24 Sep Your Drug Coverage and Prescription Pricing

Your Drug Coverage and Prescription Pricing

A recent survey shows that one in four Americans struggles to afford their prescription medications. That’s because the overall price of medications has gone up 40% in the past decade. Even that figure is misleading, because generics have brought the cost of some medicines down while price of medications still under patent protection has gone through the roof, and drug manufacturers are constantly devising schemes to drive utilization of high-cost medicines.

We want to explain how we work within this unnecessarily complicated and profit-driven system to provide our members with access to more affordable medications.

Formularies and PBMs.

Typically, we try to avoid health insurance jargon, but knowing these terms is important to understanding your pharmacy benefits. You see, when drug prices started their meteoric climb, health plans realized they could buy medications for less if they worked together through entities called “pharmacy benefit managers” or PBMs. So instead of buying medications on behalf of 60,000 enrollees, CGHC’s PBM buys medications on behalf of about 65 million people and achieves lower prices because of it.

It’s the PBMs’ job to negotiate with drug companies for the best prices on different medication options. All these negotiations result in the creation of a list that details how medications are covered, otherwise known as a formulary. Our formulary describes different price levels, or tiers, for covered medications. The least expensive drugs will be in Tier 1, and the most expensive drugs will be in Tier 4. There may also be medications that are left off the list and not covered, because there are less expensive alternatives available.

PBMs negotiate with pharmacies in the same manner. Certain pharmacies will offer lower prices to fill prescriptions, especially if another competitor is left out of the network. So while it may be frustrating that some pharmacies are left out of our network, the silver lining is lower cost medications leading to lower cost health insurance.

A System in Need of Improvement.

This convoluted system is incredibly frustrating of course for those of us that simply want to pay a fair price for the medicines we need. And very little about drug manufacturers or PBMs is transparent. Although we use PBMs, we don’t like some of the tactics they use to maximize profits. That’s why we conduct regular audits to ensure our members are getting the cost savings they deserve.

Now that prescription spending is the fastest growing cost driver in healthcare, Congress is starting to pay attention. More than 50 bills have been introduced in Congress to address drug costs, including bills that 1) would impose greater regulations on PBMs, 2) that would require drugmakers to be more transparent about how they set prices and 3) that would give Medicare more power to keep costs down. In 2022, legislation was signed into law to lower the medications that Medicare pays for, but unfortunately that bill did not extend to the rest of us.

CGHC is strongly supportive of any idea that would inject more transparency into the drug pricing process, whether that applies to drugmakers or to PBMs. The more information we have, the better we can protect you from price gouging. We’re even more excited about ideas that would address the root cause of exorbitant prices for medications.

We are hopeful that a comprehensive drug pricing reform bill will be enacted by Congress before the end of the year. If you want Congress to act, please visit USA.gov/elected-officials to find the contact information for the elected officials that represent you in Congress. You can call their offices or fill out a contact form on their websites to urge them to do something about high drug costs for people that are not eligible for Medicare. Both parties will have to work together if we want to get something passed before the end of 2024.

Prior Authorization for Medications.  

Our last newsletter (link) went deeper into our reasons for using prior authorization, but we’d like to explain it again as it’s one of the most common questions we receive.

When the formulary is developed, work with pharmacists and specialists takes place to identify medicines that could be dangerous if taken incorrectly, and to identify lower cost, equally effective alternatives for high priced drugs. These are the medications that are most often subject to prior authorization, as indicated by a PA next to the medication on the formulary.

If you see a PA next to a medication you’ve been prescribed, please see it as a signal to talk with your doctor about alternatives that may be available and the risks of taking that medication. Most physicians will tell you that they don’t know the price of every drug and they can’t keep track of every health plan’s formulary, so having this conversation is critical to ensure you are being informed about risks and alternatives. When it’s possible, most doctors will be happy to prescribe medications that cost less for you but are equally effective in treating your condition.

Read our tips for saving money on your prescriptions.

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