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Smoking Gun: Mail Order Pharmacy Pricing Scam?

by John Norton | Dec 04, 2015

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The business model of pharmacy benefit manager (PBM) corporations is predicated on exploiting and profiting from an environment lacking transparency and regulatory oversight. The cost-saving narrative spun by PBM corporations to health plan sponsors, patients and the government is often titillating, albeit nearly impossible to verify, but occasionally the unvarnished truth comes out.

For example, a peek behind the curtain of PBM corporation spread-pricing was provided by Fortune magazine's Katherine Eban in her blockbuster investigative piece called "Painful prescription: Pharmacy benefit managers make out better than their customers" two years ago. The National Community Pharmacists Association (NCPA) has highlighted the article as part of our PBM reform advocacy efforts at the federal and state level.

Now thanks to investigative producers Jay Olstad and Steve Eckert of NBC-affiliate KARE-TV 11 News in Minneapolis, Minnesota, we have a shocking illustration of how mail order pharmacy can cost much more than their brick and mortar competitors. The powerful piece that aired on November 18, 2015 is called "What's the real cost of prescription drugs?"

Olstad and Eckert offer viewers a case of mail order price gouging that might make infamous Turing Chief Executive Martin Shkreli say, "That's outrageous." The piece centers on the experience of drug customer Curt Burshem.

One of his family members needs Mycophenolate Mofetil, a drug that helps with a kidney disorder...Burshem said his family's prescription price nightmare began in March with a visit to a CVS Pharmacy in Maple Grove, Minnesota to fill the initial 30-day prescription...The total price was $104. That equals about $.87 per pill...But when it came time to renew the prescription, the CVS-administered plan recommended ordering a 90-day supply through the mail to save money.

What happened next is a textbook example of "sticker shock," where a person is prone to double-takes to make sure the price they are seeing is correct.

"Caremark is saying it's a $2,300 drug," Curt said, pointing to the bill for the 90-day mail order.
Instead of charging $.87 per pill, CVS Caremark was charging $6.62 per pill for the same medicine.

Burshem then did his due diligence by checking to see what the cost of the drug would be at other nearby pharmacies.

At a nearby Park Nicollet pharmacy, he found he could buy the same 90-day supply of the same drug for just $259.02.

The KARE-TV 11 investigative team learned about this pricing outrage and decided to survey other pharmacies. Time and again the pricing discrepancies held up.

Next the producers contacted Stephen Schondelmeyer, a professor of Pharmaceutical Management and Economics at the University of Minnesota, to get his expert opinion.

"What's happening to Curt has probably happened to many other people in this community," said Professor Stephen Schondelmeyer. "This particular example is a perfect example of a shell game," Schondelmeyer said. He says it illustrates a dirty secret in the prescription drug business.

Schondelmeyer explains that PBM corporations stack the deck in their favor by simply becoming the exclusive prescription drug provider for a health plan's patients. That sounds harmless enough, but the result is that patients are stuck with the network dictates of PBM corporations that will withhold their end of the co-insurance bargain if the patient is determined to obtain it from a pharmacy outside of their network or fill a script the PBM has not authorized, resulting in much higher out-of-pocket costs.

Unfortunately, while PBMs gleefully tout their clout in negotiating drug discounts, they aren't required to disclose how the process plays out or whether they pass on those discounts to patients. As a result, PBM corporations can actually raise prices for the patients using the health plans they administer instead of lowering them, which clearly happened with Burshem.

I mentioned earlier that PBM corporations lure patients to use mail order pharmacies for 90-day prescriptions by doing dropping the copay for one month. Burshem didn't even experience that supposed advantage.

His bill from CVS Caremark shows even with insurance covering most of the total cost, Burshem's copay was $476.55...That's almost double the price—without insurance—at the local pharmacy Burshem found. The full price there was just $259.02.

The only solution is more transparency. PBM corporations must be required to disclose more information so patients and payors can determine if these giant drug middlemen are truly saving money or are simply lining the pockets of their shareholders.