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When the largest private insurance companies use their leverage to save on the cost of prescription drugs, they make it harder for patients to obtain the medications they need, experts say.
Pharmaceutical benefit managers (PBMs), which play a major role in determining the price of prescription drugs, also decide what medicines will be covered by private insurers. If medicines are not covered, patients cannot access them, and the number of drugs that are not being covered has been increasing, meaning patients are unable to afford medicine they need, according to experts.
“It’s penny-wise but pound-foolish for health plans,” says Daniel Durham, Executive Vice President for Health Policy at the Biotechnology Innovation Organization (BIO). “If patients can’t afford to take their medicine, they end up in the hospital. The patients suffer and their medical costs increase.”
PBMs profit from overseeing drug coverage
To make sure their products are included in the formulary of drugs covered by insurers, drug makers agree to pay rebates to the PBMs, who are supposed to use the rebates they get to lower drug prices for patients, but research shows that’s not happening.
PBMs can choose to pocket the rebates they receive from drug makers, or, because the PBMs are often owned by insurers, they can elect to pass the savings on to those insurers. The three largest PBMs control 80% of the market and are all owned by insurers, who benefit when PBMs force drug makers to pay higher rebates.
This is a unique situation in which insurers are not allowing patients to benefit from cost savings. “Patients going to a hospital in an insurer’s network benefit compared to those going out of network,” says Durham. “Why discriminate against medicines in terms of not sharing the negotiation price with patients?”
PBMs can threaten to exclude a drug from formularies to force the drug maker to give a bigger rebate, according to Durham.
“Exclusions have become another one of their tools where they’re negotiating these substantial rebates and not passing those on,” he says.
Exclusions increasing
According to Drug Channels Institute, the number of formulary exclusions has been steadily increasing.
“The practice of formulary exclusion began in 2012. Since then, the number of unique products excluded from the formularies of the three largest PBMs—Caremark (CVS Health), Express Scripts (Cigna), and OptumRx (UnitedHealth Group)—has grown dramatically,” writes Adam Fein, CEO of Drug Channels Institute.
According to Fein, the most recent list of exclusions for these big three are:
- CVS Caremark: Formulary Drug Removals (January 2023) and Advanced Control Specialty Formulary (January 2023).
- Express Scripts: 2023 National Preferred Formulary (NPF) Exclusion (12/15/22).
- OptumRx: 2022 Premium Standard Formulary and Jan. 1, 2023 Premium Formulary Exclusions“.
“Historically, PBM exclusions have focused on medicines with generic equivalents or classes where multiple products have been shown to achieve similar clinical outcomes,” according to an analysis by Xcenda. “Now, PBMs are often excluding medicines for conditions where it is particularly important for patients and physicians to have multiple treatment options, such as oncology and autoimmune disorders.”
Means for shifting costs to patients
Instead of outright exclusion, PBMs can also insist on “step therapy,” in which a patient has to try the cheapest drugs for any condition first, regardless of their effectiveness.
“Before you can get this more expensive drug, you first have to try these other two. If your physician can document that the first two fail, then you can get the other drug,” Durham explains. “It’s another tool that the plans and PBMs use to shift costs to the patient.”
PBMs can also simply exclude from their formulary certain drugs that are more expensive and are needed by patients with the most serious conditions.
“Rising rates of PBM exclusions for medications to treat complex conditions such as cancer, HIV, and autoimmune disorders, for which variation in patient response to treatment is well documented, also raise potentially serious concerns about quality of care,” says the analysis by Xcenda.
While the Affordable Care Act makes it illegal to exclude patients based on pre-existing conditions, insurers can instead refuse coverage for some of drugs that people living with HIV or other serious conditions may need.
“They use drug coverage as a way to discriminate,” Durham explains. “This has a huge impact on patients in terms of the access to the drugs their physicians prescribe and their ability to pay for those drugs.”
