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Chucking insurance: Why some pharmacists are cutting out the middlemen for generic drugs

Pennsylvania Capital Star


For a growing number of pharmacists, using insurance to pay for most generic drugs makes about as much sense as getting auto insurance to cover your oil changes.


Problem is, if you try to buy generics without using your insurance card at the vast, vast majority of American pharmacies, you’re going to pay a “cash” price that is wildly inflated by the crazy system of middlemen, rebates and cost-shifts imposed on pharmacies by the insurance system.


The result, unbeknownst to many consumers, is that your copayment for many generic drugs is often more than what the entire price would be if you could get them on a truly open market.


Consider:


An Ohio patient recently was making a $141 copayment through her insurance for 180 pills of Celecoxib, a generic version of the anti-inflammatory drug Celebrex. When she went to a new pharmacy that eschews insurance, she was able to get it for $23.05.


That means the copayment for the drug is six times as much as what drug cost on the open market — even when you add in a dispensing fee.


And the cash price in a pharmacy that takes insurance — which is almost all of them? About $1,165, or 50 times as much as if she could get it from a secondary wholesaler, the pharmacy equivalent of the open market.


That vast cost difference is only part of the reason why Nate Hux and a tiny number of other pharmacists in the United States are starting up pharmacies that exclude insurance companies and their middlemen: pharmacy benefit managers, or PBMs. Hux said it also allows him to be a better pharmacist because it’s a cleaner system that pays him only to practice his profession.


For patients, the savings and better health outcomes can be intertwined. Particularly benefitting are customers with no insurance and the growing number who are on high-deductible plans.


“They just don’t take medicine because it’s stupid expensive,” Hux said recently as he leaned against the counter at Freedom Pharmacy outside of Columbus. “So we opened the door for them to be able to take 90% of the medicine that’s out there at a reasonable price: $15 or less for a 90-day supply. Why do we need insurance for $15 for a 90-day supply?”


After long consideration, Hux in December opened Freedom Pharmacy in a suite next to Pickerington Pharmacy, which he also owns and which operates within the insurance system.


“We have a pharmacy living in both worlds, so we can help guide a patient to the best world for them to live in,” he said.


For patients taking some drugs, insurance is essential.


The most expensive medicines, brand-name and specialty drugs, are typically under patent and can cost thousands or even tens of thousands of dollars a month. So it makes sense to insure yourself against that expense the way you would your car against collisions or your house against fires and floods.


But as drugs go off patent, generic versions flood in, they undercut one another and drive prices on the open market down. But most patients can’t get them on the open market.


That means they can’t take advantage of savings that have been generated by a revolution in generic drugs.


In terms of volume, generics made up just over half the prescription drugs dispensed in 2005. In 2019, they made up more than 86 percent.


“The bottom line is brand name medicines are becoming less and less important,” Hux said.


You often wouldn’t know that when insurers and pharmacy-benefit managers are involved. For example, the anti-HIV drug Truvada last year went off of patent. But when 11 generic versions flooded the market this spring, the cash price at traditional pharmacies was actually higher than that for the patented drug.


The increase is caused by a tangled mess of manufacturer discounts to pharmacy benefit managers, non-transparent reimbursements by PBMs on which pharmacies often lose money, and their need to make money on cash prices to offset those losses.


But the bottom line is that a person can to go to Blueberry Pharmacy — a shop outside of Pittsburgh that doesn’t use insurance — and buy a generic version of Truvada for $25 a month. In a traditional pharmacy, an uninsured customer would face a markup on a baseline price of $2,100.


That’s what motivated Blueberry owner Kyle McCormick to open his insurance-less pharmacy last year.


“As I saw how inexpensive these medications are, there’s no way you’re not going to have a cost increase with insurance,” he said.


Greg Lopes, spokesman for the Pharmaceutical Care Management Association, the PBM industry group, last month insisted that the middlemen working for the insurers (often as part of the same corporation) bring value to all types of drug transactions.


“America’s pharmacy benefit managers, PBMs, have a long history of supporting generic drugs to lower prescription drug costs for patients,” he said. “The key to lowering prescription drug costs is through enhanced competition among brand-name drugs from generic and biosimilar medications.”


Be that as it may, the current system of manufacturer discounts is forcing arbitrary list prices ever higher and increasing the pain for many patients, critics say. It’s felt by the uninsured as well as the increasing numbers of those who are on high-deductible plans and who have to pay coinsurance, said Robert Popovian, a former Pfizer vice president who, as both a pharmacist and an economist, now works as a consultant and analyst.

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