Medicaid

Part 2: Bypassing Prior Authorizations

By NIRAN AL-AGBA, MD

A few weeks ago, I saw a young patient who was suffering from an ear infection. It was his fourth visit in eight weeks, as the infection had proven resistant to an escalating series of antibiotics prescribed so far. It was time to bring out a heavier hitter. I prescribed Ciprofloxacin, an antibiotic rarely used in pediatrics, yet effective for some drug-resistant pediatric infections.

The patient was on the state Medicaid insurance and required a so-called prior authorization, or PA, for Ciprofloxacin. Consisting of additional paperwork that physicians are required to fill out before pharmacists can fill prescriptions for certain drugs, PAs boil down to yet another cost-cutting measure implemented by insurers to stand between patients and certain costly drugs.

The PA process usually takes from 48-72 hours, and it’s not infrequent for requests to be denied, even when the physician has demonstrated an undeniable medical need for the drug in question.


I saw my patient with the persistent ear infection on a Thursday afternoon. It would be Monday, at the very earliest, that his Ciprofloxacin prescription could be filled – provided the insurance company granted my PA request.  Because he needed the drug as soon as possible, the patient’s mother and I called the pharmacy to see how much a 100ml bottle of Ciprofloxacin would cost if she were to pay out of pocket. The answer was $135 – an almost unthinkable sum for a single mother of three who was working two jobs to make ends meet.

That’s when my frustration led to a breakthrough.

My grandfather was a general practitioner who prepared medications from the “virtual pharmacy” that lined his office walls in order to send patients home with medically-necessary medications.  Washington State allows physicians to dispense medications directly to patients, just as most general practitioners did well into the 1960s.

As my patient and his mother waited, I contacted Andameds, one of the country’s largest distributor of wholesale generic drugs.  I was told that the same 100 ml bottle of Ciprofloxacin that would have cost $135 at the pharmacy could be purchased directly by me for under $20. It arrived at my office the next day, and I sold it to my patient’s mom at cost, thus bypassing the insurer and the Pharmacy Benefit Manager (PBM) entirely.

Bypassing both the insurer and PBM entirely will soon take on a great deal of significance to physicians and their patients.

The PBMs are essentially middlemen, who go between pharmaceutical companies and insurers, negotiating lower prices for drugs bought in bulk and passing much of those savings on to the insurance company. (They make their money on the margin between what the pharmaceutical companies charge for the drugs and the slightly up-charged price PBM’s charge the insurance companies.)  According to recent disclosures, CVS and Express Scripts—two of the largest PBM’s in the nation – are passing 95-98% of the rebates they receive from the drug manufacturers on to the insurers.

While it is not clear exactly what insurers are doing with the revenue generated through drug rebates, it is obvious why a merger between CVS and insurance giant, Aetna, might be so lucrative.  If the Department of Justice approves this merger of titans, it will surely pave the way for another, between insurance behemoth Cigna and Express Scripts – which is, along with CVS and OptumRx, one of the Big Three in pharmacy benefit management entities.  After merging into one entity, it is conceivable that Aetna-CVS and Cigna-Express Scripts will control price, access, and distribution of drugs for the majority of the U.S. population.

Purchasing generic medications through Andameds allows me to bypass the insurer and the PBM, and purchase Epi-Pens for $300, compared to the $600 retail price; Amoxicillin suspension for $2 per bottle, compared with $15; and just about any other generic medication for pennies on the dollar.

Darwin said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”  At the rate we are going, a bottle of Amoxicillin suspension will soon cost more than $1000.  With the pharmaceutical industry poised to become increasingly vertically integrated, this sort of direct distribution of medications by independent physicians, like me, can be an efficient and effective way to get necessary drugs into the hands of patients who need them at prices they can afford.

Niran Al-Agba (@silverdalepeds) is a third-generation primary care physician in solo practice in an underserved area in Washington State.

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HealthViewXRes Morgan M.D.William Palmer MDBarry CarolPeter Recent comment authors
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HealthViewX
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HealthViewX

Well written.

It is important to find an efficient and effective way to get the necessary drugs into the hands of patients who need them at prices they can afford.

William Palmer MD
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William Palmer MD

I wish docs could help the patient more in negotiating a smoother drug experience. First of all, our physician organizations need to be tough and squawk more to big pharma about prices. Secondly, we should insist that Medicare negotiate prices—use oligopsony—large purchasing—for heavens sakes. Every country in the world does this except us. Third, we should yell at pharmacies to package drugs for the patient so that he has the correct pills on the right time of day right in front of him in a a daily pill sorter or pressed in some foil or something. Someone who is 90… Read more »

Barry Carol
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Barry Carol

Two points on this. First, generic drugs, on average, are already cheaper in the U.S. than they are in other developed countries because when there are more than three competitors for the great majority of generics, the free market works just fine. Unfortunately, while generics now account for roughly 90% of all prescriptions written, they account for only about 28% of the dollars spent on drugs. Big box retailers like Costco and Walmart can and do often price generic drugs below the big retail pharmacy chains because they have lots of other products to sell their customers so they don’t… Read more »

William Palmer MD
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William Palmer MD

Barry, We learn a lot from you and we appreciate your view.

But, let us assume that all of these systems in pharma are working fine and are erhical. We still have an obligation to insist that the patients and their caregivers understand what is going on: the world should be able to describe what is going on, where the profits are being taken, who the middle men are, what the rebates are accomplishing. These are input factors of production. We can’t have opacity when this production is our very mortality and morbidity.

Barry Carol
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Barry Carol

Dr. Palmer, I’ve been an advocate for price transparency since I started commenting on health policy blogs in 2006. When it comes to the cost of medical services, tests, procedures and drugs, it would be most helpful to me as a patient and to my doctors if we could each easily discover actual contract reimbursement rates in real time so we can both identify the most cost-effective high quality providers in real time. For drugs, I can at least discover pharmacy cash prices in real time by downloading the Good Rx app to my phone. There are other similar apps… Read more »

pjnelson
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pjnelson

The retail pharmacy folks derive a large portion of their net income from the “out front” sales. You may have noticed that the retail pharmacy stores are virtually never located in a shopping mall. For Walmart and the grocery store chains, their pharmacies represent a loss leader as a basis to generate “traffic.” Its a sign of the times that many stand alone pharmacy stores also sell alcohol products.

Barry Carol
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Barry Carol

The typical chain drug store ranges from 12,000 to 15,000 square feet on 1 1/2 acres with a drive-thru area outside the pharmacy department. Front end merchandise generally costs 10%-15% more than it would at a supermarket or big box retailer but the tradeoff is convenience. Customers can park near the store entrance and get in and out quickly rather than park in a huge lot and try to find the one or two items they want in a 150,000 square foot Costco or Walmart Supercenter. They tend to be located in neighborhood shopping centers or in a stand-alone location.… Read more »

Barry Carol
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Barry Carol

I would also note that large self-funded employers and insurance companies are sophisticated clients. They would not hire PBM’s to manage their drug plans if they weren’t convinced that the PBM’s add value by lowering drug prices from what the PBM’s clients could negotiate on their own and provide tiered formularies that steered patients toward less expensive but equally effective drugs within a therapeutic class.

Allan
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Allan

Bill, despite what some think, something is going on in-between the manufacturer and the retailer. This is all fine and good with the insurers since the higher the costs of premiums the higher profits can climb. Companies may be sophisticated but they are sophisticated in what they produce not in health care. Many of the most sophisticated and largest companies self-insure. If a brand name drug can cost $45 cash without insurance yet $190 with insurance where the copay is 50% something is amiss. Where is that $135 going? Who is pushing what to who is the question? The intermediaries… Read more »

Allan
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Allan

Bill, I just read this.

““Gag clauses” have long prevented pharmacists from telling patients when they could save money on medications by paying out of pocket instead of relying on their insurance. By signing the Know the Lowest Price Act and the Patient Right to Know Drug Prices Act this afternoon, President Trump is putting an end to these gag clauses for patients on either Medicare or private plans.”

I wonder where those gag clauses come from and which entities are in cahoots. Again I say the middleman must be involved.

Barry Carol
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Barry Carol

The middlemen were involved but even they didn’t fight the legislation that Trump just signed. Now if we can pass similar legislation putting an end to the confidentiality agreements between providers, mainly hospitals and large physician groups, and insurers that preclude disclosure of actual contract reimbursement rates, doctors and patients would finally be able to identify the most cost-effective high quality providers in real time and direct more of their business to them. While we’re at it, we should end hospitals’ ability to insist on all or none contracting which means insurers must contract with all of the hospitals in… Read more »

Allan
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Allan

This was HHS policy changes, not new legislation so I am not sure any group influenced the changes or how they could effectuate changes on their behalf. I’ll bet there was more talk behind the scenes than you or I know about. In any event, I think it important to place more focus on middlemen and rent seekers. I agree with you that more transparency is required but I note gradually Trump is working in that direction. A lot of players have had undue influence on our health care system and as we peel back that which is hidden we… Read more »

Barry Carol
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Barry Carol

This was legislation sponsored by Senator Susan Collins which President Trump signed on October 10th. Hopefully there will be more to come on the price transparency front.

https://www.cnn.com/2018/10/10/politics/drug-prices-legislation-signed-into-law-donald-trump/index.html

Allan
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Allan

You are right Barry, I was thinking of two things at different times forgetting the legislation he signed that I had just mentioned above “By signing the Know…”. I was thinking of his executive orders much earlier in time when I was responding. My overall suspicion is that a lot of the price hikes are coming from middlemen something others deny.

Peter
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Peter

“PAs boil down to yet another cost-cutting measure implemented by insurers to stand between patients and certain costly drugs.” In my wife’s case (and I bet others) this was an important “barrier” to having the insurance company pay for an unnecessary and very expensive drug, in this case for foot fungus. The insurer notified her of the cost ($2500) for a very small bottle after which she called the doctor who promptly changed the drug for a fraction of the cost. The problem is one I see all the time – doctors have zero knowledge of costs and most don’t… Read more »

Barry Carol
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Barry Carol

Doctors historically didn’t consider it part of their job to know or care about costs unless the patient brought it up as a significant issue for him or her. I think that’s starting to change, at least somewhat, and it could be helped along a lot if we could get rid of confidentiality agreements between insurers and providers that preclude disclosure of actual contract reimbursement rates. In the case of drugs, it would also be helpful if pharmacists were allowed to inform patients when certain drugs might be available at significantly lower cost without going through their insurance company. I… Read more »

Res Morgan M.D.
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Res Morgan M.D.

“The insurer notified her of the cost ($2500) for a very small bottle after which she called the doctor who promptly changed the drug for a fraction of the cost.”

Doesn’t sound like a PA was involved at all. The patient, pharmacist, and doctor worked together – a practice now considered archaic.

I don’t know a single physicians who doesn’t care about cost, despite your attack. In our office, we’re always glad to substitute a more economic option if there is one.

Peter
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Peter

“I don’t know a single physicians who doesn’t care about cost”

Then why didn’t she know the cost before my wife went to the pharmacist? Docs don’t care unless the patient complains, why wouldn’t the doc try to save the system money even if the patient didn’t care.

Allan
Guest
Allan

Peter, every insurance company is different in the way they pay so it is impossible for the physician to know what the patient has to pay. At least in some common places, one can’t even get a price without an actual prescription accompanying them when they are using their insurance so they may have trouble price shopping. That is something they should be able to look up before they travel to a pharmacy. IMO this is done to protect the middlemen and others.

Most physicians I know care deeply about all prices but have no way of knowing what they are.

Res Morgan M.D.
Guest
Res Morgan M.D.

“Then why didn’t she know the cost before my wife went to the pharmacist?”

And just how in the world would the physician know that?

It’s quite possible that the previous five patients with this script got it for $100 and didn’t complain to the doctor – there honestly can be this much variance in the price that different insurers have negotiated for the same drug.

But it’s more fun to blame doctors for everything.

Allan
Guest
Allan

“would have cost $135 at the pharmacy could be purchased directly by me for under $20.” Niran, That pathway I believe is only open to physicians which demonstrates the type of weird influences government has over the pricing of medication and other things in the healthcare sector. I note the same things when I buy meds out of pocket avoiding my insurance carrier. One drug is charged at $180 per month and is not ordinarily approved so my copay is $90. I pay cash and get the identical brand name product for $45 and the insurer pays zero. Another drug… Read more »

pjnelson
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pjnelson

For equitably available, ecologically acceptable, justly efficient and reliably effective healthcare, our nation’s level of corporate codependency appears to have won-out…again. Something about institutional autonomy to act in the best interests of their most important stakeholders: a patient and their family. We live in a time of progressively diminishing expression of Social Responsibility by our nation’s private and public institutions, at all scales. Just to emphasize the observation, I recently ran across an amazing analysis of mass shootings (cited below). From 1984 through 1999, there were 86 events. From 2000 through 2015, there were 206. The analysis should be mandatory… Read more »