Unmasking Pharmacy Benefit Managers: Their Impact on Healthcare and How Direct Primary Care Can Help
At the Cost of Our Health: Part 1
I switched to Direct Primary Care for many reasons, many of them related to the hidden and irrational pricing incentives in our healthcare industry. Healthcare costs have increased dramatically faster than inflation for the last three decades, and this series aims to explore some of the reasons why this has happened as well as potential solutions (hint: I think DPC helps solve many of them!). Read on for more about some of the largest “middlemen” in healthcare that most people are unaware even exist.
Introduction
Pharmacy Benefit Managers (PBMs) are often hidden players in the United States healthcare system, despite their significant role in managing drug benefits and negotiating drug prices. Most people are unaware of their existence and how they impact the cost of their medications. This article will shed light on what PBMs are, discuss their negative impacts on the healthcare system, and explore how Direct Primary Care (DPC) practices can help mitigate or eliminate these problems.
What are Pharmacy Benefit Managers (PBMs)?
PBMs are companies that act as intermediaries between health insurers, drug manufacturers, and pharmacies. They were initially created to manage drug benefits for health insurance plans and negotiate lower drug prices on behalf of insurers by leveraging their buying power. However, over time, their role has expanded, and they now have a significant influence on drug pricing and access to medications.
The Harmful Effects of PBMs
PBMs have been criticized for a variety of reasons, including:
Lack of Transparency: PBMs often operate without clear pricing structures, making it difficult for consumers and healthcare providers to understand the true cost of medications. This lack of transparency can lead to increased costs for patients and insurance providers.
Rebate System: PBMs negotiate drug prices and rebates with pharmaceutical manufacturers. However, instead of passing these savings on to consumers, PBMs often retain a portion of the rebate as profit. Indeed, an audit of PBMs’ impact on Ohio Medicaid (need-based insurance) found that PBMs collected $208 million in fees on generic medication in a 1-year period, or 31% of the total cost of these prescriptions.
Conflicts of Interest: Some PBMs own mail-order pharmacies or have financial ties to drug manufacturers, creating conflicts of interest that can lead to higher drug prices or limited access to certain medications. For example, the second largest PBM called Express Scripts is owned by the health insurance company Cigna and is currently being sued by the Ohio Attorney General for collusion causing exorbitant medication prices, including on insulin. PBMs use these pharmacies that they own to create higher revenue for themselves on a captive audience, requiring that patients use their pharmacies on name brand medications that bring in large “spreads” (the difference between what patients are charged and what pharmaceutical companies are paid).
How Direct Primary Care Helps
We here at Simplicity Health DPC provide an alternative to traditional healthcare models that can help address the problems caused by PBMs.
Transparent Pricing: We have clear, upfront pricing structures for all of our services, including medications. Patients know exactly what they will pay for their medications without hidden fees or unclear insurance coverage.
Lower Drug Costs: Simplicity Health DPC works directly with pharmaceutical wholesalers, bypassing PBMs and their associated fees. This direct relationship often results in lower drug prices for patients, as we either charge wholesale medication costs or include them in our membership fee.
Personalized Care: With a smaller patient panel, we can spend more time with our patients (30-60 minutes), allowing for a better understanding of each patient's unique needs. This personalized approach can result in more informed prescribing decisions and improved access to and affordability of necessary medications.
Reduced Conflicts of Interest: We are independent of any insurance companies and do not have financial ties to PBMs or pharmaceutical companies. This independence helps to ensure that prescribing decisions are based solely on the best interests of our patients.
Conclusion
Pharmacy Benefit Managers are powerful yet hidden players in the American healthcare system, contributing to issues such as lack of transparency and potential conflicts of interest. Simplicity Health DPC offers a valuable alternative that addresses many of these issues. By providing transparent pricing, lower drug costs, personalized care, and reduced conflicts of interest, we and DPC practices in general aim to improve patient outcomes and to make healthcare more affordable and accessible for all.
Dr. Wenzell is a family physician who recently joined Simplicity Health Direct Primary Care and is now accepting new patients of all ages. Call 937-813-2124 or click here to schedule your free, no obligation Meet-and-Greet to learn more about our practice and why we think Direct Primary Care is the best way to return the focus of medicine to the patient-physician relationship.
