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PBS NewsHour: Why a Patient Paid a $285 Copay for a $40 Drug

August 22, 2018
A featured story by PBS NewsHour reaffirms that insurance companies and drug cost middlemen determine what patients pay out of pocket for prescription drugs, and it often has little to do with the actual cost of the drug itself. That’s what Gretchen Liu came to realize, when she discovered she was paying $285 in health insurance copays for a blood pressure medication that really costs about $40.

According to a report written by researchers with the University of Southern California’s Leonard D. Schaeffer Center for Health Policy & Economics, the story of Liu is not uncommon. In fact, the study found that 25 percent of the time insurance copays are higher than the cost of the drug.
“You have insurance because your belief is, you’re paying premiums, so when you need care, a large fraction of that cost is going to be borne by your insurance company,” said Geoffrey Joyce, a USC economist who co-authored the study. “The whole notion that you are paying more for the drug with insurance is just mind boggling, to think that they’re doing this and getting away with it.”

As we explain in our “Follow the Pill” video, the drug cost ecosystem is more complex than most people think. Drug manufactures provide pharmacy benefits managers — or PBMs — with steep discounts for drugs to promote greater access for patients and consumers. Insurance providers and PBMs then ultimately determine what an individual will pay at the pharmacy counter for the medicines they need, whether in the form of copays, deductibles or coinsurance requirements. As Joyce explains:
“[I]nsurers outsource the management of prescription drug benefits to [PBMs], which determine what drugs will be covered by a health insurance plan, and what the copay will be.”

But what if insurance copays are higher than the cost of the drug? Who keeps the difference? PBMs have been scrutinized over a controversial practice called “clawbacks,” which happens when a pharmacy collects a copay that’s higher than the cost of the drug and the PBM takes a large cut of the difference. As Karen Van Nuys, one of the co-authors of the study notes:
“Whenever the copay is higher than the cash price, and the difference isn’t reimbursed to the patient, someone else must be pocketing the difference.”

Read the full story here, and be sure to check out our "Follow the Pill" video for a better understanding of how prescription drug costs are really determined and where the pharmaceutical dollar actually goes.

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