PBM 101

Contracts with “gag clauses” bar pharmacists from telling their customers when they could pay less for a medication if they paid cash instead of going through their insurance. Pharmacies that violate the gag clause risk stiff financial penalties and could be kicked out of the insurance provider’s pharmacy network - effectively a death sentence for some pharmacies. ​

Why would a PBM care if the pharmacist tells the patient it’s cheaper to buy their medicine without using their insurance? Because consumers are often unwitting participants in a scam called a copay “clawback”. A “clawback” happens when the patient’s copay is more than the pharmacy’s cost for the drug. For example, if a customer’s prescription copay is $20 but the pharmacy’s cost is $5, the PBM claims -- or “claws back” -- the extra $15, which it keeps as profit.

If you have trouble understanding the difference between Direct and Indirect Remuneration fees (DIRs) and copay clawbacks (“clawbacks”) you’re far from alone. ​ DIR is a catch-all term that covers the monies that a PBM may collect to offset Medicare Part D member costs. Originally a performance metric designed to incentivize plan sponsors for improved health outcomes, DIRs are now involuntary “concessions” made by pharmacies that produce free-flowing revenue streams for pharmacy benefit managers (PBMs).

DIR fees come in numerous forms, including penalties and other charges often unknown to the dispensing pharmacy. DIRs are assessed as a “clawback” -- the pharmacy doesn’t “pay” the PBM, the PBM deducts these fees directly from the pharmacy’s bank account or by reducing future reimbursements without notice and weeks after the initial transaction. DIR fees can also take the form of service fees, network access fees, administrative fees, reconciliation, etc. By contrast, copay clawbacks occur when a patient’s copay is higher than the price of the medication, whether the patient is using a commercial or federally-funded plan. The pharmacy collects the patient’s copay, and the PBM “claws back” the money over and above the contracted reimbursement, and keeps that money as profit. ​

Some PBMs make deals to include or exclude certain medications from coverage under a prescription benefit plan’s list of covered drugs (called “the formulary”) in exchange for rebates, or payments, from manufacturers. The larger the rebate, the more likely a drug will be included in the formulary. No rebate often means the drug will be excluded from the formulary.

These backroom deals mean patients are often forced to take medications that are not what their doctors prescribed or not in their best medical interest. Sometimes it means they have to switch medications they’ve been on for years or that have worked for them because of PBM rebate manipulation. Sometimes it means waiting for access to medication while their health declines. On products with huge volume discounts, PBMs keep the manufacturer payments rather than passing the discount on to health plan sponsors - usually the patient’s employer or the government, in the case of Medicaid and Medicare - and patients.

Almost all PBMs own - or are affiliated with - mail-order specialty pharmacies. A few of America's largest PBMs also own brick and mortar pharmacies. PBMs attempt to force or "steer" patients to their own pharmacies in an effort to keep all the money 'in-the-family' (so to speak). ​Imagine you have a membership at a big box store that offers delivery. You want to purchase your favorite cereal from the local grocer that's 1 block from your house and offers a better price, but the big box store will penalize your membership & raise prices on what you buy if you don't use their store and delivery service. Not exactly ethical, right? That's the same as "steering" or forced mail-order. ​ Like PBMs themselves, prescription drug shipping through mail order is unregulated. Temperature controls & handling requirements strictly adhered to by pharmacies go ignored during the mail-order medication shipping process. From medications rendered ineffective due to improper storage, to patients receiving incorrect medications & suffering lengthy delivery delays - forcing patients to mail order medication usually results in one thing: sicker patients.