Thars Gold In Them Thar Pills!

Many are puzzled by why politicians, employers and health insurers are so interested in getting us to participate in wellness programs, undergo preventive health screenings, fill out those online health risk assessments, and comply with health management. The questions that frequently come up are: “Don’t all of those screenings and preventive health interventions raise costs? Why would insurers want to do that?”

Of course, these initiatives raise healthcare costs — costs shared by consumers and employers — and, as we've seen, there's little evidence most of them actually work to prevent health problems. We've examined the evidence that heart disease and cancers are primarily diseases of aging and that risks for heart disease and cancer have little to do with behavior under one's control. We can even just look at the risks for breast cancer.

But instead of admitting, "there but for the grace of God go I," convincing us that our health is about "healthy behaviors" and under our control not only overestimates the degree to which diet and behaviors can prevent diseases, it gives politicians and others reign to trample on "bad" behaviors and blame those who get sick or age. Insurers, on the other hand, come out ahead on the deal. Way ahead. And few consumers and employers realize how. Nor do they realize the enormity of the financial interests behind promoting health.

Take the key role of the intense marketing of online health risk assessments (HRAs), for example. Our personal health information — complete with our pharmacy, laboratory and billing records, and medical records from healthcare providers — enables insurers and government agencies to incentivize compliance with preventive health guidelines.

Employers are led to believe HRAs and the resultant health management under insurers, as well as those employer wellness programs, save healthcare costs. But in actuality, they save employers health insurance costs. Rates set by the insurers. And employers are put in the position of pushing the insurer's mandates to keep costs down.

In a press release earlier this year, Blue Cross and Blue Shield of North Carolina announced employees’ HRAs will be made available to their employers to help them incentivize their employees’ participation:

“Employers tell us they want more information to help them take specific, measurable actions toward containing rising medical costs," said Bob Greczyn, BCBSNC president and CEO. “Your Health Profile can be one of the first and most important steps to creating a healthy workforce."...

Upon completion of the confidential [HRA] questionnaire, BCBSNC members receive personalized assessments of their health status, complete with tips on developing an action plan for maintaining and improving their health.

BCBSNC is offering Your Health Profile through an agreement with Summex Corp., a unit of WebMD Health Corp. that provides comprehensive health and wellness programs to employers.... How it works...Employers with 50 or more employees completing the survey receive an aggregate summary report that includes suggested steps for addressing health issues within their employee population.

For stakeholders, Humana published “Mining Health Risk Assessments for Richer ROI and Results,” which includes insider reports on the HRA programs at Blue Shield of California and Aetna; ideas for incentivizing participation, creating health risk profiles, and data sharing.

Insurers offer insurance rate discounts to employers based on the numbers of their employees participating in HRAs and the subsequent insurer-directed health management. Insurers even reward members hundreds of dollars to participate in HRAs. Why?

These discounts are a small fraction of the potential profit insurers can make.

Profits in a bottle

Health insurers now see themselves as healthcare management companies. Look closely at the insurance plans offered today and you will no longer find old-fashioned health insurance to cover you for a major medical problem. Their focus is no longer insurance, but management of the healthcare members receive. Medical professionals quickly learn that insurers are compelling their members to have annual physicals, prolific health screenings and lab tests, and tight medical management of health indices (such as BMI, blood sugars, blood pressure and cholesterol levels). And therein lies one of the insurers’ biggest motivations:

More prescriptions.

[This may also explain why politicians of all parties (follow the money of their campaign funding) are so hot to force everyone to have health insurance and abide by health and wellness interventions.]

Most consumers and employers don't think of insurers and pharmaceuticals in the same breath. Most are probably unaware of the enormous profits on prescription drugs possible through pharmacy benefit management (PBM) companies. And most major insurance companies own their own PBMs, through which all prescriptions must be filled. See the PBM Directory to find your insurer’s.

At FTC hearings on June 26, 2003, John Richardson with Health Strategies Consultancy, LLC, presented an industry overview of PBMs. He explained that PBMs are companies that administer drug benefits. They contract with managed care organizations, self-insured employers, insurance companies, unions, Medicaid and Medicare managed care plans, the Federal Employees Health Benefits Program and other federal, state, and local government entities to provide managed prescription drug benefits.

“PBMs manage about 70% of the more than 3 billion prescriptions dispensed in the U.S. each year... [and] manage pharmacy benefits for nearly 200 million Americans, including 65% of the country’s seniors.”

But today’s PBMs aren’t just processing drug prescription claims as in past years, he said, but have taken on new lines of business with comprehensive clinical drug management (disease management). “Case management programs through PBMs include: risk assessment and screening through claims data, patient/physician education, prescription drug management, coordinated care programs and performance feedback.” PBMs also steer doctors to write prescriptions for drugs they have the greatest manufacturer rebates, through formularies, tiered copayments and by requiring prior authorization.

The ability of PBMs to reduce prescription drug costs by negotiating better rates with the pharmaceutical companies by buying in volume certainly can benefit members. And few would begrudge a company for making an honest profit by providing that service. But concerns come in when those who control access and costs of prescription medications are also in control of our medical records, the health information we get, and the medical care we receive.

In a recent issue of U.S. Pharmacy Review, professors at Creighton University School of Pharmacy and Health Profesions examined the conflicts of interests of PBMs. Their article, “Is the Pharmacy Benefit Manager Truly Transparent?” explained that PBMs act as “a drug broker between the pharmacies that fill the prescriptions and the payers.” PBMs have recently been called into question, they said, specifically on the exceedingly large cash flows generated that are often not known by the participants. They wrote:

The pharmacy benefit manager makes two sets of contracts. One contract is with sponsors [i.e. your employer], the second contract is with the pharmacies that fill those prescriptions. In the process of billing sponsors and paying pharmacies for the prescriptions, the pharmacy benefit manager makes a ‘spread’ or positive difference between what was billed to the sponsor and paid to the pharmacy. In extreme cases, the authors have documented spreads of over $200 on a single prescription. As auditors and consultants to corporate benefit plans, we consistently find spreads on average of $2–4 per prescription. Spreads represent a markup that does not appear on the sponsor’s invoice.

Understandably, these spreads are very difficult for most sponsors to monitor. Although $2–4 per prescription may not seem excessive, a realistic example provides perspective. A plan with 6,000 covered employees would be expected to generate approximately 100,000 prescriptions per year. Spread pricing would cost this firm $200,000– 400,000 per year, in addition to the published administration fee charged by the pharmacy benefit manager (e.g. $50 per prescription charge to the sponsor).

Putting that into a more realistic picture, the Blue Cross Blue Shield Association, for example, has created a database on 79 million enrollees that Kaiser Daily Reports said will provide “a treasure trove of information that employers working with health plans can use to extract greater value for their health care dollars.” Applying the most conservative mark-ups in the Creighton professors’ math could mean potential PBM profits for BCBS plans alone of about $4.74 billion a year, plus about $2.8 million in administration fees.

The more prescriptions written, the greater the profits for PBMs (i.e. insurers). “Pharmacy benefit managers appear to have an inherent conflict of interest,” the Crieghton professors wrote. Insurers have incentives behind directing members and prescribing physicians, through formularies, to drugs that they have special contracts or rebate deals with pharmaceutical companies, they said. Another point of potential conflict of interest is PBM-owned mail order pharmacies, which they found are not the bargain as is being promoted.

A recent article in the Journal of the American Medical Association shared even deeper concerns about PBMs and their use of our personal health information. When insurers and healthcare managers own both, confidentiality concerns and conflicts of interest lead to enormous potential for abuse:

Specific confidentiality concerns include whether the goal of benefiting patients will be achieved and whether the means are appropriate. The means may be problematic because of financial conflicts of interest, lack of patient authorization, inappropriate access to information by third parties, and inadequate safeguards for confidentiality.

PBMs are a missing piece to the puzzle as to why insurance companies (which manage both private plans and government programs, such as Medicare and Medicaid) and employer are eager to medicalize health indices: BMI, cholesterol, blood pressure and blood sugars. Most of those numbers now considered “high” and in need of treatment are normal as we age and a matter of genetics or the luck of the draw, and are not malleable by “healthy lifestyles.” Only prescriptions will get them down to those increasingly stringent “ideal” ranges.

© 2007 Sandy Szwarc