Does Health Insurance Help or Hurt the Situation?
*The following is an excerpt from an article “The Medicating of America,” published in Living Safer Magazine and The Legal Examiner.
Does Health Insurance Help or Hurt the Situation?
Understanding the methodology of drug pricing can be frustrating, and it only adds fuel to the fire when you realize that the price of a drug might have little to do with what you actually pay once your health insurance company involved. To decipher this aspect of the equation, you must first acknowledge the basic principles of insurance: only pay for what is necessary and, when deemed it’s needed, pay out as little as possible. (of course, this is ignoring the prime directive of, “take in as much as possible through premiums,” but that could be its own article.)
In fact, health insurance companies rarely look at the co-pay that patients pay for a drug as compensation—instead they see it as a motivator or incentive to control which drugs you do or don’t purchase. For instance, you see a new drug advertised on television that addresses an ailment you suffer from, and the ad promises it does a better job than the drug you’ve been taking for years. Well, it could be that this new drug holds a patent, which the pharmaceutical company sees as valuable in regards to protecting their market share. But your health insurance doesn’t want to pay extra for that, so they make the old drug a Tier 1 for say, $15 and the new drug a Tier 4 for $75. What decision are you likely to make? Now before you think you understand the paradigm, consider this possibility; the maker of the new drug really wants to convert as many patients as possible from the old drug, so they negotiate with one or more of the larger health insurance carriers to sell them the drug at a special price. If the carrier sees potential with the new drug, they might declare it a “preferred” medication and offer it at a lower price than other carriers. Not to be outdone, drug makers often have yet another bargaining chip up their sleeve—the drug-specific savings card. Again, more of a marketing tactic for the manufacturer, these are issued to patients for any number of reasons that include: financial difficulties, having an uncooperative health insurance provider, or simply asking for one. Often the wording on the card states a maximum payout by the patient for a prescription fill (as opposed to a discount card) and is good for a limited time, although many are renewable through pharmacies and websites.
Before you get too discombobulated over all this, get ready for the introduction of another player—the Pharmacy Benefit Manager or PBM. Such entities fall in between the pharmacy and the insurance company, and they claim to reduce the cost of many prescription drugs by a significant margin. It’s possible that your health insurance company has tried to direct you toward using a PBM, the biggest ones include Express Scripts, OptumRX and CVS Caremark. Of course, with any savings comes the realization that, as a consumer, you have no idea what you really paid for a medication or what that drug is truly worth. And you’re not alone. Often the pharmacies themselves have no idea who’s paying what for a given drug until the transaction has run its course (i.e. been submitted to the insurance company). This means that sometimes the pharmacy can actually lose money, with some industry leaders estimating it could be as high as one out of every five sales that the dispensary fails to make a profit. “Filling a prescription is not knowing what you’re going to get paid,” says Scott Pace, CEO of the Arkansas Pharmacists Association. “It’s almost like pulling a slot machine and hoping, crossing your fingers and hoping you get paid more than it costs you to buy the drug and perform the service.”
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