Ban the 'Pharmacist Gag Rule'
Most people pay for health insurance to keep their out-of-pocket medical expenses in check. When it comes to prescription drugs, though, new research shows that many patients with insurance are paying more for medicine than the uninsured. And the people best positioned to tell patients about a drug’s actual cost — pharmacists — are often blocked from saying anything thanks to “gag” agreements.
This must change.
With most health-insurance plans, patients are responsible for a co-pay at the pharmacy counter. Typical co-pays run somewhere between $10 and $25. Sometimes, a co-pay exceeds the full price of a medication. Many generic drugs, for example, cost just $5 per month. With these medicines, many insurers still insist on collecting their full co-pay, effectively marking up drug prices and pocketing the difference.
Unless consumers specifically request information about alternative pricing, gag rules compel pharmacists to remain silent. If pharmacists violate the rules, they could be fired, cut from drug-distribution networks, or face other penalties. Pharmacists have called these rules “incredibly frustrating” and have even described the resulting higher prices as “theft.”
This is shockingly common. A new study in the Journal of the American Medical Association study examined 9.5 million prescriptions filled in 2013. With 2.2 million of them, consumers overpaid. For generic drugs, consumers’ co-pays exceed the full cost of the drug 28 percent of the time. For brand drugs, over-payments accounted for 6 percent of prescriptions filled, but the dollar value of the overpayment was higher. Aggregate overpayment totaled $135 million.
Pharmacy benefit manager (PBM) leaders say such gag rules are unusual. But according to the American Pharmacists Association, such clauses are commonplace, especially in “take it or leave it” contracts, which leave pharmacists little leverage to negotiate different terms. Meanwhile, consumers often have no idea gag rules exist. So it never occurs to them to ask how much drugs cost in cash. They simply assume that insurers and PBMs are looking out for their best interests.
Gag rules particularly harm patients with chronic illnesses like cancer, heart disease, and diabetes, which often require frequent prescriptions. The cost of treating chronic disease is staggering. The Centers for Disease Control and Prevention estimates that nearly half the adult U.S. population — some 117 million people — suffers from at least one chronic disease. Eighty-six percent of the $3.6 trillion in U.S. health-care spending goes towards managing chronic conditions. Chronic diseases also prevent patients and their caregivers from fully participating in the workforce.
For many patients, out-of-pocket prescription costs are a matter of life and death. Studies on cancer patients show that the higher a patient’s out-of-pocket spending, the less likely the patient is to fill her prescription. By needlessly inflating patients’ out-of-pocket costs, gag rules make it more likely that people won’t be able to afford to take medications as directed. Non-adherent patients often become sicker and require more intense care, which ultimately drives up total health spending.
It’s up to states legislatures to prohibit gag rules. Connecticut, Georgia, Maine, and North Carolina have already banned them. At least 10 other states are considering similar bans. Some states are also requiring greater transparency in relationships between PBMs, insurers, and pharmacies.
Lawmakers nationwide should take note. All pharmacists should have the right to inform patients about cheaper drug options.
Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.
