What You Don't Know Is Hurting You: Pharmacy Gag Clauses Banned

PBM executives were disingenuous when it came to the gag clause that stopped pharmacists from informing patients that the cost of their medications would be lower if they paid for them “out of pocket” rather than through their health insurance.  This is yet another example of PBMs putting their financial self-interest ahead of their health plan customers and consumers/patients. 

What is disappointing is that it took legislation to force PBMs to make this change.  The operative question being why is that the case? Clearly, health plans were not supportive of the gag clause as it was costing them more.  Consumers and patients were not supportive as they were paying more.  Pharmacies were not supportive, as they were the ones being “gagged”, so to speak. 

The only parties that were seemingly okay with the gag clause were the PBMs.  This past summer while the PBMs stated that they supported the legislation through the Pharmaceutical Care Management Association (PCMA), their industry trade group, it all could have been avoided. 

An article published last week by CNBC shared PCMA President Mark Merritt’s recent statement, "PCMA strongly supports S. 2554, legislation that will ensure America's patients always pay the lowest cost for their medications at the pharmacy counter, whether it's the cash price or the copay."

The PBMs are the ones that imposed the gag clause through their contracts within their pharmacy networks.  These network agreements could have been easily amended to remove this contractual element.  A thirty-day exercise.  But they didn’t do it.

The reason why is simple.  Acknowledging and proactively changing their contracts would lead to a level of transparency that their antiquated business model cannot afford.   They are working to stall change on this and many other self-serving business practices.  This is disingenuous and not a good picture of honest business.

There are additional self-serving practices by the PBM middlemen that need to be exposed in order for the U.S. to avoid having the highest drug cost of any developed country in the world.  Providing transparency into how PBMs have been operating will contribute to the necessary exposure of the following practices that will ultimately prove the desperate need for change:  

  • Exposing the difference between the cash price and what patients are paying at point-of-service
  • Exposing the difference between the cash price and what PBMs are charging their health plan customers.  This “spread pricing” gap was outlined in a recent Bloomberg article, “The Secret Drug Pricing System Middlemen Use to Rake in Millions”.     
  • Exposing situations where PBMs are setting drug prices in their “affiliated/owned pharmacies” in a manner that pads their profits
  • Exposing the Average Wholesale Price (AWP) inflation game they are perpetuating in order to ensure they meet their discount guarantees and secure additional back-channel rebates from drug manufacturers
  • Exposing the manufacturer administrative fees, clinical fees, and inflation protection fees reclassification that allows them to retain them rather than passing them onto their customers
  • Exposing the drug type (brand/generic) reclassifications that allow them to meet their discount guarantees and avoid guarantee payouts

All of these activities strongly benefit the PBM at the expense of their health plan customers and patients/consumers.

Pulse8 is offering a solution that will assist health plans/payers as they evolve the relationship with their PBM – Formul8.  Formul8 brings transparency to pharmacy costs and provides the tools necessary to affect positive change.  To learn more about how Formul8 can help your pharmacy program, contact us today to chat with one of our experts or for a live demo.

In an article published last week in The Capitolist, Mr. Ciaccia, a former pharmacy manager and pharmacy lobbyist said it very well, “PBMs are only as bad as you allow them to be, and the same could be said for all members of the prescription drug supply chain. Transparency and accountability are necessary preconditions to rid the market of any bad actors.”

We could not agree more.

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