For at least one drug, the largest insurers are forcing Medicare patients to buy the most expensive

In theory, the goal of managed care is to save money by negotiating with providers for lower prices. So it would appear that the largest managed care providers would use their influence to negotiate the lowest prices with doctors and hospitals and for drugs.

But for at least one drug, the largest Medicare-managed care companies are forcing most of their patients to buy the more expensive version, according to an analysis released last week. The reason could be that the big healthcare companies are not only big insurers, they also profit from the management of pharmaceutical benefits.

The report by 46brooklyn Research, used federal and other data from the third quarter of this year to analyze which versions of a particular drug were available to participants in Medicare Part D, the managed care portion of the government’s health care program for Americans. over 65 years old.

The analysis looked at versions of dimethyl fumarate, a drug for multiple sclerosis (MS). Until the end of 2020, the only version available in the United States was called Tecfidera.

So-called “branded” drugs generally have exclusive market access until their patents expire. This allows drugmakers to charge hefty prices – more than a list price of $ 8,000 per month in Tecfidera’s case – in part to recover research costs.

When the drug’s patent expired in late 2020, cheaper generic versions hit the market, many with list prices under $ 900 per month and some costing as little as $ 40 per month when purchased from pharmacies operating completely outside the insurance system.

But even with much cheaper versions available, four of the seven largest Medicare Part D insurers forced their customers to buy the most expensive brand name drug, according to the 46brooklyn report.

The largest seven – Anthem, Cigna, CVS, Centene, Humana, Kaiser, and UnitedHealth – cover 85% of Part D patients. And as part of their plans, almost 60% of MS patients had No choice but to buy branded Tecfidera, $ 8,000 a month if they wanted their insurance to cover it, according to the analysis.

The four insurers that only covered the Tecfidera brand – Humana, CVS, Centene and Anthem – did not answer questions for this story.

And even for the 40% of patients allowed to choose generics, almost all found them at the lowest level of their regimen’s formularies. This meant that MS patients often had to pay 25% of a hugely inflated price out of their own pocket if they wanted generic versions of the drug, according to the report.

Why would the plans do this?

A big reason might have to do with the affiliations of Part D companies with pharmacy intermediaries known as Pharmacy Benefit Managers or PBMs. Intermediaries work on behalf of insurers to create pharmacy networks whose reimbursements are determined by the PBMs.

CVS, Cigna and UnitedHealth are each affiliated with one of the three largest PBMs in the United States and combined, they are estimated to control well over 70% of the PBM market. In addition, each of the other four big plans in Part D has its own affiliate PBM, often outsourcing some of its business to one of the big three, said Antonio Ciaccia, CEO of 46brooklyn and former lobbyist for the UK. Ohio Pharmacists Association. .

Importantly, another function of PBMs is to negotiate discounts from manufacturers of branded drugs. Manufacturers offer PBMs big discounts in return for PBMs giving their drugs favorable treatment on their formulas – lists of drugs covered and to what extent.

The big PBMs say the discounts benefit their customers because they pass most of the discounts through. But the system is shrouded in secrecy and it is often not clear how much the big companies are keeping to themselves.

It is widely accepted that drugmakers are raising list prices to reflect the ever-deeper discounts they are giving to get favorable treatment from the PBMs that represent so many millions of customers.

An article from the Schaeffer Center for Health Policy and Economics at the University of Southern California found that every dollar in rebates given to drugmakers results in a $ 1.17 increase in list prices. If you’re covered you don’t have to pay that price, but it does affect how much you pay if you’re uninsured, or once you’ve entered the infamous Medicare. “Donut hole” – the point at which the beneficiary has to pay a much larger share of the costs of the drugs. The point at which a person currently enters the donut hole is after spending $ 4,430 in any given year.

In other words, instead of saving money for the system, managed care companies could somehow increase the cost of care.

“The discounts create distorted incentives for plans and PBMs,” Ciaccia said. “They often have to hunt them even if it affects the affordability of downstream patients.”

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