Ann Lewandowski knows all about pharmacy benefit managers, or PBMs, the companies that are shaping the U.S. pharmaceutical market. His job as a policy advocate at drugmaker Johnson & Johnson was to educate patient and physician groups about the role of PBMs in driving up drug prices.
Armed with this knowledge, Lewandowski filed a potentially groundbreaking lawsuit in February. However, rather than targeting PBMs, she went after a large company that uses one: her own employer, Johnson & Johnson.
Lewandowski charges in her lawsuit that by contracting with PBM Express Scripts, part of insurance giant Cigna, Johnson & Johnson — which fired her in April — failed in its duty to ensure reasonable prices for its medicines to more than 50,000 American employees.
By choosing an Express Scripts plan, she charged, J&J cost employees “millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance.” higher rates, higher quotas and lower wages or limited wage growth.
Lewandowski, 40, from Madison, Wis., relies on expensive multiple sclerosis medication. She filed the lawsuit, she said, because she “had difficulty aligning the policy positions” she reported as a J&J employee “with the actions I experienced in as a user of a health plan.”
In recent years, PBMs’ opaque business practices have drawn criticism. The Federal Trade Commission is conducting a lengthy investigation into the three largest companies and sued them in September, accusing them of driving up insulin prices. Bipartisan bills in Congress would curb them. And companies such as Mark Cuban’s Cost Plus Drugs and smaller “transparent PBMs” have attempted to lure pharmaceutical companies and health plans away from their reliance on large PBMs.
But Lewandowski’s lawsuit hits a sensitive spot that had been overlooked until recently: the language of the 2021 appropriations bill that overhauled the Employee Retirement Income Security Act of 1974, known as the ‘ERISA. The original law was intended to stop fraudulent retirement plans.
His lawsuit relies on congressional language specifying that the legal requirement for prudent management covers health care as well as retirement benefits. By offering workers a health plan, employers are “doing you a disservice.” They take your money and invest it in your health,” said Barak Richman, a health law professor at George Washington University.
In July, a similar lawsuit was filed against Wells Fargo, and more lawsuits are in the works.
PBMs demand rebates and rebates from drug manufacturers, leading manufacturers to charge higher list prices, which can increase the price patients pay at the pharmacy. At the same time, retail pharmacies say PBMs are driving them out of business by paying them less than what the PBMs charge health plans — a practice known as spread pricing. Patients generally have no idea what they will pay for a drug, and neither do their employers, because many PBM contracts contain nondisclosure clauses.
Dissatisfaction with the status quo and fear of liability are driving employers to move from the “big three” PBMs to “transparent PBMs,” which leave their decisions about pricing and drug selection unspecified.
“We signed up nine Fortune 500 companies this year, or 1.2 million patients,” said AJ Loiacono, CEO of New York-based Capital Rx, a PBM founded in 2017. According to a recent survey, up to Half of American employers are considering switching.
Cuban, in an interview with KFF Health News, said he told hundreds of Fortune 500 executives in one-on-one meetings and in groups that they were paying too much for drug plans biased to gain weight. the portfolios of large PBMs.
“You’re being ripped off,” Cuban told them. “You don’t really understand the elements, and it costs you money and costs you well-being. And now you’re going to be sued. It’s not a question of if but a question of when. »
Put pressure on a purchasing cartel
The billionaire, who launched Mark Cuban Cost Plus Drugs in 2022 to shake up the byzantine $500 billion U.S. drug market, is convinced the Lewandowski trial and others will end the dominance of big guys PBM, which controls 80% of the sector.
Cost Plus Drugs charges a 15% direct markup with a small processing fee for the 2,500 drugs it sells, mostly generics, said co-founder Alex Oshmyansky. Its nearly 3 million customers – individuals, health plans and transparent PBMs – appear to be saving money in many cases.
Large PBMs say their purchasing power and exclusive access to information allows them to save insurers, employers and patients money. Critics say they siphon off as much as 25 percent of the drug market, or perhaps $100 billion a year, according to Oshmyansky. Critics say opaque strategies and conflicts of interest often result in the poorest and sickest patients paying the most for their drugs.
The three PBMs constitute a “buying cartel,” Oshmyansky said in an interview at Cost Plus’ Dallas headquarters, formerly home to Broadcast.com, the Internet radio company that made Cuba its first billion dollar when he sold it to Yahoo in 1999. “They buy all the drugs, they raise the prices, then they resell them. »
Richman and Amy Monahan of the University of Minnesota argued in a journal article this year that the Labor Department, which had previously focused its oversight of ERISA on retirement benefits, should issue standards for the use of funds intended for health care under the law.
When companies “enter into stupid contracts with insurers or PBMs, they are arguably violating ERISA,” Richman said. “Taking the law seriously would actually force employers, who spend half the money on health care in the country, to spend that money in very different ways.” »
Some drug market experts, however, doubt whether ERISA’s lawsuits will succeed. The PBM’s complex money channels “make it difficult to build a case,” said Stacie Dusetzina, a health policy professor at Vanderbilt University School of Medicine. “You may think your company is paying too much, but compared to what? »
ERISA’s industry committee, which lobbies Congress on behalf of some of America’s largest companies, is calling on Congress to give PBMs a specific duty to represent the financial interests of their clients, said Melissa Bartlett, vice-president. Senior President of Group Health Policy. This could force patients to sue PBMs rather than their employers.
Some large employers are already changing their drug insurance plans.
In 2019, Connecticut became CVS’s first PBM client to negotiate a transparent pricing structure. His contract required 100 percent of drug rebates to go to the state and eliminated price differentials.
The state decided to go further by seeking a new contract for its 214,000 employees this year, said Joshua Wojcik, director of health policy and benefits in the state comptroller’s office. Instead of cuts and rebates, he demanded the lowest net cost per employee.
Of the big three PBMs, only CVS bid for the contract. That beat out some “transparent PBMs” — a sign, according to Wojcik, that CVS at least doesn’t want to be left behind as more clients abandon the current PBM business model.
With this change, Wojcik estimates the state will save up to $70 million annually.
$13.40 versus $2,500
Changing drug benefit policies at large companies takes time, said Cost Plus’ Oshmyansky. Their PBM contracts last three to five years, so “you have to capture them during that year where they’re evaluating other options,” he said. PBMs pay the benefit plan consultants and brokers that large companies hire to run their businesses.
“We have this weird structure where multiple sclerosis and cancer patients are subsidizing everyone else’s drugs,” Oshmyansky said. Instead of creating a pool that distributes costs among everyone who has insurance, a “disproportionate burden is placed on the sickest members.”
Cost Plus generates the largest savings for its customers on approximately 50 extremely expensive generic drugs. The poster child is imatinib, a generic cancer pill sold at Cost Plus for $13.40 for a 30-day supply, compared with $2,500 at drugstores. A study by Dusetzina and colleagues found that Medicare could save $662 million a year simply by purchasing imatinib and six other generic cancer drugs from Cost Plus rather than going through a large PBM.
Ironically, however, most generic drugs are cheaper in the United States than in Europe or Canada – so cheap, in fact, that they are falling into shortage as companies go out of business or stop providing the necessary improvements to their production lines.
In response, Cost Plus launched a compounding pharmacy to make common generics and soon hopes to have a sort of “private reserve” of 70 to 80 products that it can make on short notice in the event of a shortage, said Oshmyansky.
Although the company has yet to reach purchasing agreements for most of the branded drugs, Oshmyansky and Cuban remain hopeful. Drugmakers, through their trade group Pharmaceutical Research and Manufacturers of America, have lobbied fiercely to rein in PBMs over the past two years.
At a September 24 hearing in which Sen. Bernie Sanders (I-Vt.) questioned Novo Nordisk CEO Lars Fruergaard Jørgensen about the high prices of diabetes and weight loss drugs Ozempic and Wegovy, the executive has expressed support for a more transparent pricing model.
“On average, for our products, we give 74 percent discounts to PBMs” for every dollar the company charges, he said. If, instead, “we simply paid PBMs a small fee for the limited risk and contribution they provide, I think patients would be significantly better off.”
| This article was reprinted from khn.org, a national newsroom that produces in-depth journalism on health issues and is one of the core operating programs of KFF – the independent source for health research, polling and journalism. health policies. |
