Some seniors order drugs from abroad to save money. A few states are even considering mail-ordering cheaper drugs from Canada for state employees. Every employer cannot order drugs from Canada, however. There are just not enough drugs in Canada to serve their own population along with 100 million Americans with employee health coverage. Employers can order drugs by mail from domestic companies that fill prescriptions for employee health plans. It has long been a strategy to save on the drugs workers need.
Many employee health plans now require workers to get their maintenance medications by mail. Mail-order drugs are often touted as a better deal for both employees and their employers, but it’s not always true. According to the Wall Street Journal:
A key tool that businesses have counted on to keep a lid on employees’ drug spending—filling workers’ prescriptions by mail—is now driving up their costs.Unity Care NW, a nonprofit health clinic in Washington state, forecasts the cost of medical and drug benefits for its 365 employees and their family members will increase this year by 25% to more than $3 million. A big reason: Drugs delivered by mail are costing multiples more than those picked up at a store counter.Markups were as much as 35 times higher than what other pharmacies charged, according to a recent analysis of millions of prescriptions in Washington state.During the first three months of this year, even though only roughly 10% of prescriptions for Unity Care’s workers were dispensed through the mail, they consumed more than 80% of the clinic’s prescription-drug spending.
These findings add to other complaints against pharmacy benefit managers (PBMs). In recent years the PBM industry has consolidated to the point where three large firms control 80% of the drug plan market. Market concentration allows them considerable leverage to extract revenue from both drug makers – who want their products on drug formularies – and from employer plans who are their clients. With greater market power, PBMs can choose to boost their own bottom line, rather than save money for their clients.
At the urging of firms that manage their drug benefits, employers have turned to mail-order pharmacies to save money on prescriptions. The pharmacies promised to sell medicines to employees at lower prices than their bricks-and-mortar rivals by buying larger quantities from drugmakers and providing 90-day supplies.Instead, the opposite is happening. Drugs ordered through the mail-order pharmacies are costing more, raising employers’ spending.One employee’s three-month supply of a prescription for a generic antidepressant, fluoxetine, cost Unity Care about $100, more than twice the average price that retail pharmacies paid for the drug. The same fluoxetine prescription could be purchased from the Mark Cuban Cost Plus Drug pharmacy for about $12.
PBMs push mail-order drugs because it enhances their revenue. When PBMs dispense drugs by mail they don’t have to pay a cut to local pharmacies. Providing mail ordered drugs also allows PBMs to mark up the drugs and keep all the profits above from the wholesale price.
Generic prescriptions dispensed by mail pharmacies were marked up on average more than three times higher than prescriptions filled by bricks-and-mortar pharmacies, according to a recent analysis by 3 Axis Advisors, a healthcare research firm.Branded drugs filled by mail were marked up on average three to six times higher than the cost of medicines dispensed by chain and grocery-store pharmacies, and roughly 35 times higher than those filled by independent pharmacies…
The revenue from mail order drugs has more than doubled in the past decade to $206 billion, even though the volume of drugs dispensed by mail has risen only 11%. This could only happen if prices have risen, or the mix of drugs distributed by mail has shifted to more expensive drugs.
Firms who hire PBMs to manage their drug plan benefits are finding they cannot always count on PBMs to save money over what retail pharmacies charge. PBMs, like most providers of medical goods and services, protect their wholesale price information and won’t reveal costs to their clients. While employers can compare what they’re paying with a retail pharmacy, they don’t really know how much profit their drug plan managers are earning from selling mail order drugs to employees. There has also been recent examples of positioning expensive drugs that pay higher manufacture rebates on health plan formularies, rather than cheaper drugs to save clients’ money.