As a leader of Plumbers UA Local 98, we are providers of a skilled workforce to Michigan’s biopharmaceutical industry, helping to construct needed research and manufacturing facilities to help produce and discover new cures. In providing this work, our members benefit from the health and welfare benefits connected to these construction jobs.
Our members build the facilities where new medicines can help treat costly diseases. As union representatives, we also need to pay attention to the cost of coverage.
Out-of-pocket health care costs rose by 3.9% in 2016, according to a new report by Health Affairs. That was the fastest rate of growth in nine years. And in 2016, national health care costs hit a new record — consuming about 18% of the GDP.
Everyday consumers are struggling to keep up. Two in three Americans believe that lowering out-of-pocket costs should be a “top priority” for lawmakers. Almost as many believe that lowering the price of prescription drugs should be a “top priority.”
While these concerns are valid, it is important to consider the interplay of entities that play a role in getting medicines from the manufacturer to the pharmacy counter and how each contribute to cost for patients.
Our union belongs to the Pharmaceutical Industry Labor-Management Association, an organization that advocates for union jobs and innovation in the biopharmaceutical industry. Recently, PILMA studied the supply chain for medicines and explored several ways to find savings for patients and plan sponsors.
They begin with little-known middlemen called pharmacy benefit managers, or PBMs.
Essentially, the role of PBMs is to negotiate with drug makers on the price insurers will pay to have a drug included in their formulary. Nearly all prescriptions filled through insurance are processed by PBMs, which means they have market power to demand steep discounts or rebates from manufacturers who might otherwise be left off insurer formularies.
In theory, that’s supposed to lower prices for patients. In practice, PBMs do not necessarily pass on those savings to patients at the pharmacy counter. In fact, sometimes it means that patients actually pay more if they fill a prescription through insurance than without it.
Let’s say a patient in Roseville has a prescription filled for a brand-name blood pressure medication. The PBM has negotiated a price with the drug maker that also includes a rebate paid to the insurer issued sometime after the patient fills the medication at their pharmacy.
For example, the list price on a medication is $80. The pharmacy first collects the patient’s co-pay of, say, $40 and then collects $40 from the insurance company.
But the payment lifecycle doesn’t end there. The manufacturer then issues a coupon to the insurer, say in the amount of $50. The PBM retains part of the rebate for itself and then gives part of it to the insurer. It doesn’t give any to the patient, who still pays the $40 copay, regardless of the rebate. In the end, the patient ends up paying more than the insurer did. Meanwhile, the PBM makes a hefty profit.
It has just recently come to light the opaque flaws in the drug supply system and potentials for abuse. Legislators in Washington and throughout the country are catching on and looking into the unscrupulous practices by PBMs that places undue financial burden on patients rather than helping them afford needed medication.
According to an article in Bloomberg, “at least three state attorneys-general are investigating PBMs, in addition to other state probes looking into how the companies contract with Medicaid and other programs.”
In Kentucky, the state attorney general has launched an investigation into PBMs after a state report showed that they took $123.5 million in fees from Medicaid.
Similarly, Ohio’s attorney general sued UnitedHealth alleging it overcharged the state by more than $15 million over several years in the state’s workers’ compensation plan.
And last year, Connecticut’s comptroller announced plans to eliminate opaque fees by PBMs in the state employee plan.
The Department of Health and Human Services recently proposed a new rule exploring how HHS could share more rebates with seniors enrolled in Medicare Part D, the prescription drug benefit program. This new information could go a long way toward helping seniors in the Part D program lower their out-of-pocket costs.
This is important work. Managing one’s health is tough enough. Michigan patients — including those who help construct facilities to provide needed cures — deserve relief at the pharmacy counter. By passing along discounts and rebates on drugs, PBMs can provide this relief.
Jon DeRoo is the financial secretary/treasurer at Plumbers Local Union 98 and a trustee on the Anchor Bay School District Board of Education.
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