What’s the real cost of prescription drugs?

It’s a ‘shell game’ according to a national prescription price expert.

Ordering prescription drugs by mail through an insurance plan could cost you more than simply walking into a corner drug store and buying the same drug without insurance.

That’s the surprising finding of a new KARE 11 News investigation, raising questions about prices being charged for prescriptions nationwide.

It’s a “shell game” according to a national prescription price expert who reviewed documents obtained by KARE 11.

Curt’s story

Curt Burshem’s family experienced the problem first hand.

“It’s frustrating, very frustrating,” Burshem said.

One of his family members needs Mycophenolate Mofetil, a drug that helps with a kidney disorder. Without it, Curt says, “Your kidneys could shut down. You could be on a kidney machine the rest of your life.”

Burshem said his family’s prescription price nightmare began in March with a visit to a CVS Pharmacy in Maple Grove, Minnesota to fill the initial 30-day prescription.

The total price was $104. That equals about $.87 per pill.

Curt’s family has health insurance coverage through his employer. The insurance plan picked up most of that cost of the original prescription.

But when it came time to renew the prescription, the CVS-administered plan recommended ordering a 90-day supply through the mail to save money.

Mail order surprise

“You will generally pay less if your prescription covers a 90-day supply,” reads the CVS prescription drug benefit guide Curt received.

Since the 30-day supply cost about $100, Burshem figured the 90-day cost would be about $300. His guess wasn’t even close.

“Caremark is saying it’s a $2,300 drug,” Curt said, pointing to the bill for the 90-day mail order.

Instead of charging $.87 per pill, CVS Caremark was charging $6.62 per pill for the same medicine.

Comparing prescription prices

At first, Burshem wondered if the big bill was another example of a drug company jacking up prices.

But he took an extra step many people don’t. He decided to check around. “I’ll at least check it out and see where else I could get it for less,” he said.

He was about to make a discovery he still can’t believe.

At a nearby Park Nicollet pharmacy, he found he could buy the same 90-day supply of the same drug for just $259.02.

It was an astonishing difference: $259 compared to $2,382 from CVS thru the mail.

“There is no explanation for it at all,” Burshem said.

KARE 11 investigated and discovered the lower price wasn’t just at the pharmacy Burshem found.

We checked prices at several other local drug stores. Nothing came close to the sky-high price from CVS Caremark was charging. In fact, we found prices as low as $185 for the same 90-day supply of the medicine.

The price gap is even more surprising when you remember CVS claims that people in the insurance plan can save money by ordering by mail.

A shell game

“What’s happening to Curt has probably happened to many other people in this community,” said Professor Stephen Schondelmeyer.

Dr. Schondelmeyer is one of the nation’s leading experts on prescription drug pricing. A professor of Pharmaceutical Management and Economics at the University of Minnesota, he has testified before Congress and has negotiated prescription plans for the University.

KARE 11 asked him to review Burshem’s records.

“This particular example is a perfect example of a shell game,” Schondelmeyer said. He says it illustrates a dirty secret in the prescription drug business.

How it works

Pharmacy benefit management companies – known as PBM’s – go to employers promising to save them money by managing their insurance prescription drug claims and negotiating discounts, said Schondelmeyer.

In return, Schondelmeyer says PBM’s – like CVS Caremark – become the exclusive prescription provider for people in the company’s insurance plan, in effect creating a mini-monopoly.

“They’ve shut other people out,” says Schondelmeyer. “And they’ve done so in a way that you don’t really know and can’t find the prices.”

Schondelmeyer says PBM’s tell employers they can save them money by handling prescription claims more efficiently and by negotiating volume discounts.

The problem, according to Schondelmeyer, is that PBS’s aren’t required to disclose the prices they’ve negotiated.

He says that leaves the door open for PBM’s to quietly raise prices for their captive customers instead of lowering them.

“They think nobody would cheat us that much,” he told KARE 11. “But they do.”

Class action lawsuit

A federal class action lawsuit accuses CVS Health of “fraud” and of “knowingly and intentionally” overcharging people in insurance plans by using “a false and deceptive pricing scheme” to inflate the prices of prescription drugs.

We asked CVS for an interview. Instead, CVS sent awritten statement saying, in part, the company will “vigorously defend against the baseless allegations in this lawsuit, which is completely without merit.”

The CVS statement didn’t explain why its price for Burshem’s medicine was so much higher than the other pharmacies we checked.

Not only was the total cost for Burshem’s medicine higher at CVS. So was his copay.

His bill from CVS Caremark shows even with insurance covering most of the total cost, Burshem’s copay was $476.55.

That’s almost double the price – without insurance – at the local pharmacy Burshem found.The full price there was just $259.02.

“When I see a company doing this crap, it makes me insane,” he said.

Potential fixes

In testimony at the Minnesota state legislature last year, Professor Schondelmeyer called for more transparency with prescription drug prices. Schondelmeyer believes PBM’s need to reveal how much they charge for prescription drugs. That information is currently considered confidential.

“So there’s this hidden markup going on,” he told legislators.

The bill authored by Representative Joe Atkins did not make it out of committee.

Schondelmeyer says the hidden costs have an impact on everyone, not just people like Curt Burshem.

“If we add up drugs in all the health care system, drugs are about 18 to 20 percent of the healthcare dollar and they’re the fastest growing health care dollar today,” he said.

The more prescription drug prices go up, he says, eventually all our premiums will go up, too.

“It does affect daily insurance premiums, it affects the cost of health care,” he said.