PBMs <3 Counterfeit Drugs

Oct 27, 2022

PBMs pay pharmacies a reimbursement ceiling that is below the wholesale cost of goods floor for the retail class of trade to independent pharmacies. Counterfeiting ensues. TAP deserves a medal.

Ramblings of a Pharmacist

Benjamin Jolley


I have recently reviewed 4 separate proposed PBM-pharmacy reimbursement agreements for the 2023 plan year. Either through an effective rate, an egregious up front reimbursement, or a wholly crazy DIR fee, each of these PBM contracts lives in fairy land. Pharmacies are expected to obtain brand name medication at prices that literally do not exist in the retail class of trade. The result of this will absolutely be that counterfeit medications WILL make their way into the drug supply chain.


Why do I believe this? In July 2020, a pharmacy in Brawley, CA was attempting to obtain Biktarvy® for their patients at a price that would sustain the pharmacy practice – i.e. a price that is less than the insurance’s allowed amount. As the plan in question was reimbursing WAC minus a 6% discount, the pharmacy’s regular wholesaler was not able to supply the medication at this price. The pharmacy owner was approached by a secondary wholesaler, an outfit named Safe Chain Solutions, in Cambridge, MD offering to supply the medication in question at WAC minus a 7.5% discount ($2995.44 in 2020). Safe Chain Solutions furnished a Transaction History (aka pedigree) that started with a sale of the product from Gilead to “Drugeria” based in Puerto Rico. Believing that this was legitimate (as the PBM’s reimbursements have normalized such low prices), the pharmacy owner purchased the medication. Employed pharmacist Dr. Shane Jerominski, aka The Accidental Pharmacist, then duly dispensed it to his patient. To all external observers, the medication looked legitimate – it bore a normal label, it was the right size, the product tracing documentation was received in good order. Biktarvy® and other HIV drugs are generally labeled to “dispense in original packaging” so the pharmacist never broke the seal on the bottle. The patient, upon receiving the medication, opened the bottle and discovered that Tylenol 500 mg tablets had been substituted for the Biktarvy® – the bottle was counterfeit medication. Dr. Jerominski, being an upstanding pharmacist, investigated the situation by reviewing the DSCSA product tracing documentation and via a phone call to Gilead, discovered that all of the documentation was simply forged. Gilead informed him that they had never sold a single bottle to the wholesaler listed at the top of the transaction statement. (it’s not hard to make a fake transaction statement – Microsoft Word would be sufficient). Dr. Jerominski then duly reported this insanity to his Board of Pharmacy in California. The board responded by fining the pharmacy ~$1000 for introducing illegitimate product into the supply chain. Gilead, however, used information provided by Dr. Jerominski to identify and roll up 2 kingpins of a counterfeiting ring that was moving >$250 million in fake Gilead products, over 85,000 bottles of mostly counterfeit HIV medication. That represents 7000 patient-years of fake HIV medications, leading to loss of viral suppression, probable viral mutation and potential generation of resistance to Biktarvy. As a pharmacist who has personally worked with thousands of people living with HIV in my career, this personally infuriates me.


Where did this start? It started with the PBMs and health insurers unilaterally imposing a reimbursement ceiling lower than the PhRMA/wholesaler-set cost of goods floor, which led Dr. Jerominski’s employer to attempt to buy medications at prices that don’t exist in the legitimate market. In other words, the largest PBMs have decided that because they are large, they can impose a wholly one-sided 5-10% discount on branded medications onto pharmacies, and that is apparently worth the substantial risk that counterfeit medications bring to their plan members. (see for example, this representative of the Louisiana Office of Group Benefits, here arguing that since time is of the essence to ensure that OGB has a PBM on 1/1/2023, the CVS/Caremark contract that OGB previously negotiated must be signed as is, regardless of this issue).


The legitimate brand drug market has a pharmacy invoice cost price floor of WAC minus 2.5%, or AWP minus 18.75%. Any contractual terms that are more aggressive than that should be looked at with the utmost suspicion by any legislator providing any form of PBM oversight (medicaid, state employees), benefit advisor, broker, plan Chief Medical Officer and by all pharmacists. As I have explained in the past, it is possible to have brands invoiced at less than that, but that is due to illegitimate sell-side brand-generic product tying practiced by the largest wholesalers, not due to any actual purchasing efficiencies. (340b also exists, but its legislative purpose, while frustratingly vague, is DEFINITELY not to “fund PBM operations or lower health plan premiums”). I also think my experience here is related, and it targeted Lilly and BMS products, so this isn’t JUST a Gilead problem, and I don’t think the 2 kingpins are the whole scheme, and even if they are, until the ridiculous below-cost brand reimbursement scheme gets fixed, there will be more kingpins and more counterfeiting rings.

Hey Gilead (and PhRMA), I’ve got a proposal for you - donate the assets that you seized from the counterfeiting kingpins to a few places:



As FTC Commissioner Alvaro Bedoya recently said, “We cannot let a principle that Congress never wrote into law trump a principle that Congress made a core feature of that law. I think it is time to return to fairness. People may not know what is efficient – but they know what’s fair. It may be efficient to send a child home to wait two weeks for their cancer medicine. We all know it isn’t fair. It may be efficient to force cattlemen to sell their livestock to just one meatpacker. It may be efficient for Pine Ridge to go without baby formula. We all know that that’s not what fair markets look like.”


It may be “efficient” for health plans and PBMs to impose below cost reimbursements on pharmacies, but this sure ain’t fair. It ain’t fair for the pharmacies that meekly accept the losses. It ain’t fair for the pharmacies that get their inventory stolen. It ain’t fair for the pharma companies that make life-saving medications. And it sure ain’t fair for the >7000 patients who have suffered untold side effects and have seen their disease spiral out of control despite their efforts to comply with their doctor’s prescriptions. The PBMs have caused a whole lotta trouble through this scheme. Someone ought to belt them in the mouth. But I won’t...