By Arthur Allen, KFF Health News (TNS)
Ann Lewandowski knows all about Pharmacy Benefit Managers (PBMs), the businesses that shape the U.S. drug market. As a policy advocate at drugmaker Johnson & Johnson, her job was to teach patient and physician groups in regards to the role of PBMs in high drug prices.
Knowing this, Lewandowski filed a potentially groundbreaking lawsuit in February. Instead of targeting the PBMs, nonetheless, she turned to a big company that uses PBMs – her own employer, Johnson & Johnson.
Lewandowski alleges in her lawsuit that Johnson & Johnson failed in its obligation to make sure fair drug prices for its greater than 50,000 U.S. employees through its contract with PBM Express Scripts, a unit of insurance giant Cigna that fired her in April.
By selecting an Express Scripts plan, she claimed, J&J cost employees “millions of dollars in higher prescription drug payments, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth.”
Lewandowski, 40, of the Madison, Wisconsin, area relies on an expensive drug for multiple sclerosis. She filed the lawsuit because she “had difficulty reconciling the policy positions” she reported as a J&J worker “with the actions I experienced as a health plan user.”
In recent years, the shady business practices of PBMs have attracted considerable attention. The Federal Trade Commission is conducting a lengthy investigation into the three largest firms and sued them in September, saying they were driving up insulin prices. Bipartisan bills in Congress would stop them. And firms like Mark Cuban's Cost Plus Drugs and smaller, “transparent PBMs” have sought to wean drug firms and health plans from their dependence on the massive PBMs.
But Lewandowski's lawsuit touches on a thorny issue that was ignored until recently: language within the 2021 budget law that overhauled the Employee Retirement Income Security Act of 1974, referred to as ERISA. The original law focused on stopping fraudulent retirement plans.
Their lawsuit is predicated on Congress' language that the legal requirement for prudent corporate governance covers each health and retirement advantages. By offering their employees a medical insurance plan, employers are doing them a disservice. You keep your money and invest it in your health,” said Barak Richman, a health law professor at George Washington University.
An analogous lawsuit was filed against Wells Fargo in July, and extra lawsuits are within the pipeline.
Dissatisfaction with the establishment and fear of liability are driving employers to maneuver away from the “big three” PBMs to “transparent PBMs” that don’t obscure their pricing and drug selection decisions.
“We enrolled nine Fortune 500 companies and 1.2 million patients this year,” said AJ Loiacono, CEO of New York City-based Capital Rx, a PBM founded in 2017 current surveyUp to half of US employers are considering a change.
Cuban said in an interview with KFF Health News that he has told tons of of Fortune 500 executives in one-on-one meetings and in groups that they’re overpaying for drug profit plans to line the wallets of enormous PBMs.
“You’re being cheated,” Cuban tells them. “You don’t really understand the elements, and that costs you money and your well-being. And now you're being sued. It’s not a question of if, but when.”
Putting pressure on a purchasing cartel
The billionaire who launched Mark Cuban Cost Plus Drugs in 2022 to upend the byzantine $500 billion U.S. drug market is convinced that the Lewandowski lawsuit and others will undermine the dominance of the massive PBMs will end Control 80% of the business.
Cost Plus Drugs charges a direct markup of 15% with small processing fees for the two,500 drugs it sells, most of them generics, said co-founder Alex Oshmyansky. Its nearly 3 million customers – individuals, health plans and transparent PBMs – seem like saving money in lots of cases.
The big PBMs say their purchasing power and exclusive access to information allow them to lower your expenses for insurers, employers and patients. Critics say they siphon as much as 25% of the drug market, perhaps $100 billion a 12 months, in line with Oshmyansky. Critics say the opaque policies and conflicts of interest often lead to the poorest and sickest patients paying essentially the most for medicines.
The three PBMs amount to a “buying cartel,” Oshmyansky said in an interview on the Dallas headquarters of Cost Plus, once home to Broadcast.com, the Internet radio company that earned Cuban his first billion dollars when he sold it to Yahoo in 1999. They buy all of the drugs, raise the costs after which resell them.”
Richman and Amy Monahan from the University of Minnesota argued it a magazine article This 12 months, the Labor Department, which has up to now focused its ERISA oversight on retirement advantages, is predicted to issue standards for using health care funds under the law.
If firms “sign stupid contracts with insurers or PBMs, they may be violating ERISA,” Richman said. “If you take the law seriously, the employers who spend half of the country’s health care dollars would have to spend that money in very different ways.”
But some drug market experts doubt the ERISA lawsuits will succeed. Complex PBM money channels “complicate the argument,” said Stacie Dusetzina, a professor of health policy at Vanderbilt University School of Medicine. “You may think your company is paying too much, but relative to what?”
The ERISA Industry Committee, which lobbies Congress on behalf of among the largest U.S. firms, is asking Congress to offer PBMs a special duty to represent their customers' financial interests, said Melissa Bartlett, the group's senior vice chairman for health policy. That may lead to patients suing the PBMs somewhat than their employers.
Some large employers are already changing their drug plans.
In 2019, Connecticut became CVS's first PBM customer to barter a transparent fee structure. The contract called for 100% of drug discounts to be passed on to the state and the value band was eliminated.
The state decided to go a step further when it sought a brand new contract for its 214,000 employees this 12 months, said Joshua Wojcik, director of health policy and human services within the state auditor's office. Instead of rebates and rebates, the bottom net cost per worker was required.
Of the three major PBMs, only CVS bid on the contract. It has pushed out some “transparent PBMs” – an indication that Wojcik believes CVS no less than doesn't wish to be omitted as more customers abandon the present PBM business model.
Wojcik estimates the change will save the state as much as $70 million a 12 months.
$13.40 versus $2,500
It takes time to alter drug subsidy policies at large firms, Cost Plus's Oshmyansky said. Their PBM contracts last three to 5 years, so “you have to win them in the one year they're looking at other options,” he said. PBMs pay profit plan consultants and brokers who hire large firms to run the business their way.
“We have this weird structure where multiple sclerosis and cancer patients subsidize everyone else’s drugs,” Oshmyansky said. Instead of making a pool that distributes the prices amongst all insured individuals, there’s a “disproportionate burden on the sick members”.
Cost Plus generates the best savings for its customers on around 50 extremely high-priced generics. The flagship product is imatinib, a generic cancer pill that Cost Plus sells for $13.40 for a 30-day supply, compared with the $2,500 it costs at pharmacies. A study conducted by Dusetzina and colleagues found that Medicare could save $662 million per 12 months just by purchasing imatinib and 6 other generic cancer drugs from Cost Plus, somewhat than through a big PBM.
Ironically, nonetheless, most generic drugs are cheaper within the United States than in Europe or Canada – so low cost, in actual fact, that they cause shortages when firms exit of business or stop making crucial improvements to their production lines.
In response, Cost Plus has opened a compounding pharmacy to supply common generic drugs and hopes to soon have a form of “private reserve” of 70 to 80 products that will be manufactured at short notice if shortages arise, Oshmyansky said.
While the corporate has not yet finalized purchase agreements for a lot of the branded drugs, Oshmyansky and Cuban are confident. Drugmakers have lobbied hard over the past two years to rein in PBMs through their trade group Pharmaceutical Research and Manufacturers of America.
At a Sept. 24 hearing where Sen. Bernie Sanders (I-Vt.) criticized Novo Nordisk CEO Lars Fruergaard Jørgensen over the high prices of the diabetes and weight reduction drugs Ozempic and Wegovy, the board expressed support for a more transparent pricing model.
“On average, we give PBMs a 74% discount on our products” for each $1 the corporate charges, he said. If as a substitute “we simply paid PBMs a small fee for the limited risk and contribution they make, I think patients would be significantly better off.”
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