A group called Ethisphere each year hands out awards to the “world’s most ethical companies.” In 2023, 135 companies were chosen for an award because of their “ethical business practices that fuel corporate character, marketplace trust and business success.”
To our knowledge, there are no comparable awards for the world’s least ethical companies. If there were, the top awards would likely be given to pharmacy benefit management (PBM) companies that advise health insurance companies, employers and the government on prescription drug benefits. The dubious business practices of PBMs are well documented, such as favoring more expensive drugs to drive their profits higher, as they can collect more rebate dollars from drug manufacturers on an expensive drug than a cheap one. Favoring more expensive drugs hurts patients, who are forced to pay more out of pocket, and harms the PBM’s clients, health plans and employers, who must pay more for drugs.
However, one staggeringly unethical practice of PBMs comes from their recently developed programs called accumulators and maximizers.
In recent years, the trend in health insurance benefit design has forced patients to pay more out of pocket for life-saving medicines. High deductible health plans and hefty coinsurance requirements have shifted more costs to patients, probably hoping that patients would choose a medicine that provides PBMs with heftier profits or, sadly, force patients to forgo treatments altogether.
Drug manufacturers were alarmed by these new out-of-pocket charges because they knew patients might abandon their prescriptions and the drug company would lose sales. So, drug companies began offering patients financial assistance to mitigate out-of-pocket costs. The financial aid would help patients meet their deductible or other out-of-pocket cost requirements, and once those requirements were met, the patient’s insurance would kick in and cover the drug’s cost.
Critics of the drug industry predictably complained that drug companies were only helping to sell more drugs. Well, of course, they are. What company adopts costly programs to sell fewer products? However, the critics fail to note that patients love this financial assistance, which sometimes reduces their out-of-pocket spending to zero and helps them never miss a dose of their medicine.
PBMs saw this financial assistance from drug companies as threatening their profits. After all, if patients stayed on their medicines, PBMs would eventually begin paying. So, PBMs began implementing accumulator and maximizer programs that are astonishing in the way they work.
The PBMs essentially confiscate all the drug company financial assistance specifically intended to offset the patient’s out-of-pocket costs by not counting any of those funds toward the patient’s out-of-pocket obligations. The drug company’s money goes into the PBM’s pocket. The patient may temporarily experience lower out-of-pocket costs or may have reduced out-of-pocket costs on one drug. However, the patient will eventually be required to pay the maximum out-of-pocket for that drug or other medical expenses. Yes, you read that correctly—the PBM confiscates funds intended for patients and then tells the patient they owe the maximum out of pocket.
Why would PBMs engage in such a mercenary practice? Some argue that they are simply acting on the desire of their clients — health plans and employers — to keep health care premiums low. However, a new report from the Global Healthy Living Foundation concluded that these PBM practices did not affect premiums in the least. States that banned these practices did not see any spike in premiums.
Maybe, on the other hand, these PBM practices save money for the overall healthcare system by pushing patients to cheaper drugs (or, more likely, pushing patients off medicine altogether). This assertion is also dubious.
A recent study, funded by Genentech, concluded what we would expect: financial assistance from drug companies helped offset out-of-pocket costs, making patients more likely to stay on their medicine. Moreover, a recent study we authored for Pioneer Institute concluded that because PBM practices made it more likely that patients would abandon their medicine, overall healthcare costs would rise between $1.26 billion and $2.52 billion as non-adherent patients would require more emergency room visits, hospitalizations and surgeries. In short, these PBM practices may bring PBM profits, but they raise their clients’ overall health spending.
How would you characterize a company that confiscates funds intended for patients, forces patients to abandon their medicine, and sticks their clients with higher medical bills? Ethisphere might find the word.
