How drug middlemen take back money from pharmacists
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Illustration: Rebecca Zisser/Axios
Express Scripts, which manages pharmacy benefits for roughly 100 million people, claws back millions of dollars per year from pharmacies after prescriptions go out the doors, according to a contract obtained by Axios.
The big picture: Even high-quality pharmacies have to pay back some of their revenues to Express Scripts. That arrangement highlights pharmacy benefit managers' power over the supply chain and helps explain why pharmacies have intensified their acrimony toward PBMs lately.
How it works: The contract applies to Express Scripts' Medicare plans and the pharmacies that participate in its network.
- The two sides use a third party to grade pharmacies' quality by determining, for example, how many of their patients receive or refill their needed medications.
- PBMs then claw back money — called "performance adjustments" in the contract — from pharmacies with lower quality scores.
- Express Scripts said in a statement that it passes these pharmacy fees to its clients — in this case, the federal government.
The catch: There's little transparency into how pharmacies are scored, pharmacies don't have any control over the terms, and even high-quality pharmacies are penalized.
- Only the top 1% of pharmacies incur no penalties. The other 99% have to write checks back to Express Scripts, according to the contract.
- The top 2-15%, which Express Scripts deems "high performers" in the contract, have to pay back 2% of a prescription's price. The next 60% of pharmacies have to pay 4% of a drug's price, and the lowest performers concede 6%.
- Those clawbacks are based on drugs' "average wholesale price," which many academics and industry experts say is an inflated, flawed drug value and leads to bigger clawbacks for PBMs.
- And though Express Scripts said it passes along these pharmacy fees to its clients, it would not say whether it holds onto other, similar service fees, which researchers have described as pharmacy fees "in disguise."
Another sign of PBM power: Express Scripts "may change the method by which it deducts any performance adjustments at its sole discretion" and "shall not require the consent of" any pharmacy, according to the contract.
The other side: Express Scripts said in its statement to Axios that "high-performing pharmacies can and do earn more money."
- It's worth mentioning the largest PBMs — Express Scripts, CVS and OptumRx — also own pharmacies.
- Express Scripts did not make executives available for interviews and would not answer follow-up questions.
The bottom line: The practice of recouping money from pharmacies is rampant in Medicare.
Go deeper: The drug pricing contract Express Scripts doesn't want you to see
