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Mounting Pressure Could Result in Changes to Medicare Part D

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Mounting Pressure Could Result in Changes to Medicare Part D

November 21
19:32 2017

If you believe that drug manufacturers sell directly to pharmacies and the price we pay for the prescription drugs depends upon what the manufacturer charges the pharmacy company, then you have a lot to learn.

To begin with, most drug manufacturers negotiate prices, including discounts with insurance companies. Okay, that sounds positive, but then you also have another group of people who play a key role in deciding what the prices will be for many older people.

Have you ever heard of pharmacy benefit managers (PBMs)?

They are a whole group of multimillion dollar third-party corporations who negotiate prescription prices for commercial health plans, self-insured employer health plans and Medicare Part D plans. PBMs play a key role in how much out-of-pocket cost you pay for your prescriptions. Or to put it another way, they are primarily responsible for the drug formulary used by many healthcare insurers including Medicare Part D. They are the middleman who contracts with pharmacies and who negotiates not only discounts with drug manufacturers but also rebates. They are often directly involved with the processing and paying many prescription drug claims. It is estimated that PBMs were responsible for managing the prescription benefits for about 266 million Americans.

And guess how they make their money? Yep, by being the middleman.

However, their role and impact on drug prices and how much we pay out of pocket may be about to change. According to Kaiser Health News:

Medicare enrollees, who have watched their out-of-pocket spending on prescription drugs climb in recent years, might be in for a break.

Federal officials are exploring how beneficiaries could get a share of certain behind-the-scenes fees and discounts negotiated by insurers and pharmacy benefit managers, or PBMs, who together administer Medicare’s Part D drug program. Supporters say this could help enrollees by reducing the price tag of their prescription drugs and slow their approach to the coverage gap in the Part D program.

The Centers for Medicare & Medicaid Services (CMS) could disclose the fees to the public and apply them to what enrollees pay for their drugs…

While Medicare itself cannot negotiate drug prices, the health insurers and PBMs have long been able to negotiate with manufacturers who are willing to pay rebates and other discounts so their products win a good spot on a health plan’s list of approved drugs.

Federal officials described these fees in a January fact sheet as direct and indirect remuneration, or DIR fees.

In recent years, pharmacies and specialty pharmacies have also begun paying fees to PBMs. These fees, which are different than the rebates and discounts offered by manufacturers, can be controversial, in part, because they are retroactive or clawed back from the pharmacies.

The controversy is also part of the reason advocates, such as pharmacy organizations, have lobbied for this kind of policy change.

Rep. Earl Carter (R-GA) is a pharmacist who commented on the current situation with PBMs and drug prices:

It’s obvious something has to be done about this. This is causing higher drug prices for patients and taxpayers.

The fact sheet referred to above has set the stage for change, according to some, especially when it comes to Medicare Part D. They claim that the PBMs may have helped to keep the Part D premiums lower, but they are also blamed for higher and rising out of pocket costs.

If changes are made, it could mean higher Part D premiums but lower out of pocket costs. No one as yet has said if this will offset each other or exactly how it will affect the total cost for seniors with Part D.

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