How PBMs and Insurers Profit By Discriminating Against 4 Percent of Americans

  • by: Robert Goldberg |
  • 04/06/2016
The Alliance for the Adoption of Innovations in Medicine (Aimed Alliance), a not-for-profit organization seeking to improve healthcare in the US, released a report today that concluded many of the barriers to treatment that prevent patients from receiving quality care as prescribed by their physicians, may be discriminatory cost-saving measures proscribed by current law.  These practices include:

•Fail first policies in which patients are required to fail on older, inferior treatment before getting the treatment their doctors prescribed;
•Adverse tiering in which most, if not all, medications, including generics, used to treat a condition, such as HIV or Hep C, are placed on the highest cost-sharing tier in which up to 50% of costs are passed on to the patient;
•Clinical pathways in which an insurer pays a practitioner to prescribe a cheaper medicine despite the patient’s needs;
•Prior Authorization in which practitioners can spend up to 20 hours a week on the phone with insurers trying to obtain approval for treatment they’ve prescribed for their patients; and
•Nonmedical switching in which insurers are forcing stable patients to switch to different cheaper medications without even informing the patients’ doctor.
Stacey Worthy, who directs the Alliance policy shop said, “These practices serve to financially exclude patients with a pre-existing condition, create a blatant conflict of interest for the physician, take up valuable physician time trying to obtain approval for the treatments, and in the end, just serve to save company money.”
I’d go a step farther and note that the discrimination is driven by profits.  The claim that such restrictions have to apply most drastically to the sickest patients practices to keep costs down is the opposite of the truth. 
We know that patients with HIV, Hep C, cancer, pulmonary disease, autoimmune disorders, comprise about 4 percent of everyone with health insurance.  Health plans state that drugs for these disease now make up 25 percent of all spending on medicines and about 11 percent total health spending.  So that means all the barriers to access described by the AIMED Alliance target 4 percent of patients who make up 11 percent of plan expenditures.
It’s not because the 4 percent are such a burden on our health system.  Rather, the growing number of new medicines is a cash cow for pharmacy benefit management companies, insurers and other health institutions.  And limiting access is a way to get biopharma companies to pay to play.
Many so-called experts, such as Peter Bach, claim that restricting access to extract discounts is just what we need to reduce drug prices (here he uses hep C drugs as an example):

"Saying no, or even the threat, works to lower prices.. More recently, Express Scripts, a company that manages pharmacy benefits, showed that approval was no guarantee. It was therefore able to play two makers of treatments for hepatitis C off against each other. 
Express Scripts, once it showed it could say no, got AbbVie to discount its product. It isn’t saying how much, but Steve Miller, a senior executive, said it had “significantly narrowed the gap between prices charged in the United States and Western Europe.” Sounds like the kind of progress we need."

Except that the discounts and rebates go to the PBMs and health plans instead of directly to the patients. 
Don’t believe me? 
Read what Credit Suisse reported about the amount of rebate money being pocketed by insurers and PBMs:
“ For 2014, our 20 company universe has shown net US drug sales of $202bn and reported total rebates of $98bn. We conclude that in 2014 US rebates rose 24% against just a 7% increase in net sales, reflecting continued formulary pressures... US rebates rose 24% against just a 7% increase in net sales, reflecting continued formulary pressures.”
Rebates of $98 billion is 32 percent of total US drug sales (for that 20 company group). 
That’s a lot of cash being divvied up by Dr. Bach’s noble warriors against drug pricing.
 Read Anthem’s lawsuit against Express Scripts, the PBM Bach hails as a pricing savior.   Anthem is suing the PBM for not sharing more than $13 billion in rebates over four-year period.  The $13 billion is on top of rebates already being given to Anthem.  
A good portion of those rebate dollars (I estimate nearly 40 percent) are extracted from the specialty drugs used by the 4 percent of all insured patients (about 11 million).   So “by saying no” as Dr. Bach urges PBMs and insurers are able to share – or squabble over -- $40 billion.  
That’s about $3600 per person that is going right to PBM, insurers, hospital systems, pharmacy chains.. everyone except the patient. 
Peter Bach says that it sounds like the progress we need.
I believe discrimination is not progress, it's illegal and it begs for a legal remedy.  

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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