When Bob Rauner goes to pick up a prescription, he often finds himself using a discount drug program rather than his own insurance.
“I’ll go to Hy-Vee and pick up one of my prescriptions, and when I use my insurance card it will be about $200 cash out of pocket, but if instead I show them a GoodRx coupon, it will be about $80,†said Rauner, who is a physician and chief medical officer of OneHealth Nebraska.
“That’s ridiculous and makes no sense unless you understand the dirty little backstories of pharmacy benefit managers and how prescriptions are included in your copays and deductibles.â€
Rauner is obviously not alone in his struggle to understand how drug prices are set, but the fact that he, as a doctor and health care executive, has a hard time navigating the system shows how complicated it can be.
Prescription drug prices are a mystery largely because there is no consistency in what consumers pay.
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Manufacturers set prices and health insurers decide how much they will pay for each drug, with the balance the responsibility of the patient. Further complicating things is that many health insurers now use a pharmacy benefit manager — a middleman of sorts — to negotiate with drug companies to receive discounts and rebates.
The problem, critics say, is that those pharmacy benefit managers keep most of the discounts and rebates for themselves and pass very little of the savings on to consumers. And that problem is only growing, as insurance companies have either acquired pharmacy benefit managers or formed their own, creating a system that now dominates the prescription drug market.
According to a report released earlier this year, the three largest pharmacy benefit managers — CVS Caremark, Express Scripts and OptumRx — control 80% of the prescription drug market in the U.S.
The report, from consulting firm Xcenda, said the use of pharmacy benefit managers leads to higher out-of-pocket costs for consumers, with Americans paying the highest prescription drug costs in the world — more than twice what people in Canada and the United Kingdom pay.
And those costs are accelerating. A recent report from the U.S. Department of Health and Human Services found that the prices for more than 1,200 prescription medications increased an average of 31.6% from July 2021 to July 2022, nearly four times the overall inflation rate of 8.5% during the period.
Just like other Americans, Nebraskans are feeling those cost increases.
“The amount of patients we have to help find assistance has gone up,†said Sarah Kuhl, director of community-based pharmacy services at Nebraska Medicine in Omaha.
The program helps Nebraska Medicine patients who need assistance paying for their medications. Kuhl has a staff of 30 people who navigate the system, finding patients coupons and grants to help them pay for medications and appealing insurance denials.
She said cost “is always one of the largest barriers†to people getting the drugs they need. But another is access.
Supply chain issues caused by the COVID-19 pandemic have led to shortages of certain medicines, including saline used for drug injections and IV contrast dyes.
An early surge in flu and RSV cases also has led to shortages of flu medications and common antibiotics such as amoxicillin.
“Ten years ago, we didn’t think about drug shortages,†said Dr. John Trapp, chief medical officer at Bryan Medical Center.
“Now, it seems like every day there are drugs on shortage,†he said, noting that shortages are another factor driving up drug costs.
Trapp said the hospital now has a protocol in place for when it can’t get a drug that one of its physicians prescribes. That protocol includes substituting a similar drug when possible. But if that drug is more expensive, the hospital must eat the cost because it gets paid a per-day rate from insurers for inpatients.
Some drugs are unavailable to patients not because of shortages but because of decisions made by insurers and pharmacy benefit managers.
According to the Xcenda report, there were 1,156 medicines excluded this year from at least one of the three largest organization’s standard commercial insurance formularies, which are lists of drugs insurers will cover and the amount they will pay.
Those formulary lists also make it more difficult to fill a prescription at a pharmacy that’s outside the insurer’s or benefit manager’s network.
“What we’re seeing is that they’re really trying to drive patients to use their in-house pharmacies,†Kuhl said.
That issue came into focus earlier this year in Nebraska, when Tricare, the company that administers health benefits for military members, veterans and their families, signed a new contract with Express Scripts that lowered the rate of reimbursement to pharmacies, shutting out many of the independent pharmacies relied on by people in rural areas.
Kohll’s, which has one pharmacy in Lincoln and several in Omaha, was one of the companies that chose not to continue serving Tricare customers because of the reimbursement rate offered.
Andrew L. Schleisman, the company’s pharmacy coordinator, said low reimbursement is one of the big issues with pharmacy benefit managers.
“Contracts with these companies are generally nonnegotiable,†Schleisman said. “We are forced to accept a contract that guarantees we lose money or reject the contract and not be able to serve the patients in our community.â€
David Kohll, whose family owns the chain, went further, saying that benefit managers are the main problem with drug prices and access.
“With many pharmacies not accepting contracts, this causes lack of pharmacy access, which negatively impacts health care quality and will increase hospital expenses,†he said.
Marcia Mueting, CEO of the Nebraska Pharmacists Association, said insurance companies and pharmacy benefit managers have reduced reimbursement so much that, “pharmacists are getting paid a smaller margin now than ever for any drug.â€
Mueting said the reimbursement rates offered often don’t even cover the cost of the drug being prescribed, let alone the pharmacy’s overhead costs.
She said a recent survey done in Iowa showed that the average cost to fill each prescription is $10.38.
“I guarantee pharmacies are not getting paid what it costs them to dispense,†Mueting said.
She said she spoke to a number of independent pharmacists across Nebraska who opted out of the Tricare contract and was told that at the reimbursement rate being offered, they were going to lose an average of $6-$7 per prescription.
Both Mueting and Kohll said reduced reimbursement rates from pharmacy benefit managers are forcing pharmacies — even larger chains — to cut hours.
“It’s difficult for them to find pharmacists because they can’t pay them market rate with reimbursements underwater from the (pharmacy benefit managers),†Kohll said.
Insurers say rising costs affect them, too, and they are doing all they can to lower prices for consumers.
Clint Williams, vice president of pharmacy and clinical operations for Blue Cross and Blue Shield of Nebraska, said prescription drugs now account for nearly 20% of what is spent on claims.
“Prescription drugs are a fast-growing spending category,†he said.
Some of that is due to overall inflation and drug shortages, Williams said, but there are other factors that are driving up costs, including the price of new drugs and high-cost specialty drugs.
“This isn’t something that can be solved by insurance companies alone. There are many factors and players involved,†he said. “While there are things we can do as consumers and providers to lower costs, it doesn’t take away from the high cost of some medications.â€
Williams highlighted some of the things the company is doing to try to lower the costs of drugs for its customers, including announcing in January that it would cover the costs of insulin at 100% without any copay for members of its fully insured plans.
Other providers have made similar moves.
In July, UnitedHealth Group announced it would provide full coverage not only for insulin, but for four other drugs used to treat emergencies such as asthma attacks and allergic reactions.
“High prices are a significant barrier to prescription drugs for many people, so we are using our unique capabilities to deliver savings for consumers,†Brian Thompson, chief executive officer of UnitedHealth Group, said in a news release. “We are doing what we can to shield people from the prices set by pharmaceutical companies, and hope all stakeholders also will act to make prescription drugs more affordable.â€
Williams said consumers and providers can help drive costs lower by making sure they seek out the lowest-cost drugs available.
State and federal legislation could also help consumers next year.
The Inflation Reduction Act has provisions in it related to Medicare that will take effect in 2023.
Among them are a $35 monthly cap on out-of-pocket insulin costs, which will benefit approximately 17,000 Nebraska Medicare Part D users, and expansion of the number of vaccines that are provided free of charge.
Starting in 2025, there also will be an annual $2,000 out-of-pocket cap for prescription drug costs, which will likely benefit at least 13,000 Nebraska residents on Medicare who currently have yearly drug costs that exceed that amount.
On the state level, new rules take effect next year for pharmacy benefit managers.
The Legislature passed LB767 this year, which requires any pharmacy benefit managers operating in the state to obtain a license and submit to state regulation.
Among its provisions are a prohibition on benefit managers charging more than the cash price of a drug, or essentially what a person without insurance would pay for it. The law also bars benefit managers from penalizing pharmacists who tell their customers about cheaper drug alternatives.
Reach the writer at 402-473-2647 or molberding@journalstar.com.
On Twitter @LincolnBizBuzz.