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Posts: 160
Reply with quote  #1 
I am now in the donut hole and intend to take some of the advise in this article next year rather than find myself in the same predicament.  Never knew such a thing was going on!
Medicare Moves to Limit Costs in Drug Plans:
Some Benefit Managers Charge More Than Cost at Pharmacy, Boosting Expense for Patients

By Sarah Rubenstein, Wall Street Journal

July 22, 2008

Medicare is trying to curb an opaque industry practice that inflates what some older and disabled people pay for medicines under the federal insurance program's prescription-drug plan.

Medicare Part D, introduced in 2006 to extend drug coverage to beneficiaries, is provided through private health-insurance companies. Many insurers in turn contract with so-called pharmacy-benefit managers to administer their plans. Among other functions, these PBMs negotiate lower drug prices with pharmacies. But some companies, under a practice allowed by Medicare, then charge a higher price to health insurers and, ultimately, the government.

[chart]This approach is called "lock-in pricing" because the insurers pay the PBMs a set amount for the drugs, even if that differs from what the drugs really cost at the pharmacy. Lock-in-pricing can boost costs for Medicare beneficiaries because they pay a percentage of their drug costs. Also, the practice can more quickly drive consumers into the notorious gap in coverage known as the doughnut hole, where they generally must begin paying the full cost of their medicines. The doughnut hole kicks in when total drug expenditures by the beneficiary and the plan reach $2,510. Medicare drug plans start paying again once total expenditures reach $5,726.

Lock-in pricing "has a detrimental effect on the beneficiary because it pushes him into the coverage gap faster," says Abby Block, director of the arm of the government's Centers for Medicare and Medicaid Services (CMS) that runs the drug benefit. Under a current Medicare proposal, PBMs would be allowed to continue claiming the higher prices for reimbursement. But beneficiaries' own drug costs would be calculated without the extra amounts included.

Pharmacy-benefit managers -- including Express Scripts Inc., Medco Health Solutions Inc., and units of CVS Caremark Corp. and UnitedHealth Group Inc. -- carry out their functions behind the scenes, including developing lists of covered drugs, maintaining networks of participating pharmacies and paying the pharmacies when beneficiaries buy drugs.

CMS figures that 19% of the hundreds of Medicare drug plans are using lock-in pricing this year, affecting 14% of the 25.8 million enrollees in the Medicare drug program. Other plans use what is known as pass-through pricing, in which PBMs charge insurers the same prices they pay the pharmacies.

Patients who take lots of drugs are most affected by lock-in pricing. For example, one female patient who last year regularly took six generics and two branded drugs had average monthly costs of about $256, according to the patient's explanation of benefits. At that rate, the patient was on track to reach the doughnut hole in October. But without the PBM's higher charge based on lock-in pricing, the patient would have paid $215 a month on average for the same drugs -- and she wouldn't have hit the doughnut hole until December, according to an analysis of data provided by the patient's pharmacist.

The price spreads tend to be much greater for generics than for branded drugs. That's because generics are much cheaper for pharmacies to acquire, making it easier for PBMs to negotiate down the prices they pay and less noticeable to patients and insurers when the extra costs are included.

PBMs that administer lock-in pricing plans argue that the method is common in the private insurance market and should be available for Medicare as well. Some PBMs say the extra money they make under the pricing method provides funds to encourage more consumers to use lower-cost generic drugs. Express Scripts, for instance, says it analyzes beneficiaries' drug-purchasing habits and sends patients letters to explain how changes in their purchasing habits could lower their costs. And some companies, including UnitedHealth and CVS Caremark, which operate both as PBMs and insurers, have warned that if those extra amounts aren't included in drugs' costs, insurance plans that would be affected by any change may have to increase premiums, the monthly price that seniors pay for the plans.

To be sure, a large majority of older people are satisfied with their Medicare drug-benefit plan and say they are paying less for drugs than they were before the benefit existed, when seniors relied on a hodgepodge of private and public drug benefits, or made do without coverage. In a Wall Street Journal Online/Harris Interactive survey over the Internet of 571 U.S. adults age 65 or older, published in December, some 75% of respondents said their plan had saved them money and 83% said their plan was easy to use. Some 12% said they had to pay the full price for medicines because they had hit the doughnut hole.

The Kaiser Family Foundation projected this spring that the average premium for most Medicare Part D plans would rise nearly 17% to $31.99 a month in 2008 from $27.39 a month last year. That follows an average premium increase of 5.6% in 2007 from a year earlier.

The difference between what PBMs pay pharmacies and what they are reimbursed by insurers under lock-in pricing is generally a secret. Medicare itself doesn't have this information and therefore doesn't estimate the total cost of the practice.

For consumers it may be possible to determine the size of the price differences under lock-in pricing by looking at the full cost of your drug listed on your explanation of benefits, and asking your pharmacy how much it was paid. But many pharmacists are prohibited from disclosing pricing information under terms of their contracts with PBMs.

"It is absolutely unacceptable for any government benefit program to be based on questionable [numbers] or numbers that aren't transparent or easily understood by a beneficiary," says Michael Burgess, director of the New York State Office for the Aging, who says he was unaware of the issue until recently.

An analysis of explanation-of-benefits documents from consumers and payment data from pharmacies shows that the size of the price differences varies widely from as low as just a few dollars to well over $100. In one case, a patient filled a prescription for a 90-day supply, or 270 pills, of the generic antinausea medication prochlorperazine. The difference between what the PBM, Express Scripts, paid the pharmacy and the price that showed up on the patient's explanation of benefits was $146.53.

Express Scripts spokesman Steve Littlejohn said it is "extremely rare" for price differences to get above $100, and it occurred in this case because the patient purchased the drug at a quantity greater than is typically prescribed. Broadly, Mr. Littlejohn said that PBM pricing on generics "is very competitive, and is generally far better than [uninsured] cash-paying customers obtain on their own." He added that the differences on costs of branded drugs are much slimmer and that overall the company's per-prescription profit margin is a "single digit" percentage.

Medicare has been battling lock-in pricing almost since the inception of the drug-benefit program. But efforts to curtail or stop the practice have faced numerous delays, amid intense lobbying on the subject.

"We thought we had a clear policy" barring lock-in pricing when the drug benefit was created, says Ms. Block of CMS. "We learned that there were different ways of interpreting a policy statement," she adds.

Under Medicare's current proposal, PBMs wouldn't be able to hide the extra costs of drugs. Instead, they would have to declare the extra amounts as "administrative" costs that an insurance plan pays the PBM. Patients' own drug costs would be calculated without the extra amount included, thereby easing the burden on consumers.

Although the proposal wouldn't prohibit lock-in pricing, health-cost experts say the transparency and accounting that would be needed to include the extra costs as a separate "administrative" item could effectively curb the practice. CMS hopes to finalize its proposed regulation late this summer to go into effect in 2010.

The PBM trade group, the Pharmaceutical Care Management Association, opposes the CMS proposal because it says insurers should be able to choose what type of pricing they want. The drug benefit "program is working," says Mark Merritt, the group's chief executive. "Unless it can be decisively shown that one model offers more end savings for consumers or is decisively able to manage drug [costs] better for the program, we think there ought to be flexibility and choices."

A spokeswoman for CVS Caremark, which administers Medicare drug plans as a PBM and also sponsors plans through its SilverScript Insurance Co. subsidiary, says lock-in pricing is used in its SilverScript plans and is also common in other Medicare plans for which CVS Caremark serves as the PBM. UnitedHealth says it uses lock-in pricing on United Rx Basic and United Rx Value Medicare plans.

Not all major PBMs use lock-in pricing in Medicare, including Medco Health and Humana Inc., an insurer that acts as its own PBM for its Medicare plans. Humana spokesman Tom Noland says pass-through pricing, the alternative to lock-in pricing, gives patients "the full benefit of our negotiated discounted rates with network pharmacies and also promotes transparency of pricing."

In the meantime, Medicare drug-benefit participants buying drugs should consider checking low-price sellers of generic medications, such as Costco Wholesale Corp. and Wal-Mart Stores Inc., to see if their retail prices are lower than those in the insurance plan.

That is what Len Steinberg of Scottsdale, Ariz., did, and he found that Costco's retail price for his generic nasal spray was about half of the drug's total cost under his plan.

Mr. Steinberg, a 73-year-old retired employee-benefits consultant, says he now pays cash for certain cheap generics at Sam's Club and Costco, rather than using his drug coverage. That allows him to avoid the doughnut hole and continue receiving coverage for his more expensive branded medications, he says.



Ways to control costs in a Medicare drug plan:
• Compare drug costs in different plans using the Prescription Drug Plan Finder at
• Track your drug expenses and progress toward the 'doughnut hole' using your explanation of benefits.
• When possible, use generics, which tend to cost less than branded medicines.


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Posts: 7,476
Reply with quote  #2 
This is shameful.
I know how you feel Muff.
It is infuriating too!




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Posts: 506
Reply with quote  #3 
I have the AARP prescription plan, which comes through United Health Care.  If you order scripts by mail, there is NO deductible.  Didn't know about "lock-in pricing."  I will enquire tomorrow, but I think it doesn't apply here.

Are you on Fosamax?  There is now a generic. 

The thing that burned me was that no matter WHAT co-pay they charge me for the drug, they counted the same price against me.  So I hit the donut hole anyway.  Now that I have mets, I no longer take the expensive, glamor drugs, and I have no fear of the donut hole.  This whole thing is a racket anyway. 

the Frog's Princess
12/05 ILC 1C NX M0

4/1/08 Stage 4
and looking for NED

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Queen Blue Sky & Golden Light
Posts: 1,681
Reply with quote  #4 
Jelly doughnut, Lemon, Chocolate, GLAZED?!!!!
I "dough-nut"  (NOT) know how the beurocracy gets away with it!
What happened to Security, Honesty, Heart of Americans, and Justice?

Why are WE, the people, NOT STANDING UP for our liberty?  Have we all become a bunch of flabby cowards?  Why do we (me included) just lay down and take this lying doughnut hole?  Holey-moley.  And as the boomers age, the prices on pharmaceuticals go up, as well.  My Brother-In-Law had been taking expensive heart medication, his life depended on those meds.  He cut the pills in half because he could not and would not pay the absurd price on the pills.  Forced into retirement (he was only 49),  after cutting his pills in half, he died of a massive heart attack.  I blame this government, and the politics, and the DISCRIMINATION AGAINST PEOPLE WHO ARE ILL.  Those laws were originally set in stone to protect the people, who could not protect themselves.  It makes me sick, and it causes me to weep uncontrollably; not for me, but for those who really don't need much; some medicine, and quality of life is taken away when the medicine in unaffordable.
Crossroads, Tracy Chapman sings...and old song...and a new song; 


I wonder why and how our American, the Land of the Free and the Brave, the once proud and vibrant nation; how is it possible the people who believe in freedom, fair rights, and compassion;  the big business con-gloms rule this country allow this to occur?  It is getting to be like NAZI, Germany...sorry, but it is frightening, and those who are helpless are forgotten.
Supply and demand, no supply.  I think between Oil and Gas prices, Pharmaceutical Costs, Lowering Medicare and losing Social Security Income, and the Water issues, Cancer rates, and Jobs Lost...
The Stockmarket Values...  like the New Orleans Big Muddy Flood, everyone knew it would happen, but everyone forgot about it until after it actually happened.  Something is going to blow, and it's not going to be a pretty site.
I'm scared.
(((hugs))) Thanks Muffy, you post great reads!  Thank Fancy and G, you are all priceless!  Loves ya!


Posts: 9
Reply with quote  #5 
I am fairly new here but I wanted to say that you can be treated in any hospital in America no matter what your status is. They have to take you in and cannot refuse you.

I am an ER nurse and I have seen it all. If someone has no job or insurance or even citizenship, we must treat them as if they are like everyone else.  We also get so busy that we don't know who is covered and who is not so no one gets special treatment.

I just wanted to say that in case someone gets sick and has no insurance and thinks they can't be treated.

As far as the other issues, I am not clear on the drug coverage for cancer yet. But I suppose I will be when they want to put me on something after I am finished with my radiotherapy.


Wild Woman
Posts: 176
Reply with quote  #6 
I'm not on medicare yet.  My dh will be next year.  Our insurance changed this year to United Health Care.  I HATE THEM!  We have to pay for our drugs and everything until we reach our $2200 deductible.  And, if I read and understood the crap, when my dh goes on Medicare we STILL have to reach that $2200 deductible before they'll kick in and pay Medicare their 20%.  It's scaring the daylights out of me.  I don't know what in the heck we're going to end up doing.  Darn, I had to pay $749 for my Arimidex.  We reached our deductible pretty quickly because I had to see an LE therapist.  I HATE MY INSURANCE!  Oh, and my PCP hates United Health Care.  He has many Medicare patients.  He spends over an hour each day answering to them..why this, why that. 
I think we should be a charitable nation and help other nations.  But DARN, our own people need help!  HELP!

Goddess Forever
Posts: 1,341
Reply with quote  #7 

Is the $2200 deductible just on drugs?  On regular insurance, when you hit Medicare care, Medicare becomes primary (you must specify) and then the supplement will pick up (depending on the plan) the Medicare deductible and only pays the 20%.  

Drug coverage is different and the Plan D plans are just a mess.  DH only takes one med - generic BP meds and his plan paid for any generic.  They went up on the premium and now he has to pay the generic drug cost.  It is really not worth what we pay to keep it but there is always the "what if"

My brother with his lung problems, diabetes, cholesterol and heart meds hits that "hole" real quick.  He has stopped taking some of his meds because he simply cannot afford them.  He is not doing as well either.    From what I have seen, the Medicare drug plans seem to be ok for those not on lots of meds but if you are - watch out. 


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Posts: 506
Reply with quote  #8 
If you are about to go on Medicare, do some research before you make any decisions.  I WAS paying $485/month for BC/BS Cobra.  I had to pay $2,000 in deductible just for me, plus co-pays.  I belong to AARP.  Beginning Oct 1, I pay $96 & change for medicare, $130 for plan J supplemental (it pays everything that Medicare doesn't)  and $32 for prescriptions.  If I order them through the mail, I pay no co-pay for generics.  Best I can tell, Medicare will save me about $250 a month. 

I will not take a PPO--lots of hospitals (mine included) don't accept them.  And be ware!!!!!  If you opt for a PPO, you're stuck.  You can never get out of it.

\And yes, the $2,200  is just for drugs.  If you take something really high priced, like Femara, you blow through it pretty fast.

the Frog's Princess
12/05 ILC 1C NX M0

4/1/08 Stage 4
and looking for NED
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