They’ve made untold billions while devastating mom and pop pharmacies. These financial middlemen of the U.S. health sector are called pharmacy benefit managers, or PBMs, and while they arose decades ago as an ally to insurers fighting rising health care costs, they’ve since developed a playbook of exploitive market games — nondisclosure agreements, blind rates and Rube Goldberg-like financial contraptions — while avoiding any serious oversight or regulation.
And it’s happening in Maryville.
CVS Caremark, a $36.7 billion PBM, has acted through its contract with the Blount County government to plummet reimbursements for Maryville’s independent pharmacies by lowering costs of buying and filling prescription drugs.
As a result, when any one of the roughly 3,800 members of the county’s self-insured health plan — a group that includes firefighters, teachers and other public sector employees — fills a prescription at one of these local pharmacies, that pharmacy often loses money — in some cases $150 or more on a single refill.
Pharmacists at Blount Discount, City Drug Co. and Lowe’s Drugs, the three independent pharmacies in Maryville, all reported significant and unusual losses from the county’s health plan.
The county’s brokers say the millions of dollars saved since the decision to contract with CVS Caremark two years ago helped its starving health fund narrowly avoid financial collapse.
But recent state investigations in Ohio, Arkansas, West Virginia and others lof Medicaid programs with similar contracts have found a different story: spread pricing. PBMs like CVS Caremark mark up the difference between the amount they reimburse pharmacies for a drug and the amount they charge the client health plan. These PBMs arbitrarily slash reimbursement rates and keep the extra savings for themselves.
This is a story about the “squeeze” — the sudden and dramatic pressure leveraged on independent pharmacies — and the “spread” — how CVS Caremark and other PBMs are able to set for themselves secret profit margins at the expense of those pharmacies.