Could Generic Drugs Be Even Cheaper Without The Middle Man?

The WSJ Health Blog says that pharmacy benefit managers are marking up the amount they charge your insurance company for generic drugs and keeping the difference. Often the mark-up isn’t too severe, but the WSJ has one example where the difference was over a hundred dollars.

Here’s how it works: Many health insurers contract with PBMs to administer their drug plans. Among other functions, the PBMs negotiate lower drug prices with pharmacies. But some PBMs, under a practice allowed by Medicare, then charge a higher price to health insurers and, ultimately, both the government and patients. Though the opaque practice is common in the private insurance market, Medicare currently has a proposal to curb it, because the agency is worried the tactic, by inflating patients’ drug costs, is speeding their pace toward the “doughnut hole” coverage gap.

The differences between what the PBMs pay pharmacies and what they charge the plans can range from a few dollars to well over $100. In one case, a Medicare patient filled a prescription for a 90-day supply, or 270 pills, of the generic antinausea medication prochlorperazine. The difference between what the PBM, Express Scripts, paid the pharmacy and the price that showed up on the patient’s explanation of benefits was $146.53.

Well, that seems high. The PBM told the WSJ that mark-ups over $100 are rare, and that the money is used to help ” fund programs that drive patients away from branded drugs and toward generics that ultimately still cost less.”

Generics Are Cheap, but They Could Be Cheaper [WSJ Health Blog]
(Photo: Daquella Manera )