What is the Major Contributing Factor to the High Costs of Your Prescription Medications?

By N. Lois Adams, Consultant Pharmacist, MBA, HHCS HEALTH GROUP OF COMPANIES, LLC.

Have you ever heard of the “PBMs”?  No?  Well join the huge group of people- seniors, employers, workers-who look at me with the thousand- foot, stare in their eyes when I mention that term. I almost always get the answer. NO, what is that.

They, my friend, are the Prescription Benefits Managers or PBMs.. entities who have taken over a great part of the delivery of health care and have caused the prices to escalate upwards dramatically.

These entities started out as companies which only processed pharmacy prescription claims for insurance companies for you, the employee, the consumer, and any other person who received medicine which had to be billed to an insurance company so that they would receive reimbursement. Now they have morphed into gigantic entities which make billions of dollars at yours, the employers, the government entities, and others expense. They are no longer in the background of medicine. They are running many parts of it. 

They started out by touting that they ( the PBMs) would save all of us money.  They convinced the insurers that they could save money by establishing drug formularies whereby they divided medical problems into categories and developed drug lists which allegedly would contain necessary drugs in each category so that the physician could choose one of those to treat his or her patient. This was a beginning in medical practice whereby the physician could only choose a drug that was on “their” formulary in “their” designated category- no matter if that was the drug of choice to treat the disease or not. And how, in many cases, did they choose the drug in each category? Well, simple. They selected those drugs from manufacturers who gave them the largest rebates. It may not be the best drug for that particular condition but it was the only one “their” formulary would permit.

Then came the “Prior Authorization” (P.A) debacle which is the bain of the physician’s office staff’s existence. As a practicing pharmacist for over 50 years and the owner of pharmacy entities, I have interviewed people for employment at my organizations who have told me that most of those people who are engaged with giving decisions as to whether you need the drug or not, have no idea what the professional is asking them. They are , in many cases, only following a script and do not have any knowledge or training in medicine, the disease, pharmacology, etc. regarding the question as to whether the drug should be approved so that the physician may prescribe it..And the insurer can pay for it. It became my practice, if I was denied, to ask to speak with their Medical Director because “he had to be licensed somewhere.” This was only because the ill-informed gatekeeper would end the inquiry there and not allow any further questioning.

Their “off shore” offices were another step in obstruction. I was told that they would get back with me-perhaps in 2 weeks. My patient needed the medication and that was not sufficient. The next step was to “demand” that I be transferred back to the United States and I allowed  to speak with their medical director.  That usually was successful. The issue here also is that many office personnel or health care companies do not understand the lengths to which one must go to get approval and then what happens in that situation.? You get improper or inferior medical treatment.

It is necessary to enlighten my readers to let them know that the entire system and quality is based upon the number and amount of the rebates given by the pharmaceutical industry to the PBMs. Your doctor can no longer practice medicine in the way that he knows best…he has to engage the PBMs for permission to use the drug of choice. That is where we are today. It is “medicine by rebate”. I sincerely hope that our President will understand who the real culprit of rising medication costs is and take action to rescind the “Safe Harbor” laws so that the PBMs can no longer hide behind laws and regulations that only serve as a “Safe Harbor” for them…and certainly not for you and me.

I will be giving you more insight on the high cost of prescriptions for you and your family in a following column.  Please address any of your questions to me at , “ASK YOUR PHARMACIST”   Newsletter @AmacFoundation.org

Is New York’s “Surprise Bill” Law a Model for Federal Legislation? Yes and No.

There’s a big fight brewing in DC. No, not the one between the “Squad” and President Trump, which will likely be forgotten as soon as the outrage addicts need a new fix. The fight we’re talking about will have a much greater impact on Americans and is occuring between insurers and hospitals over various proposals to combat “surprise bills.”

The bottom line: as these behemoths clash, patients and physicians — those who need medical care, and those who deliver it — are set to be further marginalized.


We interrupt this blog post for a quick, but important, Action Alert: The bill furthest along at the moment is the Senate HELP bill, S 1895, which is now eligible for a vote on the Senate floor after passing through committee on July 8. A favorable (but unrealistic) CBO score has also been issued, increasing its chances for a vote. CALL BOTH OF YOUR U.S. SENATORS and tell them to VOTE NO on S 1895 if it comes up for a vote. The fastest way to reach your Senators is by calling the Capitol Switchboard at (202) 224-3121.


A review of the the major problems with S 1895, and others like it, can be found here, here, here, and here. S 1895, while containing potentially a few helpful provisions, is for the most part, putting band-aids on top of existing failed cancerous policies — band-aids that will exacerbate the disease instead of excising the tumor causing it. Not to mention that insurance-company controlled “unsurprise bills” may be a significantly bigger problem than surprise bills, as disintermediator Dave Chase explains. In addition the bill imposes system-wide rules to address a problem that is not as widespread as advertised. “The cost of surprise bills is a small portion of all health care spending…,” reports the CBO in its score of the bill.

In the physician community, some are suggesting that legislation like S 1895 would be acceptable if arbitration provisions are included. There is also a suggestion that a competing bill over on the House side, HR 3502 (Ruiz/Roe) is the compromise bill that can be supported, because it includes an arbitration option, and is modeled after New York’s heralded surprise billing regulations. [Update: similar arbitration provisions have now also been added to the House E&C legislation (HR 3630) addressing surprise bills.]

As state regulation of market transactions go, NY’s surprise billing law seems to cut a reasonable path. It prohibits abuses by hospitals without swinging the pendulum too far in favor of insurers. It permits a reasonable level of flexibility for patients and physicians to interact on mutually agreeable terms.

But does HR 3502 really mirror NY statue? Both do allow for arbitration, but aside from that the similarities meaningfully end.

Here are some key differences:

1) The NY law kicks in only with charges above 120% of the Usual and Customary, defined to mean “the eightieth percentile of all charges for the particular health care service.” That’s a pretty high bar that helps contain overregulation.
https://www.nysenate.gov/legislation/laws/FIS/602
https://www.nysenate.gov/legislation/laws/FIS/603

Conversely, HR3502 sets a benchmark price at “the commercially reasonable rate, as determined by the plan or issuer.” That is drastically one-sided in favor of insurers and likely unconstitutional, argues a former U.S. Solicitor General.

Yes arbitration may help provide relief from this extreme price setting to hospitals, and health systems, and “Wall Street-owned doctor groups” who can afford the expense, but arbitration is not a meaningful option for small or independent practices in many cases. 

2) Also the NY law defines “Surprise Bill” in a way that allows patients and physicians some ability to voluntarily opt out of limitations, if both parties desire, i.e.: “a surprise bill shall not mean a bill received for health care services when a participating physician is available and the insured has elected to obtain services from a non-participating physician….” And under the NY law, patients have to take an affirmative step to trigger a prohibition on balance billing: ” When an insured assigns benefits for a surprise bill in writing to a non-participating physician that knows the insured is insured under a health care plan, the non-participating physician shall not bill the insured except for any applicable copayment, coinsurance or deductible that would be owed if the insured utilized a participating physician.” https://www.nysenate.gov/legislation/laws/FIS/608

HR 3502, on the other hand, makes no provisions for patients and physicians voluntarily opting out of the provisions of the legislation, and in fact levies fines and penalties on physicians who don’t comply: “if such nonparticipating provider holds such individual liable for a payment amount for such an item or service furnished by such provider that is more than the cost-sharing amount for such item or service … such provider shall be subject … to a civil money penalty of not more than an amount determined appropriate by the Secretary for each specified claim.
https://www.congress.gov/bill/116th-congress/house-bill/3502/text

So back to the question posed in the title of this post, is the NY surprise billing law a model for federal legislation? If it were actually being followed as a model, the answer might be “yes.” But given the existing bills on the table in DC, the answer is “no.” NY law is being followed as a model in name only, not in practice.

Ultimately, the phenomenon of surprise bills signals a more fundamental problem: past failed policies that tilt the playing field in favor third party payment and punish direct payment limit patient options and are impeding market forces from squeezing out costs that line the pockets of administrators and middlemen who add minimal or no value. It is past time to level the playing field and unleash innovations that will allow those who care for patients the freedom provide an abundance of lower cost, high-quality options.

President Trump’s Salute to Patients Promises Welcome Changes, But Special Interests Attack

The week before President Trump’s Independence Day “Salute to America” he gave a welcome Salute to Patients when he signed Executive Order 13877, “Improving Price and Quality Transparency in American Healthcare To Put Patients First.”

As free market champion Dr. Keith Smith of the Surgery Center of Oklahoma puts it, the “healthcare industry price gougers wore out their welcome” and were “kicked to the curb by President Trump.”

What does the order do? Its first priority is to end “opaque pricing structures,” that “benefit powerful special interest groups, such as large hospital systems and insurance companies,” but, “generally leave patients and taxpayers worse off than would a more transparent system.”

But there’s more: the order also aims to “enhance patients’ control over their own healthcare resources” by removing failed policies that impede patients from choosing to enroll in affordable Direct Primary Care practices or alternatives to big insurance like Health Care Sharing Ministries.

The bottom line is increasing patient freedom and choice is the centerpiece of President Trump’s order. However, make no mistake, it is also put a target squarely on the middlemen who have for too long taken advantage of backroom deals made with government cronies. And the middlemen are already fighting back with a vengeance and working to undermine the order.

Underestimating the special interests’ power to stop the good changes is not an option. Just last week the Pharmacy Benefits Manager (PBM) cartel killed a White House proposal that would begin to unwind corrupt kickbacks that result in out of control price hikes for life saving drugs through disingenuous propaganda that lower prices would somehow raise premiums.

And the fake news campaigns about the Transparency Order are already underway.

Thankfully physicians like Chad Savage, MD are debunking the industry lies:

No price transparency will not lead to higher prices. “This is akin to saying the best way to get a good price on a new Sony TV is to have no idea what it costs. If someone said that to you, you would rightly reject any future advice from that individual,” explains Dr. Savage.

Marni Jamison of the Association of Independent Doctors exposes another tactic of those who oppose transparency:

The cronies are “lawyering and lobbying up, busily working to undermine, narrow and water down the order. They are not going to give up the hundreds of billions of excess dollars flowing their way easily,” she writes and shares examples of weasel words insurers and mega health systems will attempt to use to corrupt the outcome.

Middlemen’s fingerprints are already evident on the order itself to some extent. For example the “Health Quality Roadmap” provisions empower the use of failed quality metrics that are already driving up the cost of care with out any benefit to outcomes. “Practitioners who practice according to the needs of their individual patients, not according to some standardized protocol approved by a third party whose only focus may be efficiency and cost-cutting, may be penalized,” warns Twila Brase of the Citizens’ Council for Health Freedom and award-winning author of Big Brother in the Exam Room. AAPS, while overall supportive of the order, flagged provisions as potentially harmful to privacy rights and urged that “patients’ right to consent to use of their data must also be respected.”

Winning these battles for patients and those who care for them will not be easy! But nothing worthwhile ever is. So let’s all Salute President Trump for taking these bold steps by stepping to help him fend off the special interests trying to thwart his welcome orders.

Surprise medical billing is an insurance network problem not a federal government problem.

Ophthalmologist Jane Hughes, MD of San Antonio writes in:

Let’s all get on the same page about one thing. Surprise medical billing is not a federal government problem.

It is a contractual problem between the insurance company and the insured patient, largely because no one reads the fine print. It is also the direct result of networks.

There are steps that states can take that would largely solve the surprise billing that insurance has perpetrated and one step is mandatory price transparency.

On a federal level issues that are their purview involve Medicare/Medicaid. Mandatory price transparency and a concomitant rule that regardless of who is paying, the charge for the identical service or product at the same facility by or from the identical provider must be the same.

This is not price fixing as each entity decides the fee for product or service rendered. Just like a gallon of milk at a specific grocery store is the same regardless of credit card used, cash, or food stamps.

Gee, what a novel idea…

Faux Fight in DC Against the Financial Foolery in Healthcare

TO THE READER: In the bold, black font below, you see parts of a paper provided by Rep. Frank Pallone, Jr. (D-NJ, 3rd District), in anticipation of hearings held on May 9, 2019, by the Committee on Energy & Commerce of the U. S. House of Representatives. Rep. Pallone chairs the committee. The subject of the hearing? “Lowering Prescription Drug Prices: Deconstructing the Drug Supply Chain.”

In the bold, green font (with blue embedded links to sources), you see our comments on elements of the paper, and most particularly on points of fact that were omitted. Those omissions are telling. They reveal not only how politicians are beholden to very powerful lobbying interests inside the drug supply chain, but also the politicians’ lack of seriousness in fighting to reduce America’s disgraceful annual wastage of dollars spent on healthcare.  CLICK HERE FOR PDF FILE OF DOCUMENT WITH COMMENTS.

There are fighters, and then there are the faux fighters. The latter will choose the photo op and optics over substance every time. It’s what they do. It’s who they are.

Here is the lineup for the panels in the hearings of May 9 as found in the paper provided by Rep. Pallone.

Panel I

Justin McCarthy, Senior Vice President, Patient & Health Impact Group (Pfizer)
Kave Niksefat, Vice President, Value and Access (Amgen)
Jeffrey Hessekiel, Executive Vice President & General Counsel (Exelixis)
Amy Bricker, Senior Vice President, Supply Chain (Express Scripts)
Brent Eberle, Chief Pharmacy Officer (Navitus Health Solutions)

Panel II

Estay Greene, Vice President of Pharmacy Services (Blue Cross Blue Shield of North Carolina)
Lynn Eshenbacher, Chief Pharmacy Officer (Ascension)
Jack Resneck, M.D., Chair, Board of Trustees (American Medical Association)
Richard Ashworth, President of Pharmacy (Walgreens)
Leigh Purvis, Director of Health Services Research (AARP)


I. THE DRUG SUPPLY CHAIN

A. Pharmaceutical Manufacturers

Pharmaceutical manufacturers research, develop, and produce drugs. Once the Food and Drug Administration (FDA) approves a drug for purposes of marketing, the pharmaceutical manufacturer establishes a list price (also known as the wholesale acquisition cost). The list price could be determined by a number of factors such as research and development costs, demand, market competition, and manufacturing and marketing costs. Notwithstanding these factors, manufacturers may set any price they choose.

Manufacturers earn revenue when pharmacies, hospitals, and other health care entities purchase their drugs. For 2017, drug manufacturers earned about $324 billion in net revenues.

COMMENTS:

In his first sentence above, Rep. Pallone has identified who really does the serious work in the drug supply chain. All of the rest are middlemen, third-party payers, prescribers, dispensers, or consumers, none of whom are involved in research, development, or production.

The figure for total net revenues in the industry averages out to $1.7 billion for the over 190  pharmaceutical companies in the United States, which are responsible for 4.8 million American jobs, jobs that have been among the best in the country for years, attracting high achievers from the schools of the relevant sciences.

The U.S. is the preeminent manufacturer in the worldwide pharmaceutical market by a wide margin over its nearest competitor. We are also the largest market for pharmaceutical products. In short, the American pharmaceutical industry is indispensable. It’s where the most-serious work in the drug supply chain is done.

What is glaringly omitted from the “factors” that Rep. Pallone identifies as influencing a drug’s list price? The kickbacks (euphemized as “rebates”) that middlemen in the supply chain—the Pharmacy Benefit Managers (PBMs) and Group Purchasing Organizations (GPOs)—are allowed to accept without fear of prosecution.

The type of drug affects the manufacturer’s costs, as well as the revenue a company earns. Generally, small molecule drugs and their bioequivalent competitors, generic drugs, are cheaper to develop and have a lower list price than biologics. Biologics are made from living organisms and are used to treat serious diseases such as cancer, rheumatoid arthritis, and multiple sclerosis. Biologics often launch at very high prices, with annual list prices reaching tens of thousands of dollars. In addition, unlike the small molecule drug market, many biologics still do not face competition from biosimilar or interchangeable biological products. In 2017, biologics represented two percent of all U.S. prescriptions, but 37 percent of net drug spending. Generic drugs represent nearly 90 percent of all U.S. prescriptions, but only 23 percent of net drug spending.

In 2017, total retail drug spending was $333.4 billion, 6 which was a 0.4 percent year over-year increase from 2016. The key drivers of the slower growth in spending were a continued shift to lower-cost generic drugs and slower sales volume growth in some high-cost drugs.

COMMENTS:

Biologics received extended patent protection as part of a deal to grease Congress’s passage of the Affordable Care Act (detailed on pages 99-102 and 132-133 in America’s Bitter Pill, by Stephen Brill, an outcome for which Amgen alone spent $38 million on lobbying. NOTE: Amgen is represented in the panel testifying on May 9 before the House’s Committee on Energy & Commerce). And, yes, the makers of biologics enjoy large profits; the politicians who extended the period of patent protection to gain support for the ACA saw to that. There’s more than a little irony on display when we see politicians who supported the ACA vigorously (did they have to pass it to find out what was in it?) now pointing at BIG PHARMA as a notable culprit in the search for excessive cost in the drug supply chain. The top biologic, Humira, pulled in over $18 billion in revenues in 2017.

B. Pharmacy Benefits Managers (PBMs)

Pharmacy Benefit Managers (PBMs) are third-party firms hired by insurers, federal health programs, and plan sponsors to manage and administer the prescription drug benefits of health insurance coverage. This includes negotiating the prices of drugs to create formularies, as well as deciding which pharmacies are included in a plan’s network. Formularies developed by PBMs play a role in determining the cost of a prescription drug. The formulary is used to negotiate rebates and discounts with manufacturers, but it is also used to manage prescription drug use and spending by plan members. For example, cost-sharing, drug coverage, prior authorization, and member cost are all determined through a formulary. PBMs also negotiate fees and services with pharmacies, fees that may be based on each filled prescription.

PBMs mostly earn revenue by charging fees to the plans, pharmacies, and drug manufacturers, as well as by keeping a portion of the rebate they negotiate with the drug manufacturers. Increasingly, the large PBMs also earn revenue through the ownership of other parts of the supply chain including insurers and specialty pharmacies. Three companies cover about 70 percent of all prescription claims in the United States: CVS Health, Express Scripts, and UnitedHealth Group. According to one study, the PBM industry had an estimated gross profit of $23 billion in 2016.

COMMENTS:

The top PBMs have annual revenues in excess of $100 billion. This is astonishing. As of 2003, by grant of the Health and Human Services secretary at the time, these middlemen were granted a “safe harbor” from prosecution for receiving money (again, kickbacks) from drug manufacturers. In turn, the middlemen then identify the drugs that go into the formularies of the insurance companies. This is the very definition of a pay-to-play arrangement.

The arithmetic is breathtaking—the middlemen have revenues nearly 100 times as large as the companies that actually do the research and make the drugs.

When it comes to deconstructing the drug supply chain and figuring out where high and unreasonable costs are being injected into the chain, wouldn’t it make sense to mention this obvious fact when passing out white hats and black hats?

C. Insurers

Health plans assume the financial risk for the cost of drugs their customers receive as part of offering a prescription drug benefit. Insurers such as Medicare, Medicaid, private insurance companies, and self-insured large employers reimburse pharmacies, hospitals, and other healthcare entities for the amount paid to purchase the drug and related fees. The actual amount paid by the healthcare entities is confidential; therefore, insurers generally can only estimate the reimbursement amount.

Plans manage the prescription drug benefit by contracting with an external PBM, operating their own PBMs, or by purchasing drugs directly from manufacturers and dispensing the medication to consumers at their own pharmacies.

Plans earn revenue when the premiums they charge exceed the health care claims they pay. Plans use a range of strategies to hold down their drug costs, including through:

  • Formulary tiers (varying cost-sharing to encourage preferred or low-cost generic drugs);
  • Prior authorization (a physician must obtain approval from the insurer prior to prescribing a particular medication);
  • Step-therapy (a physician must begin treatment using the most cost-effective drug therapy before moving to more costly therapies if necessary); and
  • Cost-sharing and copayments (when a patient must pay a portion of health care costs not covered by the health insurance plan).

D. Hospitals and Physicians

Hospitals and physicians will often purchase large volumes of drugs from manufacturers or wholesalers through Group Purchasing Organizations (GPOs). GPOs help hospitals and physicians aggregate purchasing volume to negotiate discounts with manufacturers and distributors. If the physician or a hospital administers a drug to a patient, then the physician or hospital will use a buy-and-bill model, meaning that they will purchase the drug from a manufacturer first (sometimes with the help of a GPO), and then bill for it after it is administered.

Physicians and hospitals earn revenue if they are reimbursed at a higher rate than what it costs them to purchase and administer the drug.

COMMENTS:

The reader may have noticed that one type of middleman, the GPO, has been omitted from the drug supply chain. Did Chairman Pallone think that no one would spot that detail?

Professor Martin Makary, M.D. and Professor of Surgery at Johns Hopkins, has written in the Journal of the AMA, about the kickbacks that GPOs receive as the root cause of the over 150 FDA-documented drug and solution shortages that jeopardize the lives of Americas who are most in need of these medicines. Those shortages drive skyrocketing costs to patients, and increase costs to hospitals as both physicians and bedside nurses “MacGyver” their way around the shortages. We sure hope that the AMA board chair on the panel acknowledges the GPO role in juicing up the cost to the patient and gives Dr. Makary credit for speaking an uncomfortable truth. Dr. Resnick should also reveal what the AMA knows about the kickbacks and when they knew it.

Even pharmaceutical companies who make injectable drugs and solutions make it clear that their access to the market and attainment of market share hangs on their relationships with GPOs. This quote comes from the website of Amphastar Pharmaceuticals: “We currently produce approximately 15 injectable products while we continue to develop a portfolio of generic and branded products that target large markets with high technical barriers to entry. Amphastar’s long-standing relationship with the major group purchasing organizations and drug wholesalers in the U.S. enables it to establish significant market share upon the introduction of its new products.” Amphistar makes injectable Narcan (naloxone), which has recently been unavailable due to shortage.

To name just a very few, the following are among the drugs/solutions in short supply: epinephrine, saline solution, Pitocin, chemotherapy drugs, and insulin.

Philip Zweig has written about this very subject in the Wall Street Journal.

Multiple governmental panels have pointed to kickback to the GPOs as the root cause of these shortages and the related upward pressure on costs.

In a classic instance of the fox-in-the-henhouse paradox, Todd Ebert, the head of the GPOs’ lobbyist, the Healthcare Supply Chain Association, was a panelist on a FDA/Duke Margolis Center event to get to the bottom of the shortages. At the end of the hearings, Mr. Ebert declared that HHS can ask at any time to review the contracts between the GPOs and manufacturers of drugs that are or have been in shortage. During the symposium on shortages, attendees heard again and again that to get to the bottom of the shortages, transparency was key, and that the shortages were driven by economics.

Given that Congress in 1987 provided to the GPOs the “safe harbor” from prosecution for requiring and receiving “rebates” (again, kickbacks), reasonable people may get the impression that the Congress OWES the American people the effort of overseeing the contracts between the GPOs and pharmaceutical companies. They can make a modest gesture toward discharging that duty by calling upon HHS now to demand to see those contracts A few thousand government employees ought to be able to handle the job of reviewing the contracts.

Furthermore, those with financial acumen, but without conflicts of interest, should be present when those contracts are reviewed.

Anything less is staged faux fighting over the financial foolery embedded in the American healthcare system.

E. Pharmacies

Pharmacies dispense prescription drugs to individual patients. There are retail, mail, long-term care, and specialty pharmacies.

Pharmacies negotiate with manufacturers or wholesale distributors and purchase drugs at a confidential price. They will also negotiate with PBMs to be included in a PBM’s network and for reimbursement from the PBM, as well as other types of government and private payers. In addition to reimbursement for the cost of the drug, pharmacies will also receive a dispensing fee, which varies based on the payer. Total prescription dispensing revenues reached $423.7 billion in 2018.

F. Patients

Patients depend on prescription Rx drugs to manage chronic conditions, prevent, treat, or cure diseases, and reduce side effects from diseases or conditions. When patients purchase a drug, the price they pay may depend in part on how much of the cost their health plan covers. Patients are increasingly exposed to the list price of their prescriptions, either through their deductible or through a coinsurance percentage.

If the patient is not enrolled in a health plan, then they typically pay the full list price of a drug. Patients may access patient assistance programs and discount cards from manufacturers to lower the price they pay for a particular drug depending on criteria that is set by either the program or the manufacturer.

A recent poll found that a quarter of people who take prescription drugs say it is difficult for them to afford their medications. People are more likely to have difficulty affording their medications if they have monthly drug costs of $100 or more, are in fair or poor health, have annual incomes of less than $40,000, or take at least four drugs monthly. Three in ten 50-64 year olds report problems affording their drugs.

Comment: The saddest part of what appears to be another faux fight in the battle to help Americans have affordable accessible healthcare, is that Chairman Pallone, D-NJ, puts the patients last and the chosen panel is chock full of financial conflicts of interest. Who is speaking for the patients? We hope committee members ask pointed questions revealing who is making the big money and denying access to healthcare. Americans deserve the real truth and not another staged moment in American politics.

Another Whitewash of GPO Culpability in Soaring Costs and Shortages in the Drug Supply Chain?

By Marion Mass, MD and Craig M. Wax, DO

It appears the House Energy and Commerce Health Subcommittee on Health is preparing to whitewash the culpability of GPOs in causing drug shortages and soaring prices at its May 9th hearing on the drug supply chain.

Will any Committee Members be willing to ask any of the hard hitting questions below?

1. Multiple government panels have pointed to the GPO (Group Purchasing Organizations) role as a root cause of drug shortages. This is causing an increase in overall costs. In Chairman Pallone’s spin memo announcing the hearing they are spun as ” GPOs help hospitals and physicians aggregate purchasing volume to negotiate discounts with manufacturers and distributors.” Americans are NOT seeing lower healthcare costs. Can anyone on the panel tell me why the GPO are given this free pass?  Perhaps Chairman Pallone needs a new title: honorary spin doctor.

2. Hopkins surgeon and author Dr. Martin Makary has written about these GPOs as a root cause of shortages and high prices in the Journal of the AMA: https://jamanetwork.com/journals/jama/article-abstract/2708613 .

Dr Resnick, you are the board chair of the AMA. what can you say about Dr Makary’s assertions that the GPO are causing supply chain disruptions and cost increases to the American patient? Can you comment particularly on how this is affecting rural communities?

3. Dr. Resnick,  has any section of the AMA explored the issue of the legalized kickbacks, (AKA rebates) enjoyed by the GPO and by the PBM? [“Fun” Fact about Jack Resnick, MD: in addition to serving as chair of the AMA Board of Directors… Guess what? He’s also on the board of the scandal-plagued National Quality Forum.

4. Question for Kave Niksefat of Amgen. Your company makes biologic medications. These biologics were given significant patent protection via the backdoordeals used to pass the ACA as evidenced in Stephen Brills Book, America’s Bitter Pill. Can you comment on your company’s role in these deals? As a result of patent protection, how much money has Amgen made above what it would have had there been competition?

5. Question for Lynn Eshenbacher, as the leader in a large hospital network, can you comment on investigations led by state attornies general regarding Amgen (also on the panel) regarding how an amgen anemia drug was getting overfilled by hospitals and clinics who received kickbacks? This overfill was paid for by medicare dollar. Are you aware of any such overfills now going on, or any bonuses given to your hospital system or other hospital systems encouraging the use of specific products? This could be via manufacturers themselves or the GPO that arrange the contracts for 90% of hospitals. https://www.healthleadersmedia.com/finance/15-states-sue-amgen-alleging-kickback-scheme .

6. Question for Jeffrey Hessekiel: Your company manufactures cancer medications. It is well known that chemotheraputics are in shortage. Here is a piece written by Liza-Marie Johnson, MD, a pediatric oncologist and bioethicist at St. Jude Children’s Research Hospital in Memphis, Tenn https://blogs.stjude.org/progress/cancer-drug-shortages-threaten-most-vulnerable-patients/ . describing shortages of drugs for children with cancer. Are these shortages impacting rural hospitals worse than non-rural? Can anyone else on the panel back up her assertions that the shortages are of ” older but proven drugs that are no longer profitable for their manufacturers. The older and cheaper a drug is, especially a generic, the more likely it is to be scarce.” Why is this? What is the ROOT cause of these shortages? if physicians like her desire the drugs, and they are older medications not on patent, what exists to prevent a multitude of companies from making life saving medications.

7. For Leigh Purvis, please describe the AARP relatonship with the following:

With insurance companies: What percent of AARP revenue comes from selling Medicare Advantage plans, supplement plans and Part D Plans?

With United health care’s PBM Optum: Do you or anyone on this panel encourage Medicare Advantage members to have home care visits? Are you aware of these visits increasing risk scores and causing more medicare money on these patients? https://ip4pi.wordpress.com/2019/01/24/corporate-giants-and-the-government-revolving-door-create-costly-and-fragmented-care/

If The AARP has a  relationship with United: can you comment on the DOJ’s investigations into how United is defrauding taxpayers? https://www.acsh.org/news/2017/02/21/department-justice-believes-united-healthcare-defrauding-medicare-10885

8. Most important question for all on the panel and for every member of this committee: Do you support legalized  kickbacks for any industries in the hospital supply chain, notably GPO and PBM who do no research, no manufacture and no distribution? The kickbacks are costing the American Public $200 billion PER YEAR

$$$ from PBMs, GPOs, and Pharma Flooding into the US Congress DC Swamp

Desperate to preserve the status quo, PBMs and Pharma are flooding the swamp with dollars to buy the votes of policymakers.

Beverly Gossage of hsabenefitsconsulting.com sends in this intel from MorningConsult.com:

  • In the first quarter of 2019, the trade group representing pharmacy benefit managers, the Pharmaceutical Care Management Association, spent $1.49 million on lobbying, breaking its previous spending records for a three-month span, as pharmacy benefit managers fight a proposal from the Trump administration that would fundamentally alter the current rebate system. The pharmaceutical company trade group, PhRMA, spent $9.91 million during the quarter.

Dr. Marion Mass notes that the “1.4 million spent by PBM‘s in the first quarter represents three large companies mostly. That’s about a half 1 million for company… The trade group Pharma Represents approximately 35 companies… While it’s a lot to spend a quarter of a million dollars per company, it’s half the amount per company that the PBMs are spending.

Don’t forget the lobbying dollars, reminds Dr. Mass, that Group Purchasing Organizations, (PBMs’ cousins that manage medical supplies and drugs in hospitals) are lavishing on Congress to keep their kickback dollars flowing:

Just two examples of  GPO lobbying efforts include:

Vizient, Inc.:

vizient

https://www.opensecrets.org/lobby/clientsum.php?id=D000058234&year=2018

Premier, Inc.:

premier

https://www.opensecrets.org/orgs/toprecips.php?id=D000028434&cycle=2018

The propaganda and bribes from the PBMs and GPOs may be losing their effect as more and more members of Congress are waking up to the reality that middlemen are harming patients by driving up costs, in often hidden ways, without adding any corresponding benefits.

Senator John Cornyn, writes: “One family from the Dallas area told me they struggle to pay for their nine-year-old son’s insulin, which must be filled in a three-month supply, and costs $1,200. … Finding the culprit behind these increasing prices isn’t easy…. Part of the reason it’s so complex is because of the pharmacy benefit managers who negotiate prices with manufacturers. The rebates they provide should lower the price for patients, but the terms of these rebates, including dollar amounts and incentives, are often cloaked in secrecy, making it nearly impossible to follow the money. This lack of transparency for the consumer is alarming, and it’s clear that without action, the problem will only get worse.”

https://www.statesman.com/opinion/20190428/cornyn-prescription-for-affordable-medications 

[Sen. Cassidy is pictured in the above Tweet helpfully exposing the magnitude and growth of revenue retained by PBMs.  Will he be as outspoken about ending the graft by GPOs given that he is the top recipient of contributions connected to Premier, Inc. the GPO for 76 percent of U.S. community hospitals?

It is past time to excise the middlemen! One big step in the right direction would be to ensure that middlemen stop pocketing kickbacks disguised as rebates. Any discounts should be passed through directly to patients. And administrative fees paid to the middlemen must not be tied to list prices gamed to earn the biggest payment.

Here’s how to start unwinding the perverse incentives:

Help be a part of the solution. Learn more at: http://nomiddlemen.org.