JustCare

Tag: PBM

  • Pharmacy middlemen are responsible for hundreds of pharmacy closures so far, in 2025

    Pharmacy middlemen are responsible for hundreds of pharmacy closures so far, in 2025

    Benjamin Jolley writes for substack on how the big insurers are deploying their pharmacy benefit managers (PBMs) to decimate independent pharmacies. This year alone 2,275 pharmacies have closed to date. Why? Because the PBMs, who are responsible for designing insurer formularies and reimbursing pharmacies for dispensing prescription drugs, don’t pay independent pharmacies appropriately.

    In case you’re wondering, United Health owns Optum Rx and steers lots of business to its subsidiary. It can and does apparently pay its subsidiaries high rates and other retail pharmacies low rates for the same drugs. That’s uet another way it can rip off consumers and benefit its shareholders. CVS and Cigna are alleged to engage in the same shenanigans through the PBMs they own.

    Jolley composed a dataset of pharmacies active in the National Council of Prescription Drug Programs (NCPDP) database at the beginning of this year, which were not on the database eight months later. Here’s what he found:

    • 1139 large chain pharmacies closed.
    • 1136 independent pharmacies and small to mid-sized chain pharmacies closed.
    • 298 pharmacies changed ownership.

    Jolley then created a map:

    Based on his findings, Jolley reports that employees at 2,300 pharmacies all lost their jobs. Consequently, he estimates that 23,000 people were affected, as pharmacies tend to employ an average of 10 people.

    Because 857 new pharmacies opened during the first eight months of the year, net pharmacy closures total 1,720, or 2.8 percent fewer pharmacies.

    Since January 1, 2024, according to Jolley:

    • ~5 pharmacy owner-operators have closed their businesses permanently
    • ~11 neighborhoods lost their pharmacy
    • ~110 pharmacists and pharmacy technicians have been laid off

    Why is this happening? PBMs are underpaying for drugs. Independent pharmacies are forced to pay the big prescription drug wholesalers a lot higher rates than the chain drug stores pay. Jolley supports bills in Congress to fix the PBM problem.

    • H.R. 9096, the Pharmacists Fight Back Act: If passed, this bill would make payments to pharmacies fair and predictable. It would ensure pharmacies are paid based on the actual cost of goods with a 2% markup plus a cost-of-dispensing fee.
    • A Glass-Steagall for Healthcare – Glass-Steagall created a wall between community banking and investment banking. We need to do something similar with health care so that big companies can’t take advantage of competitors through passing money and business through their subsidiaries. The same company should not own both PBMs and pharmacies. Insurers should not own providers. United Healthcare owns OptumRx, Optum Specialty Pharmacy and Optum Physicians Group. CVS/Caremark owns Aetna and CVS/Pharmacy. Health Insurers should not own physician practices.
    • Robinson Patman Act enforcement – a PBM should not be allowed to charge different prices for identical products.

    Jolley explains that more than 70 percent of the money pharmacies receive is from government–Medicare, Medicaid, ACA and FEHBP and Tricare. Government needs to enact reforms to save independent pharmacies.

    Here’s more from Just Care:

  • Why do people pay so much for Humira now that it’s off-patent?

    Why do people pay so much for Humira now that it’s off-patent?

    Humira, the exorbitantly priced drug taken by millions of Americans, finally lost its patent at the end of 2022, five years later than in Europe. But, even though biosimilar drugs are available, people’s out of pocket drug costs for this drug continued to be high. The drug rebate system in the US benefits drug middlemen and insurers and hurts patients, reports Joshua P. Cohen for Forbes.

    In short, pharmacy benefit managers (PBMs) make a fortune negotiating drug discounts from manufacturers. They usually see these discounts in the form of rebates, which they can pocket and/or share with the insurers offering prescription drug coverage. Americans rarely see the benefits of these rebates.

    Moreover, PBMs, which determine which drugs an insurer covers on its formulary and at what copay, can opt not to include drugs on the formulary. So, Humira’s manufacturer, AbbVie gave PBMs a huge rebate to include Humira on their formularies. The PBMs could then opt not to include biosimilar equivalents on their formularies or to make the biosimilars more expensive to enrollees, in order to maximize profits.

    That appears to be what’s happening. PBMs are not making it easy and inexpensive for people to get a biosimilar drug, even though there are more than ten of them available on the market. These biosimilars had only two percent of market share last March, after being available for 15 months.

    Now, more people are taking a biosimilar of Humira. The big PBMs are finally offering biosimilars. But, CVS and Express Scripts, two PBMs, are doing so with a biosimilar from which they receive a co-branded licensing fee and discounts, in order to continue to maximize their profits from the drug. They steer their customers to their biosimilars, which are often more costly than others.

    What you can do? Shop around. Check out Mark Cuban’s Cost Plus Drugs, Costco and other sources for a lower-cost biosimilar.

    Here’s more from Just Care:

  • UnitedHealth, CVS and Cigna helped fuel opioid crisis

    UnitedHealth, CVS and Cigna helped fuel opioid crisis

    [Editor’s note: I am reposting this piece because it brilliantly exposes how the drug middlemen “PBMs,” who are supposed to be delivering value to Americans, deliver value primarily to themselves and the insurers they work for. They push opioids to vulnerable Americans without prior authorization because they make hundreds of millions of dollars doing so, even when they know that these opioids are killing people.]

    A recent Barron’s exposé detailing pharmacy benefit managers’ (PBMs) backroom dealings in the opioid crisis should be read by everyone. PBMs, which most Americans encounter only indirectly through their health insurance plans, have quietly amassed enormous power over which medications we have access to — and how much they cost. This power extends not only to routine prescriptions but also, as it turns out, to some of the most devastating public health crises of our time.

    The report reveals that the largest PBMs — CVS Caremark, UnitedHealth’s Optum Rx, and Cigna’s Express Scripts — were heavily involved in the distribution of OxyContin, a drug at the center of the opioid epidemic. Between 2016 and 2017, these companies raked in more than $400 million in fees and rebates from Purdue Pharma, OxyContin’s manufacturer. That these rebates were essentially tied to the volume of opioids sold is not just alarming — it’s emblematic of how these middlemen prioritize profit over public health.

    The role of PBMs in drug pricing and availability has been contentious for years. The middlemen argue that their rebate system helps lower costs for employers and insurance plans, but this claim often falls apart under scrutiny. As Barron’s found, PBMs received as much as 19.75% in rebates from OxyContin sales, depending on the dosage and the number of pills prescribed. The higher the dosage, the bigger the rebate and profits. This system, which rewards higher utilization of a dangerous opioid, contradicts the PBMs’ – like CVS Caremark’s – own professed claims of fighting opioid abuse.

    For years, PBMs have presented themselves as crucial gatekeepers, using their clout to negotiate lower drug prices. But the reality, as the article highlights, is far murkier. PBMs, including CVS Caremark and Express Scripts, claim they pass the majority of rebates back to their clients — figures as high as 99%. Yet, these rebates are negotiated in secret, and consumers rarely see the benefits. The rebates often serve to maintain PBMs’ relationships with drugmakers, who want to secure prime placement on formularies — the list of drugs an insurance plan covers.

    The opioid crisis, as Barron’s demonstrates, could be a chilling preview of how PBM-driven rebate schemes might contribute to other drug pricing scandals. If PBMs have been willing to accept massive rebates from Purdue Pharma in exchange for keeping OxyContin widely available during a deadly opioid epidemic, what other drugs have been pushed to the forefront based on financial incentives rather than medical necessity or effectiveness?

    The documents that Barron’s obtained, many of which were previously confidential, show that PBMs had ample opportunity to stem the tide of opioid overprescribing. They could have placed stricter limitations on OxyContin or required prior authorization (which they make significant use of for medically necessary medications) to ensure that the drug was being prescribed appropriately. Instead, they allowed Purdue to maintain a stronghold on the market. According to memos, PBMs even demanded higher rebates as the opioid epidemic worsened.

    As the article suggests, this isn’t merely a historical issue. The opioid crisis may have peaked in the late 2010s, but its effects are still being felt today. And the practices of PBMs — opaque rebate deals, backroom negotiations and a relentless focus on profit — are still very much in place. While Purdue Pharma and its executives have been held accountable through legal settlements, PBMs have largely escaped similar consequences. The lawsuits against PBMs for their role in the opioid crisis are still ongoing, and CVS Caremark’s $5 billion settlement, finalized last year, didn’t even require an admission of wrongdoing.

    This begs a larger question about the pharmaceutical supply chain as a whole. If PBMs have the power to negotiate how drugs like OxyContin are covered, and if their decisions are driven by maximizing profits through rebates, can they really claim to be stewards of affordable health care? (Regular readers of this newsletter should roll their eyes at that question.)

    For too long, PBMs have operated with little transparency. As the Barron’s investigation shows, this secrecy has allowed them to profit handsomely from one of the deadliest public health crises in U.S. history. The opioid crisis could be the most egregious example of PBM malfeasance, but it’s far from the only one. As long as PBMs continue to operate without appropriate oversight, the American public will remain vulnerable to their influence over drug prices — and, by extension, their health.

    Here’s more from Just Care:

  • Republican Congressman accuses drug middlemen execs of perjury

    Republican Congressman accuses drug middlemen execs of perjury

    You might not know what a PBM–Pharmacy Benefit Manager–is, but PBMs are among the biggest companies in American, profiting handsomely from driving up your drug costs. A Republican Congressman, Rep. James Comer, who chairs the House Committee on Oversight and Accountability is going after PBM execs for misleading the Committee with findings that are at odds with the facts, reports Page Minemyer for Fierce Healthcare.

    The three biggest PBMs, which control more than 80 percent of the pharmaceutical market, are Optum Rx, owned by UnitedHealthcare, CVS Caremark, owned by CVS, and ExpressScripts, owned by Cigna. Among other misrepresentations and alleged perjuries, their execs would not concede that their companies steer patients to affiliated pharmacies or pharmacies their companies own.

    Congressman Comer said that the execs could be punished financially and sent to jail for as many as five years for their alleged perjuries. That might be a first. As a general rule, low-income individuals spend more time in jail for petty theft than executives at big companies that gouge Americans financially, harm them physically, and worse.

    But, Congressman Comer lets the PBM execs off if they “correct the record.” Based on Express Scripts’ response to Fierce Healthcare, it sees nothing inaccurate with the representations of its executives. Its spokesperson talks about how Express Scripts reduces the cost of medications, without mentioning that the bulk of those savings go into its pockets and the pockets of insurers. PBMs too often drive up costs for individuals.

    Congressman Comer focuses on the harm these PBMs inflict on local independent pharmacies through their bad acts. And, he appears to want to do something about that. If course, in a world with negotiated drug prices, which is the only way to address outrageous prices and prevent monopoly pricing, these companies would serve no useful purpose. That’s the world that Congressman Comer should be helping to create, not undermining. But, that’s not where Republicans in Congress stand. They uniformly opposed the drug price negotiation provision for Medicare in the Inflation Reduction Act.

    Here’s more from Just Care:
  • FTC criticizes Rx middlemen in new report

    FTC criticizes Rx middlemen in new report

    In a health care world filled with insane prices and complexities, the prescription drug middlemen, sometimes called Pharmacy Benefit Managers or PBMs, are at the top of the “is this even possible” list. The Federal Trade Commission or FTC criticizes PBMs sharply in a new 71-page report, reports Reed Abelson and Rebecca Robbins for The New York Times. Only when the government negotiates prescription drugs prices will we see fair prices for prescription drugs; PBMs would cease to exist.

    So that we’re all on the same page: In a better world, PBMs would negotiate lower drug prices from pharmaceutical companies so that health insurance companies could pass on those savings to their members. In our world, the big health insurance companies own the PBMs and pocket all or most of the savings for themselves. Insured Americans end up paying more for their drugs in many cases than people without insurance. Sometimes, their insurers direct them to use higher cost brand-name drugs (because the pharmaceutical manufacturers pay the PBMs a fair bit to steer people to those drugs); people’s insurers might not even offer the generic substitute or do so at a higher copay.

    PBMs keep drugs prices so high that, in many instances, even with a Medicare Part D prescription drug benefit, you will pay less for the full cost of your prescription from Costco or using GoodRx than the Part D copay. PBMs also sometimes overcharge people for the cost of drugs.

    What the FTC says: “[T]hese powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.” They “wield enormous power and influence” and their practices “can have dire consequences for Americans.” The only quibble I have with that statement is the “may be;” PBMs profit substantially from these tactics.

    The FTC has not sued a PBM yet. But, the PBMs and the big insurers who own them have taken notice and now worry that they will be sued for anticompetitive conduct. Until there’s a Democratic majority in both houses of Congress and a Democratic president, it seems unlikely that our federal government will block their bad behavior. The Republicans appear to have no interest in reducing drug prices.

    Who owns the three biggest PBMs? CVS Health owns Caremark, UnitedHealth Group owns Optum Rx and Cigna owns Express Scripts. These three PBMs control about 80 percent of the prescription drug market in the US.

    It seems to me that the only way to stop the PBMs from driving up drug costs is to put them out of business. In an ideal world, the US would negotiate drug prices as every other wealthy nation does. PBMs would lose their value. Americans would not be victims of PBM abuse.

    As you might expect, the PBMs disagree strongly with the FTC’s report. They are huge corporations, and they will fight back as hard as they can. They correctly claim that they have enormous leverage to bring down drug prices. But they fail to acknowledge that once they negotiate lower prices, they pocket most, if not all of the savings, and/or pass the savings on to the health insurers who own them.

    The evidence speaks volumes: The PBMs have pharmacies that send mail-order drugs to patients. The FTC found that PBMs paid their pharmacies a lot more for two generic cancer drugs than it would cost to buy these drugs directly from a wholesaler. As a result, in less than three years, they made $1.6 billion in revenue from these two drugs.

    Here’s more from Just Care:

  • CVS profits from manufacturing its own generic drugs

    CVS profits from manufacturing its own generic drugs

    CVS has become the sixth largest corporation in America, owning not only a chain of pharmacies, but health insurance company Aetna, and Pharmacy Benefit Manager (PBM), Caremark, among other big businesses. To maximize profits, CVS offers many private label products. To increase those profits further, CVS has begun to sell its own prescription drugs, reports David Wainer for the Wall Street Journal.

    Bottom line, CVS believes that selling its own biosimilars will generate handsome profits. CVS can steer its customers to these generic drugs through its Pharmacy Benefit Manager or PBM, which determines the drugs on many insurance companies’ formularies, including Aetna’s. In the process, CVS can put competitor manufacturers with lower-cost biosimilars out of business.

    The Cordavis unit of CVS Health – lord knows how CVS came up with the name—works with drug manufacturers to create the biosimilars CVS sells. Biosimilars are the generic version of biologicals, prescription drugs made from living cells. The biosimilar market is booming as more blockbuster biologicals, such as Humira, lose their patents.

    Beginning shortly, Humira will no longer be available on CVS formularies. CVS will offer its biosimilar. Similarly, Cigna, which has its own PBM, Express Scripts, will take Humira off its formulary and instead offer its private label biosimilar. For now, the cost will be low for patients, 85 percent lower than Humira’s list price, with no out-of-pocket costs to patients.

    CVS projects that the biosimilar market will grow exponentially in the next five years to $100 million. It was not even $10 million just two years ago. CVS will steer its customers away from brand-name biologicals to its biosimilars and profit big time in the process. Over time, will patients save money and how much? That’s largely up to CVS, an untenable truth.

    The bigger question is how will patients fare as biologicals are replaced by biosimilars? It’s not at all clear; at least for now, it is out of government hands. PBMs, such as CVS Caremark, can and will use their power to determine which drugs people use and at what cost in order to maximize their profits. Before long, some say it’s likely that there will be no prescription drug price competition, only strategies among the PBMs and insurers to maximize profits.

    Here’s more from Just Care:

  • Insurers promote Humira over lower cost alternatives

    Insurers promote Humira over lower cost alternatives

    Humira, which treats rheumatoid arthritis and costs a small fortune, is a blockbuster drug that millions of Americans depend on. Fortunately, there are now far lower-cost biosimilar alternatives. Arthur Allen reports for Kaiser Health News that health insurers and the drug company middlemen they work with have no interest, and everything to gain, from not promoting biosimilars, needlessly costing our health care system hundreds of millions of dollars a year.

    Humira is a biologic, made with living cells, with a list price of $6,600 a month, while biosimilars cost just under $1,000 a month. So, if the prescription drug marketplace worked, most everyone would be taking the biosimilar. But, the Pharmacy Benefit Managers or PBMs, who are responsible for designing insurer formularies– the list of prescription drugs an insurer covers and at what copay–have a financial interest in continuing to steer people to Humira, as do the insurers.

    Even though Humira’s list price has increased six-fold since it was first launched in 2003, the PBMs make money offering it, as do the health insurers. The PBMs receive rebates from Humira’s manufacturer, AbbVie, for promoting the drug and share the rebate with the insurers. The only people who lose are the insureds.

    If 313,000 people who take Humira instead took a biosimilar, the equivalent of a generic version, our health care system could spend about $9 billion less. But, companies manufacturing the Humira biosimilar can’t afford to give PBMs big rebates. So, the PBMs are less interested in promoting their drugs.

    Other wealthy nations don’t have PBM middlemen and therefore don’t deal with these gross financial incentives that drive up health care costs. In other countries, almost everyone has switched to a Humira biosimilar. With the profit motive driving insurers and PBMs in the US, however, it’s not clear whether companies manufacturing biosimilars can survive here.

    It costs about $200 million to develop a biosimilar. Without substantial sales, it’s not worth the effort. Unless Express Scripts, Optum Rx, and CVS Caremark three large PBMs, reduce the copay for the Humira biosimilar so that it’s less than the copay for Humira, doctors are not likely to prescribe the biosimilar, and the PBMs will kill the biosimilar market.

    What’s crazy is that the price of biologics continues to rise at a rate of 12.5 percent a year over the last five years, and it is not affecting the market for them, even when there are biosimilars.

    Allen reports that AbbVie is telling health insurers that, if they promote biosimilars over Humira, AbbvVie will cut the rebates it pays them for Humira and other drugs it manufacturers. AbbVie also reportedly increased rebates to PBMs for Humira.

    To be clear, even though patients might have the same copay for Humira as for a biosimilar, their health insurance premiums are significantly higher because people take Humira and not a biosimilar. Humira costs more. Moving to the biosimilar would reduce health care spending and make health care more affordable, helping to ensure people get needed care.

    Even with Medicare, the annual copay for Humira can be as high as $8,000.

    Doctors don’t steer their Humira patients to biosimilars as they tend not to want to switch their patients off medications that work. Even though the biosimilars appear to be as effective as Humira, if patients aren’t saving money by switching off Humira, they have no interest in messing with their drug regimens.

    Small PBMs and insurers who don’t make their money off of drug rebates, such as Prescryptive and Kaiser Permanente, have moved most of their patients to biosimilars, saving their patients money. Prescryptive says that switches to biosimilars have happened “with absolutely no interruption of therapy, no complaints, and no changes.”

    Here’s more from Just Care:

  • Blue Shield of California ends contract with CVS Caremark in attempt to lower drug prices

    Blue Shield of California ends contract with CVS Caremark in attempt to lower drug prices

    FierceHealthcare reports on Blue Shield of California’s decision to end its contract with CVS Caremark in an attempt to lower drug prices for its 4.8 million enrollees. CVS Caremark has been doing all price negotiation and formulary design for Blue Cross of California and pocketing a lot of the rebates and fees it collects from pharmaceutical corporations. Will Blue Shield of California’s enrollees actually see their drug costs drop?

    Going forward, Caremark will only handle specialty drugs for Blue Shield of California enrollees. Amazon Pharmacy, Abarca, Mark Cuban Cost Plus Drugs and Prime Therapeutics will also be involved in different ways in ensuring enrollees have their prescription drug needs met.

    Prime Therapeutics will take on drug price negotiation with the pharmaceutical companies. Abarca will pay pharmacists for people’s drugs. Cost Plus Drugs will develop a simple way of pricing drugs so that people are not surprised when they go to the pharmacy. Amazon will be in charge of drug deliveries and will let enrollees know upfront the cost of drugs.  

    Blue Shield of California says it would like to reduce drug costs by 10 to 15 percent. Given how much money the PBMs currently earn from negotiating drug prices and pocketing rebates and fees for themselves, that should be more than feasible in theory.

    Blue Shield of California says it wants to eliminate drug rebates and fees. But, time will tell if it simply has developed a new prescription drug model that contributes more to its revenues. Blue Shield of California could simply be transferring some profits away from CVS Caremark to itself. 

    The US spent $600 billion a year on prescription drugs in 2021. That’s $1,500 for every individual. Spending continues to rise significantly. Congress has yet to do anything meaningful to lower drug prices other than to give Medicare some negotiating power over a very small number of drugs through the Inflation Reduction Act. So, at this point, any activity that could lower drug prices is a plus.

    Here’s more from Just Care:

  • Trump might actually lower drug prices for people with Medicare

    Trump might actually lower drug prices for people with Medicare

    In one of his parting acts as president, Donald Trump appears to be trying to lower drug prices for people with Medicare or to wreak vengeance against Pharma for not announcing test results for their COVID-19 vaccines before the election. The Trump administration is working to speed up the process for pricing drugs for people with Medicare in line with what other wealthy countries pay. Many are dubious that Trump’s plan will work, but, for once, he has the right idea, freeing people with Medicare from the high cost of drugs.

    Trump’s move looks like revenge against the pharmaceutical industry for waiting until after the election to announce a COVID- 19 vaccine. Regardless, if it were to take effect, it would lower Medicare drug spending significantly. And, the pharmaceutical industry is not happy.

    Trump is essentially fast-tracking an executive order he issued in September calling for international reference pricing–pricing drugs at a similar level to peer nations–for some drugs available to people with Medicare. His administration is likely planning to issue an “interim final rule,” which sounds like an oxymoron. But, it would skip the interim rule-making phase and go directly to a final rule.

    Many experts believe that pharmaceutical companies will bring lawsuits to stop the rule from taking effect. If they rely on the Republican argument that the administration is trying to impose price controls on a free market, it would be laughable. But, given how many jurors are sympathetic to industry, it would be no surprise if the drug companies win.

    To be clear, the prices that would take effect under this rule are no different from the prices Americans pay if they import drugs from abroad. Right now, the government does not allow people to import drugs from abroad, even for personal use, but millions of people do anyway because they are so much cheaper. There is absolutely no reason that we should be paying twice as much as people in peer nations for our drugs.

    What’s most interesting is that President Trump’s plan is in line with the Democrats’ House bill, HR3, which would also regulate drug prices for people with Medicare based on the price of drugs in other wealthy countries. However, HR3 extends these Medicare prices to private health insurers, and Trump’s executive order does not. However, HR3 only covers 350 drugs over ten years.

    President Trump has another rule that may go into effect that could help lower drug prices. It would end the rebates that go to pharmacy benefit managers (PBMs), which simply inflate the cost of drugs. However, if these rebates ended, there is nothing to stop the drug companies from pocketing the rebate money they would have paid the PBMs and raising the price of their drugs further. Not surprisingly, pharmaceutical companies like this policy.

    Curiously, there is a whacky argument put forward by the PBM industry that eliminating rebates would raise the cost of drug insurance premiums in the Medicare Part D prescription drug benefit. We are living in an Orwellian world. The PBM trade association needs to justify its existence.

    Here’s more from Just Care:

  • Medicare Part D plans often don’t cover new generic drugs

    Medicare Part D plans often don’t cover new generic drugs

    According to Stat, the Association for Accessible Medicines–the trade association for generic drugmakers–issued a report revealing that less than half of new generic drugs are available to patients with Medicare Part D drug coverage. These drugs cost less than their brand-name drug equivalents and would save patients and taxpayers billions of dollars a year. What’s going on?

    Researchers studied the fate of the 115 newly FDA-approved generic drugs between 2016 and 2018. They found that in the first year after a new generic is approved, no more than one in four Medicare Part D plans, and as few as one in ten Part D plans, include the drug on their formularies, their list of covered drugs. In the second year, no more than one in three Medicare Part D plans include the drug on their formularies. It generally takes close to three years before a new generic drug makes it onto half or two-thirds of Medicare Part D formularies.

    Even after a new generic drug has been on the market for three years, about four in ten Medicare Part D plans do not include it on their formularies.

    The report also indicates that Medicare Part D insurers that do cover these newly approved generic drugs tend to charge copays for them that are equivalent to brand-name drug copays. In fairness, some newly approved generic drugs cost almost as much as their brand-name equivalents. But, as a general rule, generic drugs should have lower copays than brand-name drugs.

    In their second year on the market, generic drug prices tend to fall by around 45 percent. Still, only a small percentage of Medicare Part D insurers–nine to 13 percent more–included new generic drugs on their list of covered drugs.

    The Association for Accessible Medicines believes that the brand-name drugmakers are providing financial incentives to Pharmacy Benefit Managers (PBMs)–the middlemen who decide which drugs to put on a formulary–to exclude new generics from the Part D plan formulary. The brand-name drugmakers can legally do so, it appears. To increase their market share, they simply offer “rebates” or kickbacks to the PBMs if they do not cover the competitor generic drug.

    The Association for Accessible Medicines also finds fault with the structure of the Medicare Part D drug benefit. At the point at which people fall into the coverage gap or “donut hole,” brand-name drugmakers must offer a 70 percent discount on their drugs. But, the discount amount is included as part of the out-of-pocket costs people with Medicare must spend before Medicare covers 95 percent of costs. At that point, Part D plans have less liability for their drug costs. Consequently, Part D plans have a financial incentive to get people out of the donut hole by having them use brand-name drugs.

    What’s the solution? Congress should prohibit brand-name drug makers from providing financial incentives to PBMs and Part D plans to exclude coverage of generic drugs. Part D plans should be required to cover these generic drugs at generic drug copay levels. AAM claims people with Medicare would save $4 billion a year from this fix; taxpayers would also save.

    Here’s more from Just Care: