Government to insurance agents: It’s time to stop preying on the elderly

Imagine your grandmother, ambushed in her grocery store parking lot by a salesperson pressuring her to change her Medicare coverage, a system convoluted enough to confuse just about anyone.

It sounds unbelievable, right? Unfortunately, it’s exactly what insurance companies are up to.

Insurance companies have spotted an easy target - seniors living on fixed incomes struggling to make ends meet while trying to make sense of Medicare – and are taking advantage of the situation, aggressively pushing private plans called Medicare Advantage on seniors.

When the companies switch seniors to different insurance plans without first fully explaining the change, it has caused some to lose supplemental coverage and physician access.

States currently don’t have the power to regulate the companies that issue these plans. Some argue that states should have the authority to do so, but insurance companies say they would rather see regulation at the federal level than have to deal with 50 states, each with a different set of rules.

Meanwhile, state officials say the only way insurance agents will come clean, and the only way they can look out for seniors, is if they have the muscle to make it happen.

States belonging to the National Association of Insurance Commissioners have received many complaints they can’t do anything about, leaving consumers to fend for themselves. Like figuring out Medicare, navigating the labyrinth of Centers for Medicare and Medicaid Services and state regulators is a daunting task.

The NAIC wants to set standards for marketing private plans that would be enforced by the states that adopt them.

In what could be interpreted as steps toward ending this swindling or politicians caving in to lobbyist pressure, the federal government proposed to ban insurance agents’ aggressive marketing of private Medicare comprehensive and prescription drug coverage last month.

The federal proposal does not address state regulation.

Senate Finance Committee Chairman Max Baucus of Montana was quoted by The Wall Street Journal as saying, " America's seniors have been pressured, prodded, preyed on and ripped off by shady marketing too often. I intend to get these bans into the law to ensure aggressive marketing tactics are quashed once and for all.”

PBMs cash in on contract loopholes

Each year, PBMs swindle governments, employers and insurance companies out of big bucks by deliberately misleading clients in their contracts.

Do you know what a “branded generic” is? It’s a clever term invented by PBMs. We all think “generic” means cheaper—right? Well, yes. But, no, not when it’s a branded generic.

Say what? Exactly. It’s an intentionally misleading term in contracts that bilk unsophisticated, trusting clients.

Manipulating the way they categorize drugs enables PBMs to line their wallets by charging higher brand prices for generics, classifying generic drugs as brand drugs in order to keep rebates/kickbacks from drug manufacturers rather than passing them on to employers or insurance companies, and essentially lying about generic drug utilization rates so they can attract more customers.

Most payers are unaware of this issue until after the fact, when they find out through an audit they’ve been bamboozled. At that point, there’s little they can do to resolve it. [We need to point out that too few employers know how to audit a PBM contract. More to come on this problem!]

The large PBMs’ response to this issue is that their manipulative behavior is the industry’s standard.  Well, no kidding, if by industry standard they mean always looking for a profit on the backs of those they are supposed to serve.

PBMs prey on the desperately ill

There is only one drug available to save your child’s life and only one seller. What price would you be willing to pay for it?

PBMs like ExpressScripts actually interviewed pediatric neurologists to determine how much they money they could get by with charging for a specialty drug for which they have exclusive distribution rights. Where’s the Federal Trade Commission? Or an even better question: What ethical compass guides the guys at ExpressScripts?

As reported by the New York Times, ExpressScripts arbitrarily raised the price of a vial of H.P. Acthar Gel, a drug used to treat a rare, severe form of epilepsy from $1,600 a vial to an astonishing $23,000!

The drug in question is part of a category called “specialty drugs,” medicines needed by relatively few people but are critical to the health of those people. So who picks up the tab for this extraordinary cost? Employers and patients, of course.

A PBM is supposed to negotiate with manufacturers to obtain drugs as discounted prices on behalf of employer-sponsored health plans. But when PBMs begin acting as exclusive drug distributors for lifesaving drugs, it’s an obvious conflict of interest. Along with rebates they get from manufacturers, this is just another way PBMs control access to medications, not because it’s actually best for patients, but because it is best for the PBM’s bottom line.

While these profit-mongers claim to keep healthcare costs down for their customers, exclusive drug distribution deals pose an obvious conflict of interest. Since specialty drugs have no generic equivalent and an ever-increasing chunk of PBM revenues comes from the monopolization of specialty drugs, it is hard for these companies to argue that they are looking out for the people they are supposed to serve.

PBMs profit at cost to employers and beneficiaries

While patients and employers pay the consequences, PBMs wallow in profits. If you're looking for a profitable investment and don't have any qualms about where your money comes from, take a look at pharmacy benefit management corporations. While patients and employers try to figure out how to cover soaring healthcare costs, the Big Three PBMs - CVS/Caremark, Medco and ExpressScripts - continue to profit.

CVS/Caremark reported a whopping $748.5 million in first quarter net income, an 83 percent surge over last year's first quarter.

ExpressScripts' net income of $178.3 million for the first quarter increased 35 percent over last year.

While Medco's net income of $270.2 million dropped 1.7 percent since last year, their first quarter 2007 figures may only have been higher because a popular drug that boosted last year's numbers has since been taken off the market. That said, their net revenue still increased 16 percent to $12.96 billion.

So how do they do it, especially when the rest of the economy seems to be stuck in a downward spiral? Mostly at the expense of patients and employers.

By hanging on to payments meant for pharmacists and hiding deals with drug manufacturers from employers,

the big three PBMs are only growing stronger as they spend their money lobbying to keep lenient regulations in place.

And why not? The current system only stands to benefit these greedy corporate middlemen.

PBMs weasel out of paying bills on time

If the companies known as pharmacy benefit managers were like the rest of us, they’d have lousy credit. But because they make so much profit by holding onto employer and patient money intended to reimburse pharmacists, the PBMs are fighting legislation to make them pay their bills on time.

PBM lobbyists claim that paying pharmacists within 30 days would be costly and hinder antifraud efforts. This argument—made by those who rake in record profits while facing lawsuits for unethical business practices—makes no sense. But when you take a look behind the scenes, it’s easy to see why they want to maintain the status quo. PBMs earn interest on the money they owe pharmacists, so as they see it, the longer they can hang on to it, the better. Meanwhile community pharmacies sometimes wait up to 90 days to be paid, and are forced to take out loans to pay their own bills.

Pharmacists electronically verify insurance coverage with a PBM at the time a doctor sends in a prescription or a patient brings in a prescription. So it stands to reason that the PBM can electronically transmit reimbursements to the pharmacy on time. But the PBMs are hanging onto every penny as long as they can.

Pharmacists are trying to cure this problem of slow pay through congressional action on legislation (HR 5182) that would require drug plans to pay all electronic clean claims within 14 days and to notify pharmacists within 10 days of problems in submitted claims.

Ultimately, patients will pay for this system of slow pay that only benefits greedy middlemen. When community pharmacies are forced out of business, patients will lose access to their local pharmacists, who offer lower-cost drugs and face-to-face care. And while patients end up in the emergency room for problems that could be avoided through commonsense prescription drug policy, PBMs will be laughing all the way to the bank.   

How Do We Disclose the Secret About Pharmacy Benefit Managers?

Try this. Ask the next 10 people you encounter if the know what a pharmacy benefit manager is. Your humble Blogmaster is willing to wager no more than nine will know. Now, don’t cheat and talk to people in the industry! But even that may not be a guarantee they will know what a PBM is.

Last spring we conducted a series of focus groups to determine just this question. Well, out of three groups—one with human resource managers, one with small to medium business owners, and one comprised of seniors—not a single person had heard of a PBM!

What should be done to make people aware that their access to medications is being controlled by a third party with pockets stuffed with our healthcare dollars?