[Powerful companies are removing hundreds of medicines from
insurance plans — and they’re spending millions to stop attempts
at reform.]
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WHY DRUGS ARE DISAPPEARING FROM YOUR INSURANCE COVERAGE  
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Helen Santoro
November 29, 2023
The Lever
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_ Powerful companies are removing hundreds of medicines from
insurance plans — and they’re spending millions to stop attempts
at reform. _

, AP Photo/Robert F. Bukaty

 

For the millions of Americans that take one or more prescription
drugs, having a health insurance plan that covers their medications is
crucial. The list of covered medications — called a drug formulary
— can mean the difference between a $10 copay at the pharmacy and
paying thousands out-of-pocket for a vital medication.  

Yet unbeknownst to many patients, insurers can change their drug
coverage throughout the year, thereby removing medications that
enrollees were promised. When this happens, those who lose access to
their medicines are usually barred from immediately moving to a
different insurance plan. The problem is widespread and growing: In
the last nine years, the number of medications being eliminated from
many insurance plans skyrocketed by around 1,584 percent.   

Drug formularies are dictated by pharmacy benefit managers, or PBMs
— powerful companies that determine drug benefits on behalf of
health insurers, Medicaid Part D drug plans, employers, and other
health care payers. These companies negotiate with pharmaceutical
manufacturers to determine what drugs health plans will cover and how
much the drugs will cost. The three largest PBMs are owned by major
health insurance companies, a form of vertical integration that some
health care experts worry may be leading to higher drug prices
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lower quality care for patients.

For the same reasons, PBMs are incentivized to only keep drugs on
formularies that make them the most money.

“PBMs are not interested in the most effective and lowest-cost drugs
for patients — they are only motivated by the most profitable drugs
to them,” Kashyap Patel, past president of the Community Oncology
Alliance, wrote in a 2022 letter to the Federal Trade Commission
[[link removed]] (FTC)
about the harms of the PBM model and their consolidation with health
insurers.

As state and federal lawmakers pass legislation in an effort to reform
the drug coverage system, PBMs are lobbying like never before. So far
this year, the Pharmaceutical Care Management Association, the
lobbying group that represents PBMs, has spent over $10.1 million
dollars lobbying
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this and other issues — a 67 percent increase from the same time
last year. 

“In my experience as a practicing physician, one of the greatest
administrative burdens I’m facing is sudden, arbitrary changes to a
patient’s medication coverage by their health plan,” Steven Furr,
president of the American Academy of Family Physicians, wrote in an
email. “A patient can be doing well on a specific medication for
years, and one day the plan no longer covers it or has a preferred
alternative.” 

Ever-Changing Formularies 

Theoretically, PBMs, which were created in the 1960s, should help
health plan enrollees save money by negotiating the best drug price
with pharmaceutical manufacturers. However, that may not always be the
case. 

Along with having the ability to change formularies at any time, PBMs
have a financial incentive to discourage insurers from covering
generics and other cheaper drugs
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because the companies are paid based on the discount they arrange with
pharmaceutical companies, known as a rebate. 

For example, an insurer may ask a PBM to find the best price on
insulin. The PBM will then find which drug company can offer the
insurer the best discount on the drug, as they get paid based on the
rebate.

“As PBMs demand larger and larger rebates or discounts,
manufacturers offset these reductions by raising the ‘list’ price
for their drugs,” retired internal medicine physician Arthur Gale
wrote in a 2023 paper
[[link removed]]. “PBMs
encourage this practice because they receive larger financial
rebates.” Overall, the higher the insulin price, the bigger the
rebate, the more the PBMs will get paid.

Increases in rebates going to PBMs are associated with higher list
prices on drugs
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according to a 2020 paper from the University of Southern California
Schaeffer Center for Health Policy and Economics. 

PBMs are dominated by just three companies — and all of them are
affiliated with big insurers. 

CVS Caremark is owned by pharmacy giant CVS Health, which also owns
the health insurer Aetna; Express Scripts is owned by insurance giant
Cigna; and OptumRx is owned by major insurer UnitedHealthcare.
Together, these companies control 80 percent of the prescription drug
market
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Research into the effects of the consolidation of PBMs and insurers is
limited, but some worry this development will give PBMs even more
unbridled control over prescription drugs. 

“PBM markets require careful scrutiny as less competition and more
vertical integration can embolden anti-competitive business practices
to the detriment of patients,” the American Medical Association, a
lobbying group for physicians and medical students, wrote in a press
release
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year. 

The three major PBMs also currently exclude a total of 1,836 drugs
from their standard formularies
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which is up from 109 in 2014
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according to Cencora, formerly AmerisourceBergen/Xcenda, a drug
distributor. This trend shows no sign of stopping: From 2014 to 2022,
the number of medicines excluded by one or more PBM increased by an
average of 34 percent per year
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Most of these drugs treat life-threatening illnesses, like
cardiovascular diseases, diabetes, and different types of cancer. 

Drugs can be excluded for many reasons, including when the U.S. Food
and Drug Administration withdraws a medication from the market for
safety reasons, or when a generic version of the drug becomes
available.

Yet many of these excluded drugs are single-source brand medicines,
meaning they don’t have a generic equivalent or alternative
available on the market, according to the 2022 report
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Cencora. The amount of single-source excluded drugs has also risen by
996 percent from 2014 to 2022
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“Typically, pharmacy benefit companies will only exclude medications
from formularies when sufficient competition exists within drug
classes,” Greg Lopes, a spokesperson for the Pharmaceutical Care
Management Association, wrote to _The Lever_ in an email. “Often,
drugs are excluded because their competitors are willing to negotiate
a lower overall cost for their product. In addition, PBMs developed
Real Time Benefit Tools to provide physicians and other prescribers
the ability to check, ahead of and during a patient’s visit,
eligibility and formulary information.”

However, this doesn’t line up with what some doctors are
experiencing. “I have seen patients lose control of their previously
well-managed diabetes and hypertension because of these tactics, which
can result in more office visits, increased health care costs, and in
some cases emergency department visits and hospital stays,” Furr
wrote in an email to _The Lever_. 

CVS Caremark, Express Scripts, and OptumRx did not respond to _The
Lever_’s request for an interview. 

Few Regulations

Regardless of these ramifications, there are very few federal
regulations with respect to midyear formulary changes for commercial
insurers who sell plans on the Affordable Care Act marketplace,
according to Sabrina Corlette, co-director of the Center on Health
Insurance Reforms at Georgetown University’s McCourt School of
Public Policy. 

“Plans can pretty much do what they please, within some broad
parameters,” said Corlette.  

For example, insurers must make their midyear formulary changes in
accordance with federal essential health benefits standards
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which only require them to ensure their drug formulary “covers a
range of drugs across a broad distribution of therapeutic categories
and classes” and “provides appropriate access to drugs that are
included in broadly accepted treatment guidelines.” 

Medicare Part D plans, the part of Medicare that helps cover
prescription drug costs, are also allowed to remove drugs from their
formulary midyear, as long as they abide by a list of rules set by
the federal Centers for Medicare and Medicaid Services (CMS)
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which oversees all federal health programs. 

“Medicare Part D is a public-private enterprise, whereby private
plans administer the benefit on behalf of the government,” CMS wrote
to _The Lever _in an email. “The individual private plans
establish their own formularies consistent with CMS requirements. Part
D plans can make certain changes to their formularies during the
year.” 

To remove drugs from the formulary, plans must receive approval from
the CMS. They also must either provide written notice to affected
enrollees at least 60 days prior to when the formulary change is
effective, or supply enrollees with a 60-day supply of the newly
excluded medication when the enrollee requests a refill. 

CMS states that Part D plans should only remove a drug from their
formulary if enrollees taking the drug are exempt from the change for
the remainder of the contract year. Additionally, enrollees that are
currently taking the drug may request an exemption
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the formulary change. However, many people are not aware of this
option and not all requests to remain on the drug are granted
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Some health care experts argue CMS’ regulations are not enough and
that it’s time for the FTC, which oversees antitrust and consumer
protection matters, to get involved.

“The FTC has allowed this massive consolidation among PBMs and
insurers, creating a virtual monopoly in the prescription drug
market,” Patel, the former Community Oncology Alliance president who
critiqued the PBM market model, wrote to the commission in 2022.
“Additionally, CMS continues to take a ‘hands-off’ approach to
PBMs and their Medicare Part D Plan Sponsors.”

In the summer of 2022
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the FTC launched an investigation into PBMs
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their opaque practices.  

Lobbying Hard Against Legislation

It’s not just doctors who are expressing concerns over the power of
PBMs. 

All 50 states have placed some form of regulation on PBMs
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with some either banning or regulating midyear formulary changes. 

In 2020, Minnesota lawmakers proposed a bill
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midyear drug formulary changes, and they sought to include the measure
in a 2021 health care omnibus bill
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The Pharmaceutical Care Management Association pushed back. The
organization's director of state affairs, Michelle Mack, argued the
bill would “restrict our ability to put downward pressure on
pharmaceutical manufacturers to limit the increase of prescription
drug costs and work with our clients to effectively manage
formularies on their behalf
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She also claimed it would “cost Minnesota health care payers $75
million over five years.”

The formulary limitations were excluded from the final health care
omnibus bill signed by the Minnesota governor.  

PBMs have also come under scrutiny in Congress for their roles in high
drug prices. 

The bipartisan Pharmacy Benefit Manager Transparency Act of 2023
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for example, aims to make prescription drug pricing more transparent
and requires PBMs to pass 100 percent of rebates to the insurance plan
or payer. The Senate Commerce, Science and Transportation Committee
voted 18-9 this March to send the bill to the full Senate. 

Another bipartisan bill, the Modernizing and Ensuring PBM
Accountability Act
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would increase transparency and prohibit PBMs from deriving their
money from the sticker price of a drug covered by Medicare Part D
plans. The idea is that this change would remove the incentive for
PBMs to include pricier drugs on formularies, potentially lowering the
cost for consumers who pay a percentage of the drug’s sticker price.
The bill was approved by the Senate Finance Committee by a vote of
26-1 in July.

The Patients Before Middlemen Act
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which was referred to the Senate Finance Committee in June, also aims
to delink PBM compensation from drug prices and instead pay them a
flat fee, which sponsors hope will help bring down inflated drug costs
for Medicare Part D beneficiaries. To ensure compliance, PBMs would
have to pay the federal government any money they collect that goes
over this fee.  

“For too long, PBMs have held a vice grip over the prescription drug
supply chain, price gouging hard working families and seniors
alike,” Sen. Bob Menendez (D-N.J.), a Patients Before Middlemen Act
sponsor, said during a Senate Finance Committee session this summer
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“Through the current perverse incentive structure, whereby they turn
a profit as a percentage of the list price of a prescription, PBMs
wield their influence to have health insurers cover more and more
expensive drugs even when cheaper options are available.” 

Consequently, the Pharmaceutical Care Management Association, the
association that represents PBMs, spent more than $10 million on
lobbying in the first three quarters of 2023. That’s compared to $6
million in the first three quarters of 2022.
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The pharmaceutical industry’s ongoing campaign against PBMs
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also be contributing to this increase in lobbying spending. 

“This year, Congress has held an unprecedented number of hearings
focused on PBMs as Big Pharma continues its extraordinarily high
advertising spending to blame-game others for high drug costs,”
Lopes, the Pharmaceutical Care Management Association spokesperson,
wrote in an email to _The Lever_. “The misguided proposals backed
by drug companies would do absolutely nothing to reduce prescription
drug prices and would in fact drive drug costs higher for patients and
employers.”

Still, many patient advocates and doctors say that the power of PBMs,
including their ability to make midyear formulary changes, must be
reined in. 

“The bottom line is that formularies must be stable and be made
known to physicians and pharmacies prior to implementation,” said
Furr, of the American Academy of Family Physicians. “Frequent
changes create confusion and frustration for patients and physicians
leading to non-compliance, adverse reactions, increased costs, and
erosion of patients’ confidence.”

_HELEN SANTORO is a freelance journalist who covers health,
neuroscience, wildlife, climate change and LGBTQ+ communities._

_THE LEVER is a nonpartisan, reader-supported investigative news
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