Craig Moore, the owner of Valley Pharmacy, spoke to the Boaz Rotary Club on Wednesday about the Fair Meds Act and pharmacy benefit managers.
Moore’s goal with his presentation was to help the crowd understand how PBMs are hurting and taking advantage of our healthcare system
“About 13 years ago, me and my wife had the opportunity to buy our store and we did. And oh boy it was a rude awakening for me. First year was pretty good, although we had to borrow a lot of money from the bank to buy our store. The second year, this system of fees came into existence in about 2013 called a DIR fee and they were imposed by pharmacy benefit managers (PBMs). My main objective here today is to help you understand what a pharmacy benefit manager is and how they are affecting and fleecing the healthcare system in our nation,” Moore said.
Moore started his presentation explaining what was a PBM and how they were created in the 1970s.
“In the 1970s, a pharmacy benefit manager achieved these objectives. They processed insurance claims through the pharmacy and the insurance provider. They created a drug formulary. A drug formulary is the drugs that your insurance allows you to get. There are a bunch of drugs out there and your insurance negotiates and decides this is what we want you to have. Then they go between drug factors and insurance companies to help determine what the price of the drug should be. On the surface, that sounds pretty good. This is what they did in the ‘70s and pretty much through the ‘90s.
In the ‘90s, we started seeing industries kind of start offering insurance drug benefits to companies and their employees. A lot of things were done on a cash basis, so if you went into the drug store and you got your prescription and handed the cashier the cash and you walked out the door. A lot of brand drugs were not on the market, as they are today. They changed in 2005, as Medicare Part D came into existence. Medicare Part D is when the drug benefit is tied to a Medicare insurance. So, the rule was that if you were on Medicare, you had to get a Part D drug plan. When that came into effect, about 43 million lives were added to the drug-insurance business. That is 43 million people who never had drug insurance got it for the first time. The government prioritized the program and they put the PBMs in charge of running the program, so the PBMs will be responsible for negotiating the prices and creating the formularies. It was a three-part system, as you had the retailer, the PBM and you had the insurance company. That is what they had up till 2005,” Moore said.
Moore explained vertical integration to the club and how it affects independent pharmacies.
“Vertical integration began to take place, and what vertical integration is when basically a company goes and buys all aspects of the market that they are competing with. In 2007, CVS, a retail pharmacy, purchased Caremark, which was a PBM. In 2007, CVS purchased Silverscript, which a lot of people in this room might have Silverscript as their insurance. They purchased Silverscript, which was primarily a Medicare Part D insurance. In 2011, UHC formed their own PBM, which was called OptumRx. In 2013, CVS gets back in the game, and they purchased a drug wholesaler that is called Cardinal Drugs. Can you see where this thread is going? They created their own drug sourcing called Red Oak Sourcing. In 2018, CVS acquired Aetna. Aetna was a medical insurance company. Aetna is big into Medicare advantage plans. In 2018, Cigna, a health insurance company, purchased Express Scripts, who was a PBM. So, we start to put the pieces together, we once saw a system where a middle person could balance the price of things and set the formularies, and the retailer comes wrapped up all in one thing. What do you see missing from all of these scenarios? An independent pharmacy. There are no independent pharmacies that own their own PBMs or their own insurance,” Moore said.
Moore explained how much revenue was being made by CVS, UHC and Cigna ESI, as they own 89% of the total PBM market.
“There are 66 PBMs in the United States. 89% of them are controlled by CVS Caremark, Optum UHC and Cigna Express Scripts. In our state, Blue Cross Blue Shield controls 90% of the health care market. Their PBM is Prime Therapeutics. In 2023, CVS made $357.8 billion of which $178.9 billion was generated by their PBM, which is CVS Caremark. United Health Care made $371.6 billion of which $226.6 billion was generated by Optum. Cigna ESI made $195.3 billion of which $152.5 billion was generated by ESI. We don’t know what Blue Cross Blue Shield makes. They are classified as a non-profit. They do not have to tell anyone what they make,” Moore said.
One of the several tactics used to displace independent pharmacies is DIR fees.
“One of the tactics was how can we displace the competition, so that we can control more of the market. I want to classify myself and the other independents as the competition. They use techniques to extract from our business and from your pocket. A DIR fee is an indirect remuneration fee. What it shows the government is this fee is part of Medicare Part D, it’s that we’ll take a percentage of all the pharmacies that participate in Medicare Part D and the percentages we take will be used to fund Medicare Part D. The problem with that is that they don’t have to be transparent about in the amount of fees that they take, and they don’t have to tell the government how much was used to cover Medicare Part D. When we first started, they were taking out five to seven percent out on Caremark fees. If we have people who take their prescriptions at a level of 95%, they only took 5% away from us off of every prescription we filled. The next year, the fees go up a little more from five to seven percent to nine to 11 percent. If you did everything right, you only get hammered for 9% this time. Each year, the fees just keep going up and up. That’s the DIR fee and every insurance has one,” Moore said.
With more than 300 independent pharmacies being lost in the last six years, Moore supports the Fair Meds Act, as it levels the playing field for everyone.
“We have lost 300 independent pharmacies in the last six years. The reason they are closing is because they are not being reimbursed for the good that they are selling. The ones that are staying afloat are the ones doing more than just filling prescriptions. They will have other side businesses going to just keep them afloat. As the fees go up, the more that the side businesses don’t cover the cost. We are at a crossroads in this state because we are dominated by PBMs. But in February, a bill was introduced that would level the playing field for everybody. The PBM couldn’t reimburse us lower than our costs,” Moore said.
The Fair Meds Act was unanimously approved by committee to move forward to the House, but the bill was withdrawn within a day approved by the committee. The Fair Meds Act would have enforced the following:
· Require a PBM or Pharmacy insurance to pay based on a benchmark index plus a dispensing fee for services provided
· Defines cost as an average acquisition cost that is transparent to the pharmacy, patient and employer
· Opens communication between patients and pharmacists with restrictions
· Removes exclusions and applies to all commercial drug claims
· Allows pharmacy access for patients without forcing the pharmacy to pay fees for participation or transmittal of prescription claims.
· Empowers the Alabama Department of Insurance to better enforce the Pharmacy Audit Integrity Act
· Allows employers the full benefits of any rebates generated by their employees’ drug claims
· Establishes the ownership of drug data files as belonging to the employer or payor of the prescription drug claim
To learn more about the Fair Meds Act, visit fairmedsala.com
