On January 10, 2024, 22-year-old Cole Schmidtknecht of Appleton, Wisconsin, went to his big-box pharmacy and was told that a preventative asthma inhaler he had relied on for years was no longer covered by his insurer. He would have to pay over $500 for it — out of pocket.
Cole left without the inhaler.
On January 21, 2024, he died as a consequence of a severe asthma attack.
His father, Bil, who had the same insurance provided by the same employer, visited an independent pharmacy and was offered an alternative until the pharmacist was able to straighten out the mess. But it was too late for Cole.
This appalling tragedy underscores the pitfalls of our current health care system while highlighting the value of the personal care provided by independent pharmacies, which are now rapidly disappearing. More than that, it shows that the public needs to understand how we have reached such a state in our health care system that something like this could happen, and what is needed to stop it.
In the popular mind, Big Pharma is the villain.
True, they are not entirely without blame when explaining the high cost of medications.
However, would it surprise you to know that there are other bad actors out there?
That they’re among the wealthiest corporations on the health care landscape?
That they exert great control over the supply chain for medications provided to sick people at pharmacy counters?
That these enormously wealthy corporations rake in even more money than big pharma companies?
They must do something hugely important, wouldn’t you think?
Despite conducting no research.
Despite manufacturing nothing.
Who are they? What are they?
They’re the pharmacy benefit managers (PBMs).
The three biggest of them — CVS Caremark, Evernorth (formerly Express Scripts), and Optum Rx control 80% of prescriptions in America.
They control how much pharmacies get paid.
They control the menu of medications that are covered (or not covered) by health insurers.
They control how much a government program or a private citizen will pay for a drug.
That’s power.
The kind of power that puts a company in the top thirteen of the Fortune 500, with the kind of money that flows into political campaigns and lobbying.
These PBMs are co-owned by three of our country’s big health care insurers.
We routinely villainize insurance companies, not without reason.
But it’s the PBMs that generate massive revenues for the insurance/PBM complex.
A case in point? When insurer Cigna merged with Express Scripts, a PBM, Cigna’s revenues tripled.
A Bit of History
The first PBM was created in 1968. Its job? To handle the paperwork of claims.
Eventually, the role of PBMs expanded to control the insurers’ formularies (the menu of medications approved for coverage).
Eventually, the PBMs were doing it for everybody — including large employers and government-funded (taxpayer-funded) programs, Medicare Part D, and Medicaid-managed care.
In 2003, the U.S. Department of Health and Human Services extended a “safe harbor” for the PBMs — specifically, freedom from anti-kickback law in their dealings with big pharma. (Note: This was an extension of the “safe harbor” provided to group purchasing organizations, or GPOs, as discussed in my last piece.)
Much like the GPOs — the middlemen serving hospitals, nursing homes, etc. — the PBMs could refer to money collected under the protection of the “safe harbor” as “rebates,” a sanitizing bit of wordplay.
Moreover, the alleged intent of these “rebates” was that they would be passed along to patients. Do you think this happens? Ha!
This was the polite façade of justification for the kickbacks that big pharma would have to pay to the PBMs in what obviously became a pay-to-play mechanism.
The competitors among big pharma outbid each other to get on the formulary, via the “rebate” mechanism, to become the sole (or nearly sole) suppliers of many medications.
This favors the biggest among big pharma. They can afford the kickbacks.
Smaller manufacturers are unable to pay what’s needed to play.
A lot of companies are in this category. In 2022, 1,156 medicines were excluded from at least one of the big three PBMs’ formularies. That’s a nearly 1,000% increase in the number of excluded medicines since 2014!
Some of these excluded medicines have no available alternative for those patients suffering from cancer, multiple sclerosis, and other ailments.
The three biggest PBMs have even been known to exclude less expensive insulins from coverage. In this way, they have favored insulin accompanied by a heftier “rebate” — which, again, government monitors have not confirmed ever reached patients.
Patients end up stuck with paying the copay, which is heftier because it’s a percentage of something that was more expensive than it had to be.
Government agencies were supposed to monitor this arrangement so that it would not be abused and the “rebate” money would reach its intended targets, the public.
Surprise!
The government’s monitors have been snoozing for many years.
This is how we have arrived at where we find ourselves.
The Independent Pharmacist
PBMs also control the payment a pharmacy receives for the sale of a medication.
And it’s no surprise that CVS Caremark is less generous with an independent mom-and-pop pharmacy than with a CVS pharmacy.
This squeeze leads in time to CVS buying out Mom and Pop, leaving a community not only with less attentive care, but with more of its money flowing to CVS’s headquarters in Rhode Island.
In fact, you may never see the inside of the pharmacy run by Mom and Pop. PBMs steer patients to their own in-house pharmacies — the ones they own. In effect, they end up paying themselves for the medicines they approve.
It’s like some kind of money-laundering operation.
Robbing Taxpayers
Two large Medicaid-managed care organizations, Centene and Molina, each have their own preferred PBMs.
Consider Centene’s track record of honoring the public treasury. In the last few years, Centene has settled cases brought against it by 20 states for over $1 billion. Centene’s misdeed? Keeping more Medicaid money for themselves instead of paying pharmacists what the law required.
In the peculiar dialect spoken by the Centenes of the world, the money they retained for themselves is called the “spread.”
The reader will appreciate the role that polite, sanitizing language plays in the financial arrangements of corporatized medicine in the United States.
The “spread” is far less objectionable than “robbing Medicaid” or “robbing the taxpaying public.”
Remedies?
Has anyone tried to do anything?
In July 2020, President Donald Trump issued an executive order: “Lowering Prices for Patients by Eliminating Kickbacks to Middlemen.”
The order, aimed at Medicare, was to prevent any part of the “rebates” that big pharma pays to PBMs from being kept by the PBMs. Instead, “rebate” money was to be passed along as “discounts” to patients at the pharmacy counter.
This was projected to have saved seniors $93 billion over ten years.
But along came the Inflation Reduction Act of 2022, which suspended this executive order.
Poof!
The savings projected for the next ten years disappeared.
In Pennsylvania, a good bill was advanced to help with this problem. But at the last minute, poof! Changes were introduced, and the resulting law was anemic — by design.
The United States Congress has a number of bills floating around to reform the scandalous (but mostly legal) practices of the PBMs. In the next piece, I will write about them, the strongest and the weakest. I will write about steps you can take to protect yourself from being taken advantage of under this sick system.
In the meantime, remember the Schmidtknecht family of Appleton, Wisconsin.
Dysfunctional, even evil, financial arrangements created by our political-medical-corporate complex — arrangements not unlike those of a cartel — have inflicted death upon that family.
May the Schmidtknechts’ advocacy, born out of the grief they live with every day, lead to others being spared similar tragedy.
Marion Mass, M.D., is a practicing pediatrician in Bucks County, a leading member of the Free2Care movement, and a member of The Independence’s advisory board.
Reprinted with permission from The Independence by Marion Mass, M.D.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
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