Pharmaceutical Industry Administrators “Steering” Profits to Themselves, Denying Patients a Choice

By Andrea Hartley

We have all heard about wasteful spending; but many of us are unaware of how much wasteful spending occurs in the pharmaceutical industry resulting in higher insurance premiums.  Pharmacy Benefit Managers (PBMs) are third party administrators of prescription drug programs charged with the responsibility of processing and paying drug claims.  They are also responsible for developing and maintaining the list of prescription drugs to be covered by a particular drug plan, contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers.  Today, more than 210 million Americans  receive drug benefits administered by PBMs, but many are saying these PBMs are not only failing to curb waste but also receiving huge profits.  Many also feel that their health needs are ignored and their personal rights are being violated.

Pharmacist Bob Warner, of Americus Pharmacy, Allentown cites an example.  “I had a patient bring me $5,000 worth of Chemotherapy drugs that he obtained from a mail order pharmacy.  He said he was forced to buy a 90 day supply and when he tried to take the drug, he found that he just couldn’t tolerate it.”

Warner explained that PBMs mandate that patients purchase ninety- day supplies from mail order pharmacies.  He spoke of another patient who had to purchase a ninety-day supply of a diabetes drug at 6 or 7 dollars a pill.  He found that he was unable to tolerate the drug after a couple of doses.

What happens if a patient chooses to purchase his/her meds from a local pharmacy rather than mail order?    “Patients tell me they get harassed.  One guy said that he stopped answering the phone when he sees the number coming in,” Warner said.   Patients also often have to pay for the drug themselves or go without needed medicine because of slow mail order delivery and the company’s refusal to cover an emergency fill at a rival pharmacy.  Warner says that he has seen this problem getting progressively worse over the last 10 years.

Do the PBMs have a vested interest in where you buy your prescription drugs?

Each of the giant PBMs owns a mail order drug company resulting in a major conflict of interest according to John Norton,  spokesperson for the National Community Pharmacists Association

“PBMs get to make the rules by which retail pharmacies provide services to patients, and in doing so, the PBM makes it more difficult for competitors of their own retail pharmacies to operate.  This is obvious patient-steering and an effort to monopolize as much of the market as possible at the financial expense of plan sponsors and worse, patient care and attention we provide our customers,”   he said.  He explained that many patients rely on the counsel and expertise of their neighborhood pharmacist to help them with their medication, which they cannot get from the mail order pharmacies.


Here are the facts according to a report published by James Langenfeld and Robert Maness (2003) The cost of PBM ‘Self-dealing’ Under a Medicare Prescription Drug Benefit.


  •  PBMs make an average of $3.50 for every mail order prescription they fill compared to $1.40 for a prescription filled at their community pharmacy network.


  • Mail order dispenses cost-saving generic drugs only 30% of the time, while community pharmacies dispense generics at least 46% of the time.


  •  PBMs earn revenues from their own wholly owned mail order operations and two general sources:administration fees–including spread pricingpaid by managed care clients; and rebates, discounts, and other  monies that pharmaceutical manufacturers pay to PBMs to favor the manufacturers’ drugs.


  • Rebates are typically paid for single-source branded drugs but not for most generic drugs.  PBMs usually retain a portion and in some cases all of the rebate dollars that they collect from branded  manufacturers, giving PBMs an incentive to sell more single-source branded drugs, even when cheaper and therapeutically similar or identical drugs are available


  •  PBMs with mail order houses profit by repackaging prescription drugs and selling the repackaged goods at higher per unit AWP (average wholesale price) than the manufacturer originally charged.


Other concerns expressed by independent pharmacists and patients include:


  • In a May 24, 2004 press release, Mark B. McClellan, MD, PhD, administrator of the Centers for Medicare and Medicaid Services said, “Four out of five seniors and people with disabilities prefer to buy their drugs from their neighborhood pharmacies, where they can get face-to -face advice and quick access to their medicines from a pharmacist who knows them.


  • Pharmacists employed by PBSs do  not have to be licensed in the individual consumer’s state.   Therefore, if patients have a problem with a medication they received from a PBM, they have no recourse with the state board of pharmacy or other regulatory bodies that help protect consumers,
  •  Patients claim to have had their personal information used without their permission by PBMs.


  •   A US pharmacopeia study found that about one quarter of packages delivered through the mail were exposed to excessive heat, about 104 degrees which can diminish some medications’ effectiveness.


During a 2009 Senate hearing, an Arkansas pharmacist noted a case where the PBM charged a small, self-insured employer $126 for an employee’s prescription for Simvastatin, a cholesterol-lowering medicine. The pharmacy was paid $14. U.S. Senator Mark Pryor, who introduced a  national bill aimed at cubing anti-competitive practices and prescription drug costs said,  “Americans already pay far more for their prescription drugs than individuals in other countries. We don’t need middlemen adding to the problem,” Pryor said.  “My bill ensures that patients can at least choose which pharmacy to shop at and it increases transparency to prevent PBMs from overcharging patients.”

Independent pharmacies have been struggling to keep their doors open and some have been driven out of business.   Bob Warner and the 62,400 independent pharmacists throughout the country as well as the many patients who have been hurt by this present system are looking for a change.  They hope that you will take the time to contact your representatives in support of  Senator Pryor’s  national bill and Pa .House Bill: 511 and Pa. Senate Bill: 201 which would prevent insurers and PBMs from forcing consumers to use mail order pharmacies owned by the PBMs and insurers and prevent charging higher co-pays to consumers who use neighborhood pharmacies.