Because of their big share of patient prescriptions, the three largest PBMs are about to undergo scrutiny via Congressional reports and looming lawsuits that call out questionable practices
Pharmacy benefit managers (PBMs) are finding themselves under scrutiny from both Federal Trade Commission (FTC) investigations into drug pricing as well as recent Congressional hearings into anticompetitive practices.
Because of how PBMs have captured the lion’s share of patient prescriptions away from retail pharmacies in the United States during the past 15 years, pathologists and clinical laboratory managers may want to track how Congress and federal antitrust regulators respond to this development. The issue is the high cost of prescription drugs for patients and the role of PBMs in keeping drug prices high to optimize their profits.
House representatives pressed the executives for “steering patients to pharmacies the PBM owns and favoring more expensive brand-name drugs on their formularies, or list of covered drugs, which result in higher rebates paid to them by drugmakers,” Healthcare Dive noted.
In its final report, the Committee on Oversight and Accountability found that “PBMs inflate prescription drug costs and interfere with patient care for their own financial benefit.”
Though hearings on PBMs have been increasing, the last time PBM executives testified on the Hill was before the Senate Committee on Finance in 2019, according to Healthcare Dive.
“Spread pricing and rebates benefit PBMs and have helped the three largest PBMs monopolize the pharmaceutical market … these self-benefitting practices only serve to help their bottom line rather than patients,” said Chairman James Comer (above) during a meeting of the federal Committee on Oversight and Accountability. “PBMs have been allowed to hide in the shadows for far too long. I look forward to the Oversight Committee continuing to work in a bipartisan fashion to shine a light on how these PBMs have undermined community pharmacies, raised prescriptions drug prices, and jeopardized patient care.” Clinical laboratory executives may want to track efforts by Congress to rein in PBMs so as to reduce the cost of prescription drugs to patients. (Photo copyright: US Federal Government/Public Domain.)
Turning up the Heat on PBMs
The spotlight began to grow on PBM practices back in 2023. Since then, PBMs have been the focus of three congressional hearings. The late July meeting came just hours after Chairman James Comer, R-KY, presented his report following a 32-month-long investigation “into how PBMs raise prices and reduce consumer choice,” Healthcare Dive reported.
Comer’s research found that “PBMs have used their position as middlemen to cement anticompetitive policies which have increased prescription drug costs, hurt independent pharmacies, and harmed patient care,” according to a press release announcing the upcoming hearing with the executives of the three largest PBMs.
Comer’s report uncovered “300 examples of the three PBMs preferring medications that cost at least $500 more per claim than a safe alternative medication excluded from their formularies,” Healthcare Dive noted.
Coming Lawsuits, Public Opinion
While the Congressional hearings put pressure on the three PBMs, a new threat looms on the horizon—multiple lawsuits—including one from the FTC “over their tactics for negotiating prices for drugs including insulin, after a two-year investigation into whether the companies steer patients away from less-expensive medicines,” The Wall Street Journal reported.
State attorney generals and independent pharmacies are lining up with lawsuits targeting PBM’s questionable business practices as well, Healthcare Dive reported.
While PBMs maintain their innocence, public opinion differs. An independent survey from KFF found that approximately three out of 10 individuals surveyed reported not taking a prescribed medicine due to expensive costs.
“This includes about one in five who report they have not filled a prescription or took an over-the counter drug instead (21%), and 12% who say they have cut pills in half or skipped a dose because of the cost,” KFF reported.
Further, 82% of those surveyed described the cost of prescription drugs to be unreasonable. Still, 65% described the costs as being easily affordable, with the biggest challenge going to those with a household income of less than $40,000.
PBMs Push Back
In response to the backlash, the PBMs brought their own report to Congress, prepared by global consulting firm Compass Lexecon. It showed that “PBMs pass through almost all rebates to plan sponsors and have operating margins below 5% in recent years,” Healthcare Dive reported.
During their testimony, Conway said that Optum Rx saves over $2,000 per person annually. Kautzner claimed Express Scripts brought $64 billion in savings to patients last year and kept “out-of-pocket costs on a per-prescription basis at $15, despite brand manufacturers raising drug prices on 60% of those products,” Healthcare Dive reported.
Joyner said CVS Caremark experienced “little or no competition” from the pharmaceutical industry for brand name drugs. He blamed the pharmaceutical industry for drug pricing increases, Healthcare Drive reported.
“Let me be clear, we do not contribute to the rising list prices. Hampering our ability to negotiate lower drug cost … would only remove an essential tool and our ability to deliver lower cost for medications,” Joyner told the Congressional committee.
House representatives were not moved.
“On one hand we have PBMs claiming to reduce prescription drug prices and on the other hand we have the Federal Trade Commission, we have major media outlets like The New York Times, and we have at least eight different attorneys generals, Democrats and Republicans, who all say PBMs are inflating drug costs,” said Raja Krishnamoorthi (D-Ill), Healthcare Dive reported.
“This is why just about every state now is taking up PBM reform,” Comer said. “There’s a credibility issue.”
Because there has been a parallel concentration of market share for clinical laboratory testing among a handful of billion-dollar national lab corporations, clinical laboratory managers may want to follow these events. They are examples of federal regulators investigating the business practices of a major healthcare sector while, at the same time, members of Congress look for ways to lower healthcare costs. Prescription drugs is a high-profile target.
At some future point, the cost of genetic testing could also become a target when Congress seeks other healthcare sectors in their goal to control medical expenses.
Patients concerns about the quality of care provided since Amazon acquired One Medical in 2022 can affect clinical laboratory testing for those providers
Recently, The Washington Post reported on leaked documents that appear to indicate Amazon’s One Medical primary care call center was not using trained, certified medical professionals to field patient phone calls and provide telehealth guidance. Instead, The Post reported, “[One Medical’s] call center is staffed by contractors who receive about two weeks of medical training before responding to patient concerns,” and that, “They have missed urgent issues like blood pressure spikes and sudden stomach pain with blood in one patient’s stool,” MSN’s Business Insider reported.
The Washington Post, which is owned by Amazon founder Jeff Bezos, went on to report, “Amazon’s primary care clinic One Medical circulated talking points telling workers to claim that in cases when its call center failed to escalate potentially urgent calls to medical staff, patients ‘received the care they needed,’ according to screenshots of internal messages seen by The Washington Post.”
The Post’s report highlights the challenges some telemedicine providers using “non-physician” personnel are having in delivering quality primary care.
During the COVID-19 pandemic, social distancing and hospital lockdowns kept many people indoors and unable to access their doctors and clinical laboratories when they needed. As the pandemic progressed, enterprising mega corporations like Amazon saw an opportunity and invested heavily in bringing healthcare to patients where they live and shop.
Amazon, for example, announced in 2022 that it would be purchasing One Medical and all of its primary care clinics nationwide for $3.9 Billion.
“There is an immense opportunity to make the healthcare experience more accessible, affordable, and even enjoyable for patients, providers, and payers,” said Amir Dan Rubin, One Medical’s CEO, in an Amazon press release announcing the acquisition at that time. “We look forward to innovating and expanding access to quality healthcare services, together,” he added.
But it turns out, developing alternative pathways to primary care is not such an easy thing. According to Business Insider, some patients with One Medical are struggling to get adequate care, major patient concerns have been missed, and there are concerns over the efficacy of the services.
“The opportunity to transform healthcare and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention, and willingness to invest in the long-term is so exciting,” said Amir Dan Rubin (above), One Medical’s CEO, in an Amazon press release. Clinical laboratories that service One Medical’s providers may want to follow this developing story. (Photo copyright: LinkedIn.)
Call Center Contractors Spark Concerns
One Medical was started by Harvard-trained internist Thomas Lee, MD, in an effort to streamline medical services to the benefit of stakeholders and patients, according to Forbes. This subscription based service offered patients 24/7 virtual care with access to in-person appointments.
“One Medical was founded in 2007 as a concierge medical network before going public in 2020 and purchasing Iora Health, a value-based provider for seniors, in 2021. By the end of 2022, a majority of One Medical’s revenue came from capitated contracts. The company currently operates more than 200 clinics and a telehealth service in a membership model,” Healthcare Dive reported.
But according to reports reviewed by journalists at The Washington Post, on more than one occasion elderly patients have been failed by the One Medical call center in Tempe, Arizona. Patients began to be rerouted to this call center about a year after the Amazon acquisition.
The Post reported that several patients reported symptoms such as pain and swelling, blood in stool, a spike in blood pressure and sudden rib pain, and that the call center failed to escalate these calls to clinical staff—instead simply scheduling an appointment sometimes for days later.
The workers at the Tempe call center included newly hired contractors with what The Post described as “limited training and little to no medical experience.” Internal sources at One Medical are raising the alarm bell about the dangers of Amazon’s frugal approach. “There were a lot of things slipping through the cracks,” one anonymous source told The Post.
Quantity over Quality
In an interview with PBS, Caroline O’Donovan, the reporter at The Washington Post who broke this story said, “In the documents that were leaked to us, there’s a doctor who wrote a note saying, ‘I don’t think these call center people even realize that they’re triaging patients, which is not something that they’re qualified to do.’”
Amazon contends that no one was harmed in the cases where protocol was not followed.
In an email statement concerning the Washington Post report, Amazon spokesperson Dawn Brun wrote, “While the patients ended up receiving the care they needed (during in-person visits with their providers), the initial call could have been managed more effectively,” The Post reported.
“We take patients’ feedback seriously and the [Washington Post] story mischaracterizes the dedication we have to our patients and care teams,” she added.
However, O’Donovan says that the patients—and some employees—she spoke with challenged that idea. “The patients I spoke to again and again—and some of the One Medical employees I spoke to—said there’s a difference between getting your phone call answered faster, literally someone picking up the phone, and actually getting your problem solved,” she told PBS.
When data-driven companies like Amazon get involved in healthcare certain care standards may be sacrificed in the name of optimization.
This story shows that there is not an easy solution/answer to developing alternative primary care pathways. Clinical laboratories have a stake in the evolution and developments in the field of primary care and telemedicine because often these patients need lab tests.
Millions of cancelled healthcare appointments and lengthy waits for care abound in UK, New Zealand, and in the US
Strikes continue on multiple continents as thousands of healthcare workers walk off the job. Doctors, medical laboratory scientists, nurses, phlebotomists and others around the world have taken to the picket lines complaining about low wages, inadequate staffing, and dangerous working conditions.
In England, junior doctors (the general equivalent of medical interns in the US) continue their uphill battle to have their complaints heard by the UK government. As a result, at hospitals and clinics throughout the United Kingdom, more than one million appointments have been cancelled due to strikes, according to the BBC.
“The true scale of the disruption is likely to be higher—many hospitals reduce bookings on strike days to minimize last-minute cancellations,” the BBC reported. “A total of one million hospital appointments have had to be rescheduled along with more than 60,000 community and mental health appointments since December [2022], when industrial action started in the National Health Service (NHS).”
According to The Standard, “Consultants in England are to be re-balloted over the prospect of further strike action as doctors and the government remain in talks with a view to end the dispute. The British Medical Association (BMA) said that specialist, associate specialist, and specialty (SAS) doctors will also be balloted over potential strike action.”
“We must be prepared to take the next step and ballot for industrial action if we absolutely have to—and we will do this … if upcoming negotiations fail to achieve anything for our profession,” Ujjwala Anand Mohite, DRCPath, FEBPath (above), a histopathologist at the NHS, Dudley Group of Hospitals, and the first female Chair of the SAS committee UK, told The Guardian.
New Zealand Doctors, Clinical Laboratory Workers Strike
In September, the first-ever nationwide senior doctor strike occurred in New Zealand and was then followed by another strike of about 5,000 doctors and 100 dentists from New Zealand’s public hospitals, the World Socialist Web Site reported.
Similar to the UK, the strikes reflect mounting frustration over pay not keeping up with inflation and “decades of deteriorating conditions in the public health system,” the WSWS noted.
This follows months of strikes by the island nation’s medical laboratory workers, which are ongoing.
“Our pay scales, if you compare them internationally, are not competitive. About half of our specialists come from abroad, so it’s quite important for the country’s health system to be able to attract and keep people,” Andy Davies, a lung specialist who joined the picket outside 484-bed Wellington Hospital, told the WSWS.
“We’re not asking for the world, we’re asking for an inflationary pay rise, and we haven’t had an inflationary pay rise year-on-year, and it’s beginning to show,” he added.
“What type of health system do they want?” he continued. “Do we want one that treats all people and manages what they need, or do we want a hacked down system that does less?”
The conflicts over pay and working conditions have caused many healthcare workers in New Zealand to leave the field entirely. This has led to severe shortages of qualified workers.
“Patient waiting times—for cancer, hip replacements, cardiac problems, and many other conditions—have exploded due to understaffed and overwhelmed hospitals,” the WSWS reported.
US Healthcare Workers also Striking
The US has its share of striking healthcare workers as well. Healthcare Dive tracked 23 ongoing or anticipated strikes throughout the nation’s healthcare industry since January 1, 2023. In 2022, there were 15 strikes of healthcare workers at the nation’s hospitals and health systems.
These walkouts include doctors, nurses, pharmacy workers, imaging specialists, and thousands of frontline healthcare workers striking over dangerously low staffing levels, unsafe working conditions, and low pay.
In October, 75,000 nurses, support staff, and medical technicians from Kaiser Permanente participated in a 72-hour strike comprised of hundreds of hospitals and clinics throughout California, Washington state, Oregon, Virginia, and the District of Columbia, Reuters reported.
The three-day strike, “Marked the largest work stoppage to date in the healthcare sector,” Reuters noted. Doctors, managers, and contingency workers were employed to keep hospitals and emergency departments functioning.
“The dispute is focused on workers’ demands for better pay and measures to ease chronic staff shortages and high turnover that union officials say has undermined patient care at Kaiser,” Reuters stated.
Staffing shortages following the COVID-19 pandemic are partly to blame for current struggles, but contract staffing to fill critical positions has exacerbated the problem.
“Kaiser’s outsourcing of healthcare duties to third-party vendors and subcontractors has also emerged as a major sticking point in talks that have dragged on for six months. … The clash has put Kaiser Permanente at the forefront of growing labor unrest in the healthcare industry—and across the US economy—driven by the erosion of workers’ earning power from inflation and pandemic-related disruptions in the workforce,” Reuters noted.
Across the globe, many healthcare workers—including clinical laboratory scientists in countries like New Zealand—are feeling burnt out from working in understaffed departments for inadequate pay. Hopefully, in response to these strikes, governments and healthcare leaders can come to resolutions that bring critical medical specialists back to work.
The newly approved legislation will “eliminate regulations preventing patients from learning about diagnostic testing and services provided by local clinical laboratories,” according to a press release issued by the Pennsylvania Senate Republicans.
Republican state Senator Rosemary Brown was the bill’s primary sponsor. She was joined as co-sponsors by a bipartisan group of colleagues.
“The regulations prevent patients from learning about clinical laboratories and the services they provide,” Brown said in the press release. “Patients deserve to know about their options when they are selecting a clinical laboratory to perform these important tests and procedures.”
The press release noted that Pennsylvania is the only state that prohibits clinical laboratories from advertising to residents.
“It’s time for Pennsylvania to catch up with the rest of the nation and enable patients to have access to this information,” said co-sponsor of the bill Republican Senator Tracy Pennycuick (above) in a press release. “Our bill would enable advertising while maintaining the important consumer protection provisions that ensure tests and procedures can only be performed based on a doctor’s order.” Once enacted into law, clinical laboratories in Pennsylvania will be able to advertise their services just like labs in other US states. (Photo copyright: Montgomery County Republican Committee.)
Details of Senate Bill 712
The bill applies to clinical laboratory tests ordered by licensed healthcare practitioners and performed by the medical laboratories themselves. Labs are prohibited from making claims “about the reliability and validity of the testing that is inconsistent with the testing proficiency standards” in federal law, the bill states, and labs must disclose that the test “may or may not be covered by health insurance.”
Brown, Pennycuick, and co-sponsor Republican Senator Lynda Schlegel Culver, discussed the need for the new legislation in a March 2023 memo, observing that 70% of healthcare decisions are influenced by clinical laboratory tests.
“As our state and the nation’s healthcare system continues to grow and evolve, consumers are demanding greater transparency and to be more engaged in how healthcare is delivered to them,” they wrote, adding that the state’s current restrictions are “outdated.”
“We believe permitting outreach to Pennsylvania consumers with accurate, scientifically based diagnostic information can be a source of personalized, highly relevant insight to help foster better, more informed dialogue with licensed healthcare providers, which enables Pennsylvania consumers to take action to improve their health,” they wrote.
“Patients should have access to information about the services and procedures available at their local clinical laboratories,” said Senator Culver in the press release. “I want to make sure patients can make informed decisions about where and how to obtain these important health services. Our bill would remove the gag order on this specific set of healthcare services.”
Similar legislation, HB1558, sponsored by Republican Representative Paul Schemel, is currently pending in Pennsylvania’s House of Representatives.
Larger Push for Healthcare Consumerism
Dark Daily and our sister publication The Dark Report have reported extensively about the rise of consumerism in healthcare—including factors such as price transparency—as it applies to medical laboratories.
And in “Millennials Set to Reorder Healthcare and Lab Testing,” The Dark Report advised clinical laboratories on the need to reconfigure key aspects of their services to accommodate the rising numbers of Millennials in the workforce. For example, these consumers are accustomed to using mobile devices to interact with retailers and want the same convenience when obtaining healthcare services from doctors and labs.
Global management consulting firm McKinsey and Company addressed many of these issues in report titled, “Driving Growth through Consumer Centricity in Healthcare.” The authors suggested that healthcare providers need to “redefine the consumer experience” by emulating “consumer-focused companies in other sectors” with “personalized offerings and services, value-based pricing, and an elevated experience—all from distinctive, high-quality brands.”
The report also noted that providers still have a lot of work to do. “Many consumers believe that the health system does not support their care needs, and they perceive that the quality of their healthcare is negatively affected by their personal attributes, including income, insurance coverage, weight, and age, among other factors,” the authors wrote.
Huron, a healthcare consulting company, identified five current trends in healthcare consumerism based on a survey of US consumers, Healthcare Dive reported. They are:
Greater digital functionality, including telehealth, wearable devices to report health data, and mobile apps for scheduling, communication, and payment.
Affordability, shorter wait times, and online ratings as factors driving consumers to choose providers.
Accurate diagnoses and effective treatment plans as drivers of consumer satisfaction.
Increasing demand for technology-enabled conveniences such as virtual care.
More price transparency in response to concerns about affordability.
Pennsylvania’s decision to join the rest of the nation and allow clinical laboratories to advertise their services may be evidence that the growing number of consumers who want direct access to medical care and the ability to choose their provider—be it hospital, physician, or clinical laboratory—are encouraging the pathology and medical laboratory professions to lobby their state lawmakers to make it easier to advertise their services to the public.
Shift from fee-for-service to value-based reimbursement is fueling increase in joint ventures and co-branded insurance products, creating opportunities for nimble clinical laboratories and anatomic pathology groups
As healthcare moves from fee-for-service to value-based reimbursement, health insurers and providers are joining forces at a steadily increasing rate, with nearly three-quarters of partnered products in early 2018 being joint ventures or fully co-branded insurance products. This trend presents an opportunity for clinical laboratories to help providers become more effective in their use of laboratory tests as they aim for better patient outcomes and lower treatment costs.
While health systems integrating with insurance services is not new, the roll out of the Affordable Care Act (ACA) in 2014 and its emphasis on value-based reimbursement helped create renewed interest in vertical integration, notes Becker’s Hospital Review.
According to consulting firm Oliver Wyman, the number of payer-provider partnerships has grown rapidly over the past six years, with 73% of the 22 insurance products launched in the first quarter of 2018 being joint ventures of co-branded offerings.
In comparison:
22% of partnerships were joint ventures or co-branded in 2014:
33% in 2015;
57% in 2016; and,
71% last year.
Of the 22 new payer-provider partnerships announced this year, 20 product announcements explicitly emphasized value-based compensation, while compensation was implied but not mentioned in the final two product-based partnerships.
“Payers and providers continue to be interested in forming product-based partnerships,” Oliver Wyman stated when releasing the new data. “Our analysis … continues to show a steady increase of trend toward deeper partnership, with more co-branding, greater levels of value-based financial alignment, and other forms of closer collaboration and joint ventures.”
Oliver Wyman cited several “notable” new entrants:
In addition, Oliver Wyman noted that national payers Aetna and Cigna added to their growing rosters of joint ventures in 2018.
Speaking with Healthcare Dive, Tom Robinson, Partner, Health and Life Sciences at Oliver Wyman, described this year’s new ventures as varying in type, size, location, and model. He noted that 50/50 joint ventures with co-branding have gained in popularity, however, accountable care organizations (ACOs), pay-for-performance, and bundled-payment models also are being formed. Robinson believes these vertical integrations offer opportunities for innovation.
“The point of these partnerships is to create something new, rather than just building the same old offerings with a narrow network,” Robinson said. “Successful partnerships will take the opportunity to innovate around the product and experience now that the incentives, insight, investment and integration are all for it.”
In the video above, Oliver Wyman Health and Life Sciences Partner Tom Robinson discusses the emerging trend of payer-provider partnerships, and he highlights unique challenges and opportunities of these joint ventures. Click here to watch the video. (Photo and caption copyright: Oliver Wyman.)
Lower Costs, Improved Access, Through Payer-Provider Partnerships
In announcing Blue Cross Blue Shield of Rhode Island (BCBSRI), and Lifespan’s launch of coordinated healthcare plan BlueCHiP Direct Advance, BCBSRI President and Chief Executive Kim Keck pointed to the plan’s ability to drive down healthcare costs.
“We hear a consistent theme from our members—they want more affordable health plan options—and through our collaboration with Lifespan we are doing that,” Keck stated in a news release. “BlueCHiP Direct Advance is an innovative product that features Lifespan’s vast network of providers who are positioned to more effectively manage and coordinate a patient’s care. And, our partnership allows us to offer this new product at a cost that is 10% lower than our comparable plans.”
When Allina Health System of Minnesota and Aetna last year announced their partnership plans, Allina Chief Executive Penny Wheeler, MD, praised the ability of “payer-provider” partnerships to improve care coordination and increase access to preventive care.
Jim Schowalter, MPP, President and Chief of Executive of the Minnesota Council of Health Plans, told the Star Tribune the joint venture between the for-profit insurer and local health system would accelerate the shift within the state to value-based care.
“This is another effort in our state that moves us away from old fee-for-service systems,” Schowalter stated. “Working together, doctors and insurers can deliver better personal care and hold down medical expenses.”
While the future of the ACA and other healthcare reforms is uncertain, clinical laboratories and anatomic pathology groups should expect healthcare networks and insurers to continue to find ways of partnering. That means pathologists can expect to have an expanded role in helping providers improve patient outcomes and reduce healthcare spending.
