premiums as soon as the rule is enacted.
Congress has discovered they can pull the entirely disingenuous accounting sleight of hand of delaying the rebate rule (in other words, allowing the PBM to keep collecting their kickbacks and not forcing them to pass on to patients) and thereby claiming that they are saving money by preventing Medicare premium increases. To put another way, the PBM’s and Insurers are playing Chicken with the rebate rule by threatening Medicare premium increases, and the Congress-people that delay the rebate rule are taking the bait. I suppose that makes them lower than chickens in the game. Perhaps they are simply chicken….. oh, never mind. Maybe they simply don’t understand.
The insulin Bill was not the first time Congress delayed the rebate rule. Apparently they did it in the infrastructure bill, too. Howard Dean, a physician and former presidential candidate called them on it in Newsweek, even pointing out that the rebate rule was solid, and potentially the best thing to come from the Trump Presidency.
Based on the above, we ought to let that insulin bill die and come up with a real way to lower insulin costs.
The recent Gun Bill Passed by the Senate and House and signed into law sneaked in a gift to PBMs.
Why on earth would a bill on guns contain another delay in the rebate rule, yet another gift to the PBM industry? The same faulty accounting gimmick of using the rebate rule delay as a pay for. Unbelievable. Senators Chris Murphy, D-CT and John Cornyn, R-Tx are mum about who put the PBM poison pork into the gun bill. Interestingly, Murphy’s top donor is the law firm that helps CVS negotiate mergers. And Cornyn is a top taker from Vizient, a hospital Middleman Group Purchasing Organization.
Good news at last! PBM reform in the Mental Health Package
Thankfully, some good news exists. . Some colossally INCREDIBLE news:
Some of us were really yelling ‘Yay’ when we discovered splendid section 602, quietly added by Rep Michael Burgess (R-Tx), mandating big time TRANSPARENCY for big PBM/Insurers with shocking penalties of $10K per day for non-compliance.
Requiring PBM transparency will save $2BILLION/10 years, paying for the bill. Billion with a ‘B’. As Mental health and substance abuse medications are largely overpriced due to PBM kickbacks, this provision absolutely belongs in the bill.
Americans will receive some wonderful services with this bill for Mental Health and Substance Use Disorders. Full detail can be found in the bill, but here is a screenshot of some of the high points
WE CANNOT STOP… we must make sure the mental health bill passes in the senate WITH PBM reform Intact.
Please CALL and EMAIL both of your US Senators ASAP, (find their numbers and email contact links here ) and tell them to PASS the Senate version of HR 7666 with the Burgess amendment to bring PBM transparency and accountability intact. Ask your friends to call. Ask your neighbors to call. Ask everyone in your circle and beyond. Tell YOUR Senators you now know the PBMs are behind the ever increasing healthcare costs and it’s time for Congress to listen to we the people and not the profiteering villainous Pharmacy Benefit Managers!
Drs. Mass and Dewey are proud to be pediatricians for over 20 years each and fierce advocates for patients and physicians!
Dr. Mass, graduated from Duke Medical School and trained at Northwestern. She has practiced in the Philadelphia area. She’s a cofounder of Practicing Physicians of America And leadership in Free To Care .
Dr. Dewey attended Loyola University Stritch School of Medicine . She did a year of surgery internship then two years of pediatric surgery research before training in Pediatrics at University of Minnesota. She is founder and CEO of Peds Mama Doc and has published in multiple outlets
Over half of Americans have skipped filling a prescription because of costs.
Large pharmaceutical companies and the inflated prices and portion of the market that some hold for a particular drug beyond a reasonable patent period is a scenario familiar to most Americans and must be addressed. Lesser known but at the root of the problem of monopoly power and high prices in the pharmaceutical world are companies that don’t innovate and don’t manufacture, namely pharmacy benefit managers or PBMs.
The public’s awareness of these drug intermediaries or middlemen and their effect on prescription drug pricing has grown exponentially over the past decade. This awareness has increased the will of state and federal lawmakers to do something about the lack of transparency and competition enjoyed by PBMs.
Another middleman contributes to inefficiencies and increased costs, and you’ve probably never heard of them. As we built awareness of the issues related to PBMs, we must now do the same for Group Purchasing Organizations (GPOs). GPOs are lesser-known corporate middlemen who control the healthcare supply chain in hospitals and other medical institutions, driving up overall health care costs. This section will discuss the respective roles of PBMs, GPOs, and pharmaceutical companies in increasing costs and decreasing access in the healthcare space. Much like the last section, Free2Care will focus on increasing transparency, unwinding perverse incentives, and creating changes that lead to more competition.
PBMs were created to help insurers contain drug spending for prescription medicines. They control formularies, utilization tools, and administer drug claims. They do this for Medicaid-managed care, Medicare part D, commercial payers, and large employers. Historically, they achieved this purpose and provided the value that was intended. However, since the PBM’s received the benefit of safe harbor from the Anti-Kickback statute in 2003, drug costs have soared year over year.
The PBM market has consolidated with the six largest PBM controlling 95% of prescriptions.
Consolidation, coupled with complexity and opacity, has allowed large PBMs to pocket substantial revenue. Using questionable practices, they have driven companies that own (typically insurers) PBM’s to the top of the Fortune 500 top 20. This growth comes at the expense of all Americans, especially those who most need affordable medications: Those with chronic diseases.
Significant and questionable revenue streams and business practices of PBM include the following.
Spread pricing is how PBM retains a portion of the money paid to them by the third-party payer meant for the pharmacy. In Ohio’s Medicaid program alone, the state found two of the nation’s largest PBMs to have helped themselves to $224 million per year. These PBM were charging the state six times the going rate for their services.
Multiple other states have followed Ohio’s lead in uncovering this practice in the Medicaid space. The spread phenomena are not limited to the Medicaid space but spills into government-led entities such as counties, schools, and employers.
Direct and Indirect Remuneration (DIR) fees result from a loophole in Medicare regulations. DIR fees are charged to pharmacies as a clawback based on the PBM’s unpredictable and inconsistent quality metrics. Clawbacks can happen months after a patient receives their medication, leaving pharmacies at the mercy of PBM.
Some PBMs have close ties to or even own a large pharmacy chain. There is no transparency in what these PBMs pay their big-box pharmacies vs. independent pharmacies for meds, what they retain via the spread, or how much they charge for DIR fees. It is a perverse incentive to overpay their associated pharmacy chain entities and underpay independent pharmacies. Some are doing this.
This practice can destroy the over 20,000 small businesses and independent pharmacies that are highly trusted by the patients who use them because of the PBM practices above.
Specialty and Mail Order Pharmacies In addition to the other vertical integration mentioned, PBMs’ have their own specialty and mail-order pharmacies. Specialty pharmacies are created to deliver drugs to patients that must remain in certain environmental conditions. “lock up” huge chunks of market share by contractual arrangements with the government’s Medicare and Medicaid programs, or their contractual arrangements with, ownership of, or ownership by insurers, and even with the 340-B program participating hospitals, as detailed in section A. With exclusive access to such large shares of the market, price manipulation and other shenanigans become not only irresistible, but essential to conceal. Hence the resistance to investigation.
Worse yet, the 3 big PBM Express Scripts, CVS Caremark, and OptumRx took in over 70 percent of mail order prescription revenue in 2019, to the tune of $113 billion and yet often sent medications that were unviable, resulting in declining health conditions. Sometimes, meds were sent late or damaged to cancer or insulin dependent patients.
The vertical integration harms patients directly while increasing the monopoly power of those PBMs associated with large pharmacies and, in turn, compounds the conflicts of interest that potentially harm patients.
We echo Senator Wyden’s call for the FTC to investigate how DIR fees are an anti-competitive tool. We also support the CMS proposed rule to allow DIR fees to pass through to medicare beneficiaries in the Part D space.
Utilization tools such as prior authorization, step therapy, and non-medical switching are administered by PBM and prevent patients from medications that have stabilized their disease. These tools often create health problems for patients and time-consuming tasks for physicians. These tools form a revenue stream as delays in needed care equate to PBM retaining capital.
Kickbacks An astounding portion of the money flow going to PBM has no transparency, as demonstrated below. This is especially true of “rebates,” also known as kickbacks.
The PBMs were granted an exemption from anti-kickback statutes by HHS in 2003. PBMs were allowed to accept monetary remuneration from pharmaceutical companies from that point. Their role as formulary makers poses an enormous conflict of interest. This erodes trust in our medical system. The making of the formularies is shrouded in secrecy. PBM euphemistically calls these kickbacks rebates.
The legalized kickback system creates “rebate walls.” Pharmaceutical companies outbid one to become sole or near sole suppliers of many medications. Note that BIG pharmaceutical companies would be more likely to afford kickbacks that have been increasing. This effectively makes competition for smaller manufacturers more difficult.
Insulin and List vs Net Price
Choosing just one high-profile essential medication, insulin, The Senate Finance Committee, working in a bipartisan manner in 2021, uncovered a portion of the tangle for the unprecedented rise in the cost of insulin.
The tangle could be summarized in a simplified chart for a particular essential medication: Insulin.
Net price is what the pharmaceutical company collects. List price, what the patient and or third party pays, is the net price plus all the opaque kickbacks and fees collected by the mediators in the market. The lion’s share of insulin cost tripling comes from the PBM middlemen and insurers themselves. However, we must point out that manufacturers are willing to play in this broken marketplace and, as a result, they profit from the kickbacks that drive monopolies in production. As seen in the senate finance report, it seems as though the three companies that make the bulk of insulin set their prices based on one another. And it is not necessarily the price that companies need to make profits. It should be evident that the drugs are chosen to be ‘covered’ by insurance (i.e., those on the formulary, maybe (and likely are) covered because a sizable pharmaceutical company paid the kickback to get them there. It should also be evident that this can occur for every drug for which there could be competition. The growth in the list price is feeding corporations that do no research or manufacturing.
The horizontal and vertical integration that has occurred between large pharmaceutical chains, insurance companies, PBM, and specialty pharmacies, allow these companies to have the revenue streams mentioned above to consolidate further, knock competition from smaller PBMs, smaller manufacturers, independent pharmacies, and others out of the market, and allow increased monopolization by large pharmaceutical firms themselves.
It is not just PBM that can collect kickbacks in the healthcare space, but also Group Purchasing Organizations (GPO). GPOs write the contracts that facilitate the movement of all supplies—masks, medical devices, sterile solutions, and medications —into hospitals, hospital-owned clinics, and nursing homes. This represents a staggering source of revenue, given that supplies can account for up to 40% of a hospital’s overhead, second only to payroll. Estimates are 300 billion per year. In 1972, Congress had passed anti-kickback legislation in the healthcare arena to protect patients. In 1987, the GPO was given a “safe harbor” exemption from the anti-kickback statute. In 2003, the HHS extended this to PBMs. Rules placed oversight on the kickbacks: They were to have been limited to 3% or less of the purchase price of the products. The HHS OIG has never exercised its responsibility for ensuring the kickbacks remained at or below 3%.
Even if rules enforced the 3%, they still perversely incentivize PBM and GPO. They select a more expensive product for their contracts and formularies. GPOs, like PBMs, have become consolidated: A GAO report found that in 2012, six companies (now consolidated into four) controlled 90% of this segment of the supply chain.
The cost burden of kickbacks has tended to reduce the number of manufacturers for supplies and medicines. The wealthiest manufacturers can afford the kickbacks. Smaller competitors have tended to disappear or never enter the market in the first place. The effect of single or few suppliers for many products is a brittle supply chain that has led to over 700 products in shortage. Hundreds of drugs and solutions —chemotherapies, antibiotics, and anesthetics—have been on the list of known deficiencies for years, decades, in some cases. Most are familiar; with generic medications, which should be plentiful and inexpensive due to great competition. The fact that shortages for generics exist is a red flag that the root cause is a distortive factor, like kickbacks.
In a recent Zoom meeting with legislators from the state of Maryland the representative for the PBMs said that if a particular law regulating PBMs was passed, they would only pass the expense back on to the employer. They will do whatever they can to not lose revenue, even as patients are harmed.
Telling that with pressure on for PBM and more aware of the kickbacks, PBM have started to diversify again horizontally into the GPO space.
This gives the FTC even more justification to fully investigate the mergers and acquisitions in the PBM space.
Marion Mass, M.D.
Co founder Practicing Physicians of America
Philadelphia area pediatrician
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Thank you all.