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Jon Fleischman

Emick: AB 299: Prescribing a Cure to Taxpayer-Funded Mail Order Pharmaceuticals

We are pleased to share this original commentary from Apple Valley Mayor Curt Emick.

Gone are the days when the mail and the milk were the only two services that would deliver to your doorstep. The modern family can have virtually any product delivered directly to their door, including prescription medications. In an era of convenience and innovation, this practice may at first glance seem to benefit the consumer. The hidden reality is that a seemingly good deal for the consumer is in fact, quite a bad deal for conservatives and taxpayers alike, as noted by the Taxpayer Protection Association’s (TPA) latest report on taxpayer-funded mail-order pharmaceuticals (here).

Some context is needed in order to understand how these organizations waste our tax dollars for we are not talking about chump change: for federal employee benefits alone, the government spends $35 billion a year. When prescription plans are federally-funded—as is the case with federal employees and recipients of Medicare—the administration of prescription drugs is managed by a middleman: a Pharmacy Benefits Manager (PBM). The influence of these organizations has grown significantly, from simply administering the task of processing prescriptions to negotiating costs of health care benefits. This transition coincides with an industry trend: whereas the cost of prescription drugs has traditionally been footed by consumers, they are now paid by third parties and PBMs have a large say in the matter.

Conservatives should take heed of PBMs as they wield considerable influence over consumer choice through their authority to set drug prices, both for the community pharmacy competitors they oversee as well as their own mail-order operations. This price management scheme is complicated by a reality noted in the TPA’s report: PBMs maintain a direct conflict of interest as they often own the very mail-order prescription drug companies at question. In order to entice consumers to opt into their mail-order plans, PBMs offer reduced—or in some instances, zero—copays for the prescriptions. Reduced out-of-pocket costs and the convenience of doorstep delivery provide an attractive alternative to driving to the local pharmacy. While indeed this service is convenient, the problem lies in the reduced copay. Someone has to pay it. Consequently, PBMs jack up the prices for consumers who choose to fill their prescriptions at the pharmacy and health insurance companies are left to cover the remaining deficit. A greater fiscal burden levied on health insurance companies means the general cost for healthcare rises for all. This undoubtedly leaves the taxpayer to pick up the tab.

Mail-order pharmacies are also rife with disregard for their patients. Logistical issues can cause erratic delivery schedules, causing even vital medications to arrive late. This in turn forces the consumer to obtain emergency refills at their local brick-and-mortar pharmacies, resulting in a double billing of the same prescription. Additionally, should a patient no longer require a given prescription, it quickly becomes a bureaucratic nightmare to cancel the automatic refill. As a result, consumers are left paying for and dealing with medications they no longer need. Not only is this frustrating to the consumer, it amounts to enormous waste as health insurance companies—and subsequently the taxpayers—foot the bill for millions of unnecessary medications. And just how much are these surplus drugs costing the taxpayer? The Michigan Pharmacists Association hosts an annual statewide medical disposal event and reported that in 2012, they collected over $1 million worth of unused meds.

As conservatives, such wastefulness should be cause for concern. Normally, free market forces would prompt corporations to increase efficiency standards in order to retain customers. However, the position of PBMs is one of indifference: because government benefits guarantee a stream of revenue regardless of their actions, these companies can forgo innovative, customer-focused and cost-cutting practices. Lawmakers across the aisle are slowly beginning to take notice of the bureaucracy and lack of oversight that has resulted. Rep. Stephen Lynch (D-Mass.) stated the following regarding PBMs during his term as chairman of the House Oversight and Reform Subcommittee on the Federal Workforce: “It’s unbelievable, the needless complexity of this whole system…It’s built to thwart oversight. It’s built to introduce as much complexity as possible. It’s a scam of major proportions.”
Here in California, legislators are looking to cure the mail-order ailment. For the reasons detailed above, mail-order pharmacies may not be the consumer’s first choice, but it may become their only choice as PBMs have recently proposed mandating the mail-order service. Assembly Bill 299 (full text: here) curbs this by prohibiting pharmacies from entering into an agreement with a health care service plan that requires patients to utilize mail-order services.

The decisions made by PBMs are self-interested and are made at the expense of taxpayers. As a fiscal conservative, I believe it is imperative that we all remain vigilant in our bureaucratic oversight for the sake of the taxpayer in our effort to ensure funding raised from taxes is well-spent. This becomes particularly pertinent when the government spends over $10 billion on prescription drugs for federal employees alone. And as both a conservative and as a pharmacist, I believe that our system should afford patients the conservative principle of choice in how to obtain their medication. There is a reason the likes of AARP California and the California Senior Legislature, California Pharmacists Association, and the AIDS Healthcare Foundation have rallied around this bill. Join me in supporting AB 299, the right medication for California’s PBM problem.