As a Medicare retiree and resident of The Villages, as well as former insurance association professional, I’ve witnessed firsthand the unique healthcare cost challenges faced by older Americans. The pain points are obvious and come in the form of skyrocketing out-of-pocket costs, but the complex and confusing reasons why these are so high are not. Fortunately, the latter, especially as they relate to prescription drug prices, benefited from some much needed sunlight during a recent U.S. Senate hearing with drug manufacturer CEOs.
Yet, both Democrat and Republican Senators soon pivoted to the lesser-known role of big Pharmacy Benefit Managers (PBMs). Namely, the web of opacity and profiteering related to PBMs and drug pricing that these corporate middlemen earn billions from. During the hearing, condemnation of PBMs’ practices was bipartisan and near universal, and echoed immediately by countless patient advocates. Soon after, the White House announced its own “listening” session to further examine the role of PBMs in driving up prices for medicines.
Conspicuously absent among those expressing concern, however, was the AARP. How does that make sense?
First, some context. PBMs are ostensibly used by health plans (i.e., health insurers, employers, etc.) to negotiate large discounts – often 40% or more – from drugmakers to lower “list” prices for patients and to decide which medicines will be made available on plan formularies (i.e., lists of approved drugs). Yet, PBMs often pocket all or much of the discounts they negotiate rather than directly passing the savings on to patients. All told, the three largest PBMs control over 80% of drugs prescribed in America. What many do not know is that in most cases the largest health insurance companies actually own the largest PBMs. Worse yet, the parent insurance company owners still often charge patients at the higher pre-negotiated “list” prices in some form or another.
In short, these massive “insurer-PBM” middlemen are often paying themselves, sometimes twice, with huge drug price discounts meant for patients, including those of us in Medicare. U.S. Senator Tim Kaine (D-VA) went so far as to say. “PBM’s aren’t doing a single bit of research. They’re not producing a single product, and yet they seem to me to be the ones that are scooping up most of the money.”
Others like Senator Mitt Romney (R-UT) questioned the very notion of why PBMs exist, noting “We have something here they don’t have in the rest of the world. These PBM’s want higher and higher list prices because they get paid based on how high the list price is because they get a percent of the list price.”
Bipartisan reforms have been advancing slowly in Congress, so most seniors would think this issue ripe for one of AARP’s well-known and feared grassroots and media campaigns to demand insurer-PBM accountability, but that is not the case. Many speculate the reason why AARP has not been an aggressive or vocal proponent of reform lays with a potential conflict of interest related to its financial partnership with the massive insurer-PBM conglomerate UnitedHealth – one that pays the AARP billions of dollars.
UnitedHealth also happens not so coincidentally to be the largest insurer-PBM in America and holds the biggest market share for Medicare Advantage Plans (mostly AARP-branded). Furthermore, UnitedHealth is the parent corporation to a massive network of specialty pharmacies, primary and urgent care practices, home health services, health IT companies, and even an FDIC-insured bank. All of these services generate revenue from Medicare. All told, this financial relationship – coupled with AARP’s relative silence on insurer-PBM reform – is seen by many as compromising the integrity of AARP’s advocacy efforts – or lack of them dependent on the issue. (PBMs, Medicare premium increases, overcharges, claims denials, etc.)
As a retiree and a seniors’ advocate, and someone with some professional understanding of the complexities of healthcare, I find AARP’s lack of engagement on insurer-PBM reforms deeply troubling. Older Americans rely on organizations like AARP to champion our interests and hold powerful entities accountable. Yet, when faced with an obvious need and opportunity to confront the predatory practices of big insurer-PBMs, AARP remains largely silent. If not beholden to its financial ties to big insurer-PBMs like UnitedHealth, what excuse is there?
During the Senate hearing, Senator Bill Cassidy (R-LA), a medical doctor, highlighted the pervasive lack of clarity surrounding big insurer-PBMs, remarking, “We don’t know if those discounts lowered prices for the patient, and reports say the intermediary took the full price.” Likewise, Senator Roger Marshall (R-KS) said about PBMs, “It’s so non-transparent, we don’t know where this money is going.” Perhaps something similar can be said for the lack of clarity when it comes to just whom AARP actually represents these days.
Bob Johnson is a resident of The Villages, retired trade association executive and senior advisor to Commitment to Seniors.