Before making a major purchase such as a house or a car, most consumers want to know what they’re purchasing. Has the house had water issues or termites? Is it structurally sound? What kind of mileage will the car get? How good is the warranty? They can typically get answers to all these questions and more beforehand, so that they’re able to make a sound and reasoned decision before buying.
So I wondered whether the same holds true for consumers when they buy health insurance. Can they easily find out whether the medication they are on is covered by the insurer’s or pharmacy benefit manager’s formulary? Will they learn whether the medicine they need requires prior authorization or step therapy or any other newly concocted administrative barrier? Are they told upfront about any out-of-pocket costs they may be responsible for when they visit their doctor or fill a prescription? The answer to all of these questions is a big maybe.
There is no doubt that such information exists within the bowels of websites and mounds of paperwork supplied by the insurance company or PBM — entities also referred to as middlemen. However, having to navigate such byzantine and/or antiquated information systems can deter even the most inquisitive consumer who is trying to do his or her homework before making a major purchase of health insurance.
So, why is health insurance or pharmacy benefit shrouded in mystery? Is it the fear that providing too much information will lead consumers to look for better options? Are informed patients seeking answers about access to their medicine a threat to the viability or perhaps profitability of these entities? Or could it be because, at times, when using their health insurance, patients may be paying more out-of-pocket than they have to?
Yes, you read that last one correctly. There are times when patients pay more out-of-pocket for their medicines by using their insurance than they would have had they paid cash. The PBM/insurer policy that drives this outcome is referred to as a “clawback,” and it works as follows. A patient walks into a pharmacy and hands over the insurance card to the pharmacist. The pharmacist will then let the patient know if the insurance requires a copayment for that medicine.
Now, there are instances that the copayment exceeds the cost of the medicine, and it would actually be cheaper for the patient to pay in cash; however, the pharmacist is prohibited by the PBM or insurer from disclosing this to the patient at the point of sale due to a gag clause in the contract between the pharmacy and the middlemen. And this difference in payment doesn’t even stay with the pharmacy. The PBM/insurer then takes that money, or “claws back” the amount, from the pharmacies to fatten their bottom line to the detriment of the patient.
This unfortunate occurrence takes place more often than one may imagine. According to a study published earlier this year in the Journal of American Medical Association, authored by the Schaeffer Center at the University of Southern California, overpayment by patients when copayments exceeded drug costs occurred in 23 percent of prescriptions dispensed. In other words, nearly one out of every four visits to the pharmacist results in a patient overpaying for their drugs because they used their insurance card instead of paying cash. This perverse outcome occurs more frequently when patients are purchasing generics (28 percent of prescriptions).
But don’t worry — PBMs/insurers make out like bandits 6 percent of the time when clawback is enforced on brand-name medicines. According to the article, patients overpaid to the tune of about $130 million during the period covered by the study. Not a bad return for PBMs/insurers. Lest you think this can’t possibly be true, this past month, PBS News Hour investigated the policy of clawback to learn why a patient had to pay a $285 copay for a $40 drug.
To help remedy the situation, over 20 states have passed laws to protect patients from overpaying for their prescription medicines. These laws prohibit the predatory practice of clawback and the use of gag clauses in contractual agreements with pharmacists by PBMs/insurers. However, state laws do not cover health plans under the Employee Retirement Income Security Act. Congress has to do that. Thus, it is heartening to see that congressional legislation has passed and is awaiting President Donald Trump’s signature to prohibit gag clauses in contracts between pharmacists and PBMs or insurers.
It is time for the United States to adopt policies that ease the ability of Americans to gain basic information about their health insurance coverage. It is time for all states to take a step in the right direction when it comes to health care policy and follow in the footsteps of Louisiana, Texas, Connecticut and the federal government by banning the practice of clawback and the pharmacists’ gag rule.
Robert Popovian is the vice president of Pfizer U.S. Government Relations.
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