TWINSBURG, Ohio — They oversee and negotiate how much you and your insurance spend on prescriptions, but are pharmacy benefit managers (PBMs) just adding to the bill?
What are Pharmacy Benefit Managers?
PBMs, a middleman in the pharmaceutical marketplace, were first introduced in the 1960s and were created to negotiate on behalf of an individual and their insurance with drug manufacturers and pharmacies on the price of a prescribed drug.
Since then, PBMs have also managed how the web of rebates, reimbursements, refunds and fees will work.
An independent pharmacy in Twinsburg explains how they say PBMs put them out of business
It didn't add up for Michael Moawad. As the owner of Twinsburg Healthmart Pharmacy, he watched the business grow year after year.
And yet, he found himself forced to close this past October after opening the store in 2015.
"Since COVID-19, our volume doubled or tripled [and yet] we closed," he said. "The problem is the more you fill prescriptions, the more you lose."
As time passed, he watched the fees he owed to PBMs rise and rise thanks to a Medicare loophole.
He's referring to DIR fees, also known as clawback fees, which occur weeks and months after a drug prescription is filled.
In fact, for the first part of the year, Moawad said he watched PBMs claw back from him $50,000 for the 7,500 prescriptions he filled after he filled them.
"They increased it so much," he reflected. "The last quarter I paid $50,000. The one before that was only $30,000. I don’t know why $30,000. I don’t know why $50,000. I don’t know if the next one will be $100,000. So how are you going to make a business decision? It’s impossible. You’re supposed to be buying the product, selling it to the customer and profit. But if you’re buying and then selling the product and lose, you can’t survive."
Going forward, Moawad worries these rising fees will likely impact other independent pharmacies if nothing changes with these pharmaceutical middlemen.
"It is a turning point," Moawad said. "A lot of people might end up closing their doors because basically they can't afford it."
Why are PBMs being sued?
Optum, Express Scripts and CVS Caremark make up about 75% of the PBM market. Their parent companies also happen to own some of the largest names in health insurance and pharmacies; the companies PBMs are supposed to negotiate with, such as Aetna, Cigna, United Healthcare and CVS Health.
It’s that kind of relationship that has both the densely Democrat city of Cleveland and the Republican Ohio attorney general singing the same tune: both are suing pharmacy benefit managers over their rising prescription drug prices.
"The PBMs are screwing us," City of Cleveland law director Mark Griffin said. "Pharmacy benefit managers should owe a fiduciary duty to their clients being us, the city and their purchasers and they should be completely independent and not have any sort of financial entanglements with the people who they're supposed to have tough bargains with."
"Something is way out of whack," Ohio Attorney General Dave Yost said. "We’ve got to fix this. They are doing bad things to the health systems and it violates anti-trust law."
In the city of Cleveland’s case, it's the rising cost of insulin for its employees, which amounts to more than $2 million/year, that prompted this.
"The pharmacy managers are supposed to be protecting us but often times they work for themselves or for the insulin manufacturers," Griffin said. "They have an incentive to be nice to the drug manufacturers and not all of those come back to us. So what's happening is that the middle man, not only is taking a cut, but is also getting a refund."
In both the city and the state’s lawsuits, they describe how PBMs take a cut that can be as much as half of a prescription cost despite not contributing to drug development, manufacture, or innovation.
“Like the importation of kudzu to stop soil erosion, the creation of the pharmacy benefit manager was a solution that has become the problem," Yost's lawsuit reads.
"It makes me angry that you can be doing more business than you've ever done, but because people aren't playing fair and because the law is distorting the marketplace, you go out of business," he said.
"Right now, they have gotten their tentacles so deeply into the formularies and the payment process and they're using it for their own self interest," Yost said. "The PBMs in their current configuration are not good for the system. They're not good for America."
Over the years, Yost has filed four different lawsuits against PBMs, a problem he says he first became aware of when he worked as the Ohio Auditor.
Yost also points out how the three biggest PBMs are now aligned with three of the biggest insurance companies, which he says can lead to anti-trust issues.
"They have control over the list of approved drugs for the insurance company, who gets paid for what and how much they go to the manufacturer," he explained. "And they can say, 'Hey, nice drug you've got here, be a shame if something happened to it. If you want to be on the list, you're going to have to give me a taste. You're going have to give me a rebate.'"
Yost admits these lawsuits are a long-term battle but hopes they can lead to seismic changes in the landscape.
"This lawsuit has potential to forever change the way PBMs are interacting in the pharmacy space, how they treat the pharmacies, how they interact with the insurance companies, how they treat us and most of all, what they do to the price of prescriptions," he said. "This was created by legislation. It could be solved by the law."
PBMs react (and don't react) to ongoing lawsuits
News 5 made several attempts to speak with the nation’s largest pharmacy benefit managers.
Optum never responded. CVS declined to comment and directed News 5 to the national PBM association, The Pharmaceutical Care Management Association, which also did not respond to repeat requests to talk about a PBM’s role.
Evernorth, which owns Express Scripts, replied to the lawsuit involving them by saying:
“We reject the baseless allegations in this politically-motivated lawsuit, which was launched without any discussion or diligence with us. We will vigorously defend our standard and ethical business practices that put patients first. As the list prices for prescription medications continue to skyrocket every year, group purchasing organizations enable us to leverage combined purchasing power to significantly lower the cost of prescription medications for those we serve.”
In the interest of full transparency, Express Scripts is the entity used by News 5 Cleveland for its employees.
