The federal agency that manages Medicare has completed a rule meant to curb an industry practice that has inflated drug costs for some patients with Medicare drug coverage. The practice involves pharmacy benefit managers (PBMs), the middlemen that administer drug plans on behalf of insurers. The PBMs are making a financial killing in providing this “service.” As you may know, PBMs negotiate drug prices with pharmacies and reimburse them for drugs that patients purchase. Insurers, in turn, pay the PBMs for administering the claims. The PBMs are making big bucks for their service in this process. The Wall Street Journal had this to say:
The higher drug costs for patients result from a so-called lock-in approach used by some PBMs. Under this practice, insurers pay the PBMs a set amount for drugs, regardless of what the PBMs actually paid the pharmacies. Often, what the PBMs pay the pharmacies is less than what the insurers pay the PBMs. But the size of that difference is typically secret, and the PBMs keep it. The practice can drive patients into Medicare’s “doughnut hole” gap in coverage more quickly. While under the new rule, plans can still use the lock-in approach. The amount paid to the pharmacy – not the higher price paid by the insurer – will have to be what is used to determine patients’ pace to the doughnut hole. The rule will go into effect on January 1, 2010.
PBMs that have used lock-in pricing have argued that the extra money they make under the pricing method provides funds for programs to encourage more consumers to use lower-cost generic drugs. Express Scripts Inc., a PBM that has used the lock-in approach, said in a statement that it was “concerned this new rule will lead to higher costs and fewer competitive plan design choices over the long-term.” In a statement, Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services, said the new regulation will “reduce what [patients] pay at the pharmacy counter.”
Hopefully, this new rule will result in lower drug prices at the national level. I really don’t believe the public knows how the Bush Administration, Congress and the drug industry socked it to the American people when they passed the law that allowed the PBMs to enter the picture.
Source: Wall Street Journal
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