America, its Pharma Middlemen, and Legal Thievery

The pandemic of 2020-2021 waxes and wanes, leaving death and destruction behind. While millions of ordinary Americans have taken financial hits and while countless small businesses have folded, the salaries of CEOs in certain corners of the healthcare industry have skyrocketed.

Michael Neidorff, CEO of Centene, a provider of government-funded health plans, saw his salary leap by nearly 60% in 2020.  That was nothing compared to what happened to CEO David Cordani of Cigna. His salary exploded by an eye-popping 491%.

Nothing to see here, people. Keep moving. It’s all perfectly legal. Right?

Would it be impertinent to ask about the revenue streams that support such compensation? Where does the money come from?

Among the little-understood “cash cows” in the American healthcare economy are the Pharmacy Benefit Managers (PBMs). They’re so huge that they’ve bought up insurance companies. Or they’ve become so attractive that gigantic insurance companies and national pharmacy chains have bought PBMs or merged with them.

The electorate needs to know their names, and to get wise about them, what they do, and how they do it.

Until that happens, there’s zero hope of moving the politicians to do what’s needed to drive down healthcare costs, particularly drug prices. If threatened in the slightest way by probing flashlights that could expose them, the PBMs have deep war chests to pay to switch the flashlights off.

The PBMs, you see, are middlemen with colossal influence over which manufacturers of medicines survive or die. PBMs define the formulary, the list of drugs that are “covered by” insurance. These PBMs have their nimble fingers in the pockets of Americans in multiple ways.

• PBMs collect direct and indirect remuneration (DIR) fees off of each prescription, largely hidden fees that are passed along to consumers and taxpayers.
• PBMs keep part of the money paid to them through Medicaid plans for prescription drugs instead of passing full payments to pharmacies. They pocket this “spread.”
• PBMs squeeze small pharmacies out of business, building the road to consolidation, reduced competition, and monopoly, sometimes to the obvious detriment of public health and reduced service to the public.
• PBMs’ monopolistic “vertical integration” of the businesses that create their streams of revenue creates textbook conflicts of interest. Example: The pharmacy the PBM owns has nurse practitioners — employed, say, in “minute clinics”— who prescribe meds that the PBM approves for the insurers the PBM owns. Those nurse practitioners can recommend to patients the purchase of over-the-counter products in the same pharmacy. CVS, Aetna, do you recognize yourselves?
• PBMs collect kickbacks. How did that become legal? In 2003, our government (actually unelected bureaucrats) extended a “kickback exemption” enjoyed since 1987 by the Group Purchasing Organizations (GPOs) — the huge middlemen of medical supplies in America — to the PBMs. (The curious will find that in 42 U.S.C. 1320a-7b(b)(3)(C).) The Secretary of Health and Human Services back then, a Republican, now sits on the board of the aforementioned Centene. The onetime Speaker of the House, a Democrat, is also on Centene’s board. Their compensation is handsome. Holy revolving door, Batman!
• PBMs are pushing for “equivalent reimbursement,” forcing physicians into the impossible position of accepting the same compensation as “non-physician providers” with far less training, “providers” who are wildly attractive to corporate interests because they’re cheaper to employ. And we wonder why there’s an exodus of physicians from their fields.
• PBMs’ specialty and mail-order pharmacies “lock up” huge chunks of market share by contractual arrangements with the government’s Medicare and Medicaid programs, or their contractual arrangements with, ownership of, or ownership by insurers. With exclusive access to such large shares of the market, price manipulation and other shenanigans become not only irresistible, but essential to conceal. Hence the resistance to investigation.

Whatever they were intended to be, PBMs have become monsters that plunder the American people and help create the most outrageous national price tag for health care in the world.

On May 4, a committee of the United States Congress discussed a couple of bills related to drug prices.

Armed with a somewhat better understanding of the role of PBMs in America’s corrupt, virtually extortionate healthcare economy, you may be able to distinguish those who really want lower drug prices for Americans from those who are “faux fighters” in this arena. Those who care about Americans will be the ones shining a flashlight on America’s pharma middlemen and their legal thievery. The “faux fighters” will ignore the subject or try to switch off the flashlight.

Our next piece will comment on highlights from the hearing.

Pull up a chair and pop some corn, America.

Published by the Courier Times and featured here with author permission.