The biggest health insurers and Pharmacy Benefit Managers (PBMS) offering Part D prescription drug coverage are overcharging Medicare for generic drugs, according to a new JAMA study by researchers at UC San Diego, West Health and the University of Washington. More than 40 million people with Medicare have Part D drug coverage for their outpatient drug needs. As a result of these overcharges, their out-of-pocket coinsurance costs are likely signficantly higher than they should be.
The researchers find that part of the reason that older adults and people with disabilities face high out-of-pocket drug costs with Medicare Part D is that Rite Aid, Cigna, Centene, CVS Health Humana, and UnitedHealth, which offer Part D coverage, and the Pharmacy Benefit Managers they own or contract with are inflating the costs of some drugs significantly. Pharmacy Benefit Managers or PBMs buy drugs from manufacturers and design the Part D drug formulary–list of covered drugs–that an insurer offers.
What’s happening? The insurers and/or the PBMs maximize profits by paying pharmacies (often the pharmacies they own and operate) many times the pharmacies’ acquisition cost of a drug. The insurers or the PBMs eventually clawback that overpayment. But, because they pay a high price to the pharmacies, the Part D insurers can charge a much higher copay to their enrollees–based on the inflated price of the generic drugs–driving up enrollees’ costs.
The researchers found that sometimes, insurers or PBMs pay pharmacies markups of 6,000 percent or 7,000 percent. For example, insurers paid pharmacies $126 for a cancer tablet that costs $4.20 a tablet.
In 2022, a USC Schaeffer paper also reported generic drug price padding by the PBMs. The authors call for drug pricing transparency. But, that proposal still gives a role to the PBMs and does not fix the system. It would continue to allow PBMs and insurers to keep low-cost generics off their formularies in order to benefit from big rebates they receive from brand-name drug manufacturers for putting their drugs on formulary. And, it would not stop the padding of generic drug prices.
The simplest way to address inflated drug prices in the US is to open our borders to drugs from verified pharmacies around the world and require insurers to cover them.
Here’s more from Just Care:
Leave a Reply