Kyle and Ken Fields were looking for a way to honor their father and preserve the pharmacy business he spent years building.

The brothers had heard complaints from businesses and universities in southwestern Ohio about rising prescription drug costs, so they began laying a foundation for Appro Rx — their version of a pharmacy benefit management company.

One by one, their audits found that businesses were unknowingly paying 20 to 30 percent markups — $200,000 or $600,000 more than actual cost per year — for medications.

A common finding in the audits was that the charges were coming from the country’s largest pharmacy benefit managers: CVS Caremark, Optum Rx and Express Script. Pharmacy benefit managers are middlemen in the prescription-drug pipeline between manufacturers and pharmacies, and they were established with the goal of managing costs for insurers and consumers.

The Fields brothers thought that landing the pharmacy benefit manager contracts would be easy.

Then the president of a private university in southwestern Ohio called to say that his existing PBM had made a donation to the school for the exact amount the Fields’ audit found they were overpaying for drugs.

A month later, a grocery store chain called to say that a representative from his current PBM cut a $212,000 check on the spot to cover the discrepancy found in the Fields’ audit.

Shortcomings in federal or state regulation of pharmacy benefit managers, coupled with the secrecy around how prices are set for prescription drugs, have public agencies and private businesses fighting for transparency so they can unravel how pharmacy benefit managers work.

Pharmacists at Ohio State University's Wexner Medical Center agree with the Fields brothers that the same things are happening in the private sector, and, in fact, to almost anyone who has a health care plan.

 

Rising costs

A nationally recognized industry survey by the Henry J. Kaiser Family Foundation reported that the price tag for family health care coverage has increased from $13,000 in 2008 to $20,000 this year.

Prescription-drug spending has been the fastest growing sector of health care costs over the past several years, according to the Centers for Medicare and Medicaid Services.

“In the private sector, it’s even worse because there is little scrutiny,” Kyle Fields said. “People just don’t know what the cost of the drugs are, and that goes for business owners.”

He said one of the biggest problems in the private sector is that employers aren’t aware that when they selected a health care provider for employees, they also are selecting the health care company’s pharmacy benefit manager.

Health care companies such as Centene and UnitedHealthcare are owned by the same companies that own the PBMs Envolve and OptumRx, respectively. CVS Caremark is in the final stages of purchasing Aetna, pending federal approval.

Pharmacy benefit managers demand a rebate from manufacturers in exchange for including their drugs in health care plans so they are pre-approved for patients. That list of approved drugs is called a formulary.

Manufacturers factor those rebates into the price of their drugs, which adds to the cost for consumers.

The Dispatch contacted six of the 10 major pharmaceutical companies in the country. All six pointed fingers at PBMs for rising drug costs but would not provide data showing how.

At the same time, the largest pharmacy benefit managers point fingers back at drug manufacturers. CVS Caremark has refused numerous requests from The Dispatch for proof.

Despite all of the finger-pointing, the two groups seem united by one key factor: The quest for higher profits.

“We don’t hate PBMs; they are our customers and we want to work with them,” said Christine Waller, spokeswoman for pharmaceutical giant Mylan, earlier this year.

 

Dropping PBMs

Frustrated by the setup, Scott Knoer, head of 18 Cleveland Clinic pharmacies, did what he thought was fair for the group's employees and their dependents: He tossed PBMs out of their health care plan.

That allowed Knoer and his staff to take back control of the approved drug list and end the secrecy.

“We determine what the most cost-effective medication is, which is not the cheapest,” Knoer said. “We are not placing things on a formulary to get a rebate and maximize profits.”

Taking control of the formulary has saved Cleveland Clinic $33.6 million per year, he said.

Knoer noted that his group has an advantage because, as a pharmacy, it can more easily see which drugs are most cost effective.

A complicating factor in the private sector, Knoer acknowledges, is that businesses don’t have the resources to manage their own formularies.

 “There’s a lack for awareness by business owners and the employees they have doing this,” he said. “Usually, there is someone in human resources that runs the employee health plans and they are not physicians or even really know what a PBM is.”

 "PBM buster" companies like Appro Rx said business owners can start by asking for numbers and seeing what they are being charged per claim.

The range should be $2 to $4 per claim, depending on the medication. Anything above that, Fields and Knoer agree, deserves more questioning by business owners.

“It blows your mind how twisted this system is,” Fields said. “Just asking for transparency is a start.”