Let’s face it: the only reason we buy generic goods is to save money. (And when it comes to healthcare, there’s a lot that inevitably needs to be saved.)
This is especially true when it comes to prescription medications. While it’s nice to have a shiny, name-brand label on our pill bottles, we recognize that, in most instances, the ingredients of the “no-name” product are just as good than the name brand’s. And so, we select the generic to save a few bucks.
But a June 2nd article in Healthcare Dive suggests that generic-branded prescriptions aren’t as cost-effective as consumers might think. Here we go…
According to a recent white paper from University of California’s Leonard D. Schaeffer Center for Health Policy & Economics, consumers are overpaying billions of dollars for their prescription drugs due to “arcane” and “opaque” pricing practices from our nation’s largest PBMs.
The real reason you’re not saving money
If you need a refresher, PBMs negotiate drug prices on behalf of insurance companies. They connect insurance plans with wholesale pharmaceutical sellers, pharmacies, employers, and—let’s not forget—patients. And one of the ways PBMs claim to save consumers money is through generic brand drugs. Sounds like a good thing, right? Wrong.
The article reveals that these no-name brands aren’t just ‘not saving’ consumers money, in many cases, they’re more expensive than the name brand. Some consumers are overpaying for their prescriptions as much as 20%.
The numbers speak for themselves: the October 2021 U.S. Generic & Biosimilar Medicines Savings Report estimates that, in 2020, generic and biosimilar drugs saved the United States healthcare system $338 billion. Generic drugs account for more than 90% of prescriptions, but only 18% of drug spending in the country, according to the article. And yet, these savings aren’t benefiting consumers.
So, where does all this money go? It goes to the country’s three largest PBMs and their affiliated organizations—which are, to no surprise, some of the nation’s largest health insurers:
- CVS Caremark by CVS Health, a sister company of Aetna
- Express Scripts, owned by Cigna
- OptumRx, owned by UnitedHealth Group
Together, the three largest PBMs process close to 80% of all retail prescription claims.
How are PBMs pocketing this much money?!
“Clawbacks” and “spread pricing” are the approaches PBMs use to obfuscate drug pricing. Through these strategies, patients and pharmacies are billed higher than what drugs actually cost – and PBMs pocket the difference.
What’s more, these cost increases aren’t just a few bucks. The white paper estimates that these PBM practices have led to patients’ overpaying billions of dollars for their prescriptions.
What can we do about it?
A small silver lining is that PBMs appear to be coming under the microscope. They’re not only under Congress’s microscope, but also the Federal Trade Commission’s (FTC). Back in May, two senators introduced legislation that sought to prevent PBMs from using clawbacks and spread pricing and called for more transparency in reporting financial data, and in early June, the FTC announced an investigation requiring the six largest PBMs to turn over financial and business information.
This is all well and good, but will it lead to real change? Will legislators and regulators crack down – or bow out?
