The Unmasked Truth Behind Legal Kickbacks
Our very own contributors, Drs. Rupali Chadha, Marion Mass, and Mary Tipton are back in the news, speaking out and speaking up against the “kickbacks” enjoyed by Pharmaceutical Benefit Management corporations - AS LEGALIZED by the Safe Harbor protection of PBMs for practices otherwise against the law. Hundreds of billions of dollars are diverted from the patient consumers, and directed to those who add no value to the medical services being rendered and received. Artificial shortages and inflated prices for common prescription drugs are the norm.
As we featured last month, the executive orders signed by President Trump are a huge and positive step forward - according to some more than any other president has done for the patient consumer as it relates to prescription drug costs. However those orders “expire” when President Trump is no longer in office.
To protect the progress made, congressional action is required. That will only happen if the constituents “get woke” to what goes on behind the shady scenes and demand the repeal of the Safe Harbor laws.
Read more in the article that follows titled Patients Suffer While Doctors Try to Reform ‘Corrupt’ Prescription Drug Policies, by T. H. Lawrence, originally published in www.mdstatewire.com on August 20, 2020 (below).
They’re doctors, after all, not politicians or lobbyists.
But they are united to stand against a system that must be changed to provide affordable prescription drugs to their patients, all three told the Maryland State Wire. Drs. Marion Mass, Mary Tipton, Amber Colville, Rupali Chadha and Christine Saba share a strong opposition to the current process, which they say adds needless costs to drug prices and makes people in need of prescription medicines pay unfair amounts or face serious, even fatal health risks.
“It’s scandalous that we have lawmakers in our country that allow this to go on,” said Mass, a Philadelphia-area pediatrician.
Philadelphia-area pediatrician Dr. Marion Mass
Mass is also a writer who serves on the editorial board of the Bucks County Courier Times and The Doylestown Intel, and she does public speaking as well. She is also vice chair of the Practicing Physicians of America, a member of the Bucks County Health Improvement Partnership and belongs to the Pennsylvania Medical Society.
Mass is one of 70,000 doctors who belong to Free2Care. The group’s Twitter feed says it is a “national coalition of over eight million patients and doctors dedicated to solutions that make health care affordable and accessible.” Mass says that pharmacy benefit-management firms have seized control of prescription drugs and are squeezing money out of patients – a lot of money, as an estimated $250 billion went to these middle managers in 2013, according to the American Prospect.
Medical expenses have exploded in the last 50 years. A 2019 report from the Peterson-Kaiser Family Foundation Health System Tracker, based on National Health Expenditure (NHE) data from the Centers for Medicare and Medicaid Services (CMMS), said it had increased from $74.6 billion in 1970 to $1.4 trillion by 2014. The numbers continued to spike, with healthcare costs – including direct care, prescription drugs, administrative costs and insurance – reaching $3.6 trillion in 2018.
“On a per-capita basis, health spending has increased over 31-fold in the last four decades, from $355 per person in 1970 to $11,172 in 2018,” the study reported. “In constant 2018 dollars, the increase was about six-fold, from $1,832 In 1970 to $11,172 in 2018.”
“Follow the money,” Mass said. “If there’s money, why aren’t we following it? Ask yourself where it goes.”
Pharmacy benefit managers (PBMs) are middlemen between drug manufacturers and insurance companies. In 2016, it was reported they managed prescription-drug benefits for 266 million Americans out of a population of 323 million.
When PBMs rose to play a prominent role in health care in the 1970s, they were seen as a beneficial part of the process. Their role was to process claims for health plans while assisting health care providers with acquiring low-cost drug options.
Insurers could purchase in greater volume by using the PBMs, which was seen as another way to lower costs. That changed in the 1990s, as drug companies and pharmacy companies took ownership of PBMs, and as with so many other businesses, mergers and acquisitions reduced their number.
Today, only three firms – Express Scripts, CVS Health and OptumRx, a subsidiary of the UnitedHealth Group – control more than three-quarters of the market. These companies develop lists, known as formularies, that play a major role in what medications are covered by both private and public health insurance policies.
The process also sets the cost to patients. Mass has been blunt with her assessment of PBMs.
“They’re a bunch of paper pushers,” she said. “No one is following the money because it is completely opaque. I’d certainly like to get a look at those contracts.”
PBMs use a variety of techniques to profit from patients. They employ a process known as “spread pricing,” in which health care plans are billed at a higher rate than pharmacies are paid.
An Ohio study showed plan sponsors were charged $2.5 billion while pharmacies were paid $2.3 billion. That’s a smooth $200 million profit for the middlemen.
Another way they cash in is by the use of “clawbacks,” where patients are billed for higher copays than the actual cost of medicine. In Ohio, a pair of PBMs charged $50 for Sprintec, a contraceptive and anti-acne drug. They paid $12 for it, generating a profit of $38 per prescription.
A University of Southern California study said clawbacks cost consumers $2 billion annually, and that pharmacists are prevented from telling their customers about cheaper options. Mass says the role these firms play in health care is largely unknown to the public.
“America doesn’t know how large a portion – in some estimates it’s half or more than half of the cost – goes to an administrator,” Mass said.
What she and other doctors are furious about is what they term “kickbacks” to the PBMs, which prefer to call them “rebates.” Mass calls it crooked, even if it is legal.
“There are middlemen in there who have a right to receive kickbacks,” she said. “The government gave them the right to receive this. They call them rebates, but they’re really kickbacks – and they should call them kickbacks.”
No other industry in the nation is allowed to accept these kinds of payments, she said. But a “safe harbor” policy allows payments and business practices that, although they violate federal anti-kickback statutes, are not prosecuted.
Trump issues executive orders
Trump ordered Secretary of Health and Human Services (HHS) Alex Azar to move to lower costs on prescription drugs, including insulin and epinephrine, and ensure that Americans are getting the lowest price possible for their drugs. The orders direct the HHS to stop the kickbacks, with the money instead going to senior citizens as Medicare Part D discounts, according to Fierce Healthcare. That figure represented $30 billion in 2018, according to the HHS, an average discount of 26-30%.
In addition, federally qualified health centers (FQHCs) that purchase insulin and epinephrine in the 340B program would be required to pass the savings from discounted drug prices directly on to medically underserved patients.
“This will increase access to life-saving insulin and epinephrine for the patients who face especially high costs among the 28 million patients who visit FQHCs every year, over six million of whom are uninsured,” according to an HHS press release.
Trump also wants to allow states to develop safe importation plans for some prescription drugs, allow the re-importation of insulin products made in the United States if the HHS deems it needed for emergency care, and allow the use of individual waivers for safe personal importation of lower-priced drugs from pre-authorized U.S. pharmacies.
The president also called for making sure the Medicare program and seniors pay an equal price for the most costly Medicare Part B drugs than any economically comparable OECD (Organization for Economic Co-operation and Development) country. Trump said this will stop other countries benefiting from research and development done by American companies.
“President Trump has already done more than any other president to lower drug costs,” Azar said in the HHS release. “No president has ever taken action on drug prices as bold as any one of today’s individual actions. Today’s executive orders will deliver billions of dollars in discounts directly to patients at the pharmacy counter, safe low-cost imported drugs for Americans, the best deals for America on highly expensive drugs, and direct discounts passed on to patients on important drugs from community health centers.”
Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said it was a necessary and important step forward.
“Today’s executive order does what President Trump came into office with a mandate to do: disrupt a failed Washington status quo,” Verma said in a CMMS press release. “Thanks to this bold step, Medicare will no longer be a powerless price-taker, and American seniors will no longer foot the bill for the world’s innovation while other countries take a free ride.”
Mass says that Trump is using the right term by calling the money to PBMs “kickbacks.” It’s all about money, she says.
She says that with insurance companies and pharmacies purchasing the services of a PBM, it turns the process into a revenue stream.
“They’re cash cows,” she said. “It’s crazy but it’s true. It’s perfectly true.”
The conflicts of interest are plain, Mass says. The PBM receives a percentage of sales, so they have an incentive to approve more expensive drugs and to keep prices high.
Smaller firms are forced out of the market, creating monopolies. Insulin prices should be much lower, and there should be a reliable supply. Instead, the cost just keeps rising.
“It should be plentiful,” she said. “It’s incredibly corrupt. Why is no one looking at it?”
When Mass goes to Washington, D.C., to speak to members of Congress, they seem disinterested in changing the process. But she has a lot of allies.
Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group that represents the country’s leading biopharmaceutical research companies, would like to see the safe harbor policy discarded.
“This proposal would also help to fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers favoring medicines with high list prices,” PhRMA’s President and CEO Stephen J. Ubl told Lexology.
“The politicians don’t seem to want to touch it,” Mass said. “They all seem afraid to touch it.”
PBMs have ‘rigged the market’
Dr. Mary Tipton is equally disgusted by the oversized role that PBMs play.
“Taking kickbacks is something that is illegal in most supply chains and markets,” Tipton, an internal medicine/pediatric specialist in South Jordan, Utah, told Maryland State Wire.
She says the PBMs have “rigged the market,” causing drug shortages and price increases.
“They kind of have an unlimited gravy train,” Tipton said. “In my opinion, it’s definitely coordinated.”
She says the safe harbor rule must be discarded to make progress on lowering prices. More transparency is needed as well, which would allow people to understand how much they are paying for drugs, and how much lands in the deep pockets of PBMs.
“If the public is saying, ‘We’re not going to stand for this anymore,’ it would help,” Tipton said.
She says she was gratified that Trump used the term “kickbacks” because it’s important to let people understand exactly what is happening.
“These are kickbacks, not rebates,” Tipton said. “We were happy about that. PBMs call them rebates or discounts, because it is a term that is less detrimental to them.”
She says that one problem with Trump’s orders is they are only effective while he remains in office. A new president could discard them. The best solution would be congressional action.
But senators and congressmen receive millions from the prescription drug industry and are often unwilling to oppose it, Tipton says.
“I do think that is one of the main reasons, sad to say,” she said. “It seems like it’s very hard to get things done politically without keeping your big donors happy – at the expense of physicians and patients.”
Tipton has become very conversant on the topic, although she admits it wasn’t something she wanted to study. She was forced to do so.
“It’s dumb that I spend a third of my time, highly trained time, on this,” Tipton said. “It’s not why I’m a doctor, not why I went to med school. Incentives are misaligned and these companies take advantage of it. I’m not anti-capitalist, but these are perverse incentives.”
Dr. Rupali Chadha, a board-certified general and forensic psychiatric physician in Newport Beach, California, admits she gets angry over the process. Chadha operated a private forensic practice but now works for the state of California, treating the criminally insane and as an expert witness in trials.
She recalls her patients agonizing over their prescription-drug bills.
“I’m still mad for my patients,” she told Maryland State Wire.
Chadha says she is struck by how casually the “rebate” system was introduced and allowed to become such a potent piece of American health care.
“They’ve made it all legal,” she said. “This is sanctioned by Congress with safe harbor. It’s completely legalized. You talk to congresspeople about it and they act like they have not heard of it, which is false. And you talk to candidates and they are shocked. It’s really remarkable.”
Chadha says the PBMs were designed to negotiate lower prices, “but they won’t do that.”
Instead, they have gotten into bed with insurance companies to maximize their profits. They have used their profits to form political action committees and fund candidates.
“We definitely have a swamp situation,” Chadha said.
She says one solution is to work with congressional candidates to inform them on the issue. It’s also crucial to “wake up their constituents,” Chadha said.
She says that people on both sides of the deep partisan gulf should appreciate the President Trump’s efforts.
“Donald Trump, love him or hate him, did something pretty intelligent,” Chadha said.
Another reform she favors is allowing people to purchase direct primary care for a regular monthly fee. It would provide unlimited access to care, reduce cost and pay doctors more, Dr. Chadha said. People would still have insurance to cover catastrophic medical scenarios, she says. It would reduce the use of kickbacks and other shady practices.
“Direct primary care has corporate medicine shaking in its boots,” Chadha said.
It’s a new way of providing health care that deserves a serious look. Patients wouldn’t receive staggering bills while doctors would be paid more without serving as “paid workhorses.” They would be able to maintain their independence
“We don’t want to be unionized, because we’re independent people,” she said. “And we don’t want to involve partisan politics.”
Chadha admits this is not something she thought she would spend a lot of time on in her career.
“We’re not taught this in medical school,” she said. “We’re taught to care for people.”
She says the amount of money spent lobbying Congress is “highly suspicious” and explains why drug costs are so prohibitive. Food and health care are the largest lobbyists, Chadha says.
“Money buys influence and power,” she said.
Chadha said the public and media can help bring down costs.
“That’s what we need,” she said. “We need public outcry. We need to get people angry. That’s the only way we’re going to make progress.”
Chadha has witnessed how health care can work without companies that perform no real services to patients seizing such a large piece of the pie. Her parents are from India and immigrated to Canada, where she grew up with a socialized medical system.
She was trained at Johns Hopkins University and did a clerkship at King’s College in England. After seeing how those countries operate, the American system “boggled my mind,” she says.
Drugs that cost pennies in India are hugely expensive here.
“It’s because they just negotiated better with our prescription companies,” Chadha said. “We are paying the brunt of research and development costs.”
Dr. Christine Saba, a pediatrician in Rockville, Maryland, says it’s a corrupt system. Patients are harmed and people with no real ties to medicine are enriched.
“So, basically, the middlemen who are benefiting from a law placed in 1987 called the safe harbor is only a safe harbor for themselves,” Saba told Maryland State Wire. “Not for the patients who need the medication. The safe harbor has ended being a way they receive dollars – a form of legalized kickbacks.”
She says there is only one solution.
“We need to have this law repealed,” Saba said.
In the meantime, she has made a determined effort to share the facts. Like the other doctors, she spreads the word while she is at work.
“I have been educating my patients and other physicians one by one,” Saba said. “Transparency is the needed vehicle to have this become apparent.”
A ‘badge of honor‘
Dr. Amber Colville, an internal medicine specialist in Ocean Springs, Mississippi, says these companies have a direct impact on the people she treats.
“When you stifle competition and you can’t get basic medication that has been around for 4,000 years, who suffers for that? Patients,” Colville told Maryland State Wire. “Small drugs that used to cost pennies on the dollar, you can’t get that at all. Small manufacturers can’t afford to pay the PBMs.”
When that happens, prices rise and access declines. A big part of the problem is that people are unaware of this issue, says Colville, who first learned of the impact these middlemen had when she attended a National Physicians Council conference in Washington, D.C., in 2016.
“If I didn’t know about it, being a doctor for 20 years, how does Joe Smith know about it?” Colville said. “It’s convoluted. I explain this to my patients all the time because they complain about it all the time. I tell them, ‘Well, baby, that’s out of your hands and mine. The only thing more difficult than passing an act of Congress is reversing one.”
The skyrocketing cost of prescription drugs sometimes leads Colville's patients to take partial doses or skip a dose. When she learns about that, she enters that into their records.
“And this is what insurance companies go by, that’s how they collect data,” Colville said.
She wants them to see the impact of their practices, she says. Health care just keeps increasing in cost, as hospital administration costs rise, pharmacy firms spend millions on advertising and PBMs get a cut out of every prescription filled every day. Doctors are low on the list.
“Oh my God, please,” Colville said. “Everybody makes more than us.”
She says it all gets passed along to the patients, something she witnesses and hears about every day. While it’s a big mountain, Colville is convinced that reform is attainable.
“I think it can be done,” she said. “I think it can be reversed. Everybody knows there is a problem but very few know what the problem is.”
Colville says that increased education and attention will convince the public to make their elected representatives do something about it. The media can play a vital role in bringing this issue to the fore, she says. Right now, health care professionals are leading the effort.
“We’re working doctors,” Colville said. “We’re not paid lobbyists. We’re not paid to go to Washington and talk to these politicians. The AMA (American Medical Association) hasn’t worked for doctors for a long time. So we do it ourselves and we get very disenchanted. It doesn’t seem to get us anywhere.”
But Colville is not ready to abandon the fight. It’s a major reason she is in private practice, because she can’t help but speak out on issues that matter to her and her patients.
“I wear that as a badge of honor, actually,” Colville said.