By Bill Rusteberg
What’s the price we pay for free-credit drug money?
If you’re under age 40 you have never experience life without a PBM. Although the first PBM was established in 1968 claims were paper filed and no one really knew PBMs even existed.
It wasn’t until around 1984 when PBMs started using an electronic payment system for point-of-sale claim adjudication which plan members enjoy to this today. For the first time plan members didn’t have to pay first and claim later. In effect they were fronted free-credit drug money they never had to repay, seeing only a small copay as their share.
Whereas before plan members knew exactly what their medications cost, with the advent of new era Rx PBM free-credit financing buying behavior fundamentally changed. A moral hazard mindset became common. Cost was no longer a consideration. Price didn’t matter anymore.
When price is no longer a point-of-sale consideration the seller has the advantage. The term “Taking Advantage” developed dual meanings, one for the PBM and the other for consumers. PBM’s and pharmaceutical manufacturers knew consumers were no longer concerned about price so they began taking advantage by raising prices and building formularies favoring more expensive medications. Consumers took advantage too by demanding more drugs for every need, a natural tendency when something is so cheap its free all made possible by free-credit drug money they didn’t have to repay.
We are the only country on the planet where PBMs exist, where drug prices are the highest in the world, increasing every year faster than a melting Raspa in deep South Texas on an August afternoon. Consumers have not complained over the past 40 years and never will as long as free-credit drug money that never has to be paid back continues to exist in American health care finance.
Such is the price of free-credit drug money.
Take that away, let consumers pay and chase, and you will see a difference in buying behavior and it won’t be good for sellers. They won’t be able to continue hiding prices behind third party intermediaries. That will be good for working Americans who are paying for all of this and for the first time in over 40 years market demand will again dictate prices.
Please understand we are not bashing PBMs for making money off a system we all helped create. They deserve it because we allow it. After all America is the land of opportunity and the envy of the world. Jerry is an authentic All-American example. At a young age he saw an opportunity, seized it, and made it big in the PBM business. Nothing wrong with that.
This article is not intended to be perfectly sound in theory or practice. Rather, common sense drives this narrative as it should. That is, when prices are hidden by free-credit drug pricing paid with other people’s money mischief in the marketplace is bound to happen. And it has. And that’s the truth.
