Ginny Crisp, PharmD

This is the PBM playbook in three numbers. $409.81 is what the PBM “negotiated” for your plan, markup included. $398.16 is cash, no insurance in the picture. $13.86 is a coupon that bypasses the PBM entirely. The “insured” price isn’t the cheapest, it’s often the most expensive. Plan sponsors are paying that markup too. And until 2018, the pharmacist was legally forbidden from telling you that.

Last week I posted about how health insurance companies kill people and the government protects them from liability. I thought I understood how bad they are. I was wrong. Turns out PBMs own and sell some of the drugs they get to decide whether or not to cover. They claim it saves money. In theory yes. In practice, highly unlikely. But the system is intentionally too opaque to understand. So I'll explain what's happening by rebuilding it in a market everyone understands. Housing. Imagine you weren't allowed to own a house or rent an apartment directly. You go to your real estate agent and tell them where you work, how many kids you have, what you need. They find the right place. But neither you nor they can approve it. Only your housing insurer can. And you can't pick an insurer. Your employer does, and it pays them about $2,500 a month out of your check. If this market were normal, they'd hand you the $2,500 and you'd find your own place for far less. They'd hand you the $2,500 - except the government only leaves it untaxed if it runs through the insurer. Take it as cash, lose a third to taxes. And you can't ask your employer to just give it to you to buy your own place. The law won't let them. Now the part that matters. Nobody can rent or sell to you directly, only through middlemen called housing benefit managers. And HBMs only make money on rebates. So the monthly payment is $10,000 and landlord kicks $7,500 back to the HBM as a rebate and keeps $2,500. The cost was always $2,500. They have to charge $10,000 so they can pay the rebate. So landlords can't compete by building a better building - the HBM doesn't care about that, just the rebate. So landlords can only get on the HBM's list by inflating the rent so they can give bigger rebates. It gets worse. The HBM puts them on the list, but they'll only let you live there after you live somewhere else first. Somewhere with cheap wiring, thin walls and in the worst part of town with terrible schools. Somewhere you and your real estate agent would NEVER consider. But the safe one is off the table until you can prove something bad enough happened: Kids getting bullied at school? No way, get a therapist. Break in? Only if the police report says the door was locked. Fire? Only if the fire department is sure it was the wiring. Still not bad enough, though. Now the HBM is a slumlord. Builds the cheapest buildings, charges just below top rent, pays the rebate to itself. Fine, you think, at least it's a little cheaper than $10,000. But that was never the goal. Now that the HBM owns its own buildings, it turns to every other landlord and says: my building is the default for everyone and unless your rent hits $15,000 and your rebate hits $13,000 you're off the list. When the slumlord, HBM, and housing insurer are the same company real landlords can't compete, they can only comply. This isn't an abstract thought experiment. Last week I told you about two of my patients who didn't survive the bad building. That's this system. Swapping healthcare and drugs for housing and places makes it understandable. You and your doctor want you on the right drug at the best price. Nobody else cares.

My MD wrote a prescription he believes I need. He sent it to a local Walgreen’s to be filled. After a delay of one week Walgreen’s notified me the cost will be $409.81 and that insurance doesn’t cover it. I said “try again”. Another week passed and I went to Walgreens and asked why the delay? They said the insurance company sent a request to my MD asking for explanation. Tired of waiting I said “okay I’ll pay cash. How much was it?” After punching on the keyboard the clerk said $398.16. I pulled a printed coupon out of my pocket and said “….here’s a coupon from Walgreens that says the price is $13.86.” I paid Walgreen’s $13.86 for a prescription Walgreen’s told me would cost $409.81. I don’t know who is more screwed up, Walgreen’s or the pharma company that made the pills, or the insurance company that wouldn’t pay. But this crap is downright criminal.

High hospital prices are the reason your insurance is expensive. They’re the reason you haven’t gotten a raise. They’re almost entirely driven by government policy. We can fix this.