Lack of Transparency in Drug Pricing and Product Design Is Costly to Medicare Beneficiaries and Tax Payers
Actor Tom Hanks, playing Forrest Gump in the 1994 movie said, “My Mama always said, ‘Life is like a box of chocolates. You never know what you are going to get.’”
The Pharmaceutical lobby made sure they knew what they were going to get in their box of chocolates when they wrote, and Congress approved the Medicare Prescription Modernization Act of 2003, which added prescription coverage for Medicare beneficiaries.
Congress granted the lobby a blank check by prohibiting the government from negotiating the prices of prescription drugs, medical devices and other products for Medicare beneficiaries.
As a result, the pharmaceutical industry’s box of chocolates has been filled with unprecedented profits and dramatic increases in stockholder share values during the past ten years since the Medicare Part D program became effective in 2006.
Steven Russolillo reported in a Wall Street Journal article, March 31, 2014, “Health Care stocks have been outperforming every other sector in the S & P 500, gaining 55 percent in the last two years.”
For Medicare beneficiaries, their box of chocolates is more like Mama Gump’s version. They, “never know what they are going to get” when they receive their prescription plan renewal notice during the annual election period in October.
Every year, our research team finds some insurance providers who overcharge in the cost of drugs, pull drugs from their formularies, increase premiums, but lower benefits, drop pharmacies from their networks, offer first dollar coverage one year, than take it away the next with a high deductible, and play games in the design of their products.
For example, our client took our advice last year and chose the best plan offered during 2015 by one insurance provider. In October, he learned his 2016 premium would increase by 58.6 percent, the first dollar coverage he had last year was removed, a $250 dollar deductible was added, the generic prescription drugs he was taking were reduced in cost by 33 percent over the previous year, so he would not reach his deductible by the end of the year.
His box of chocolates contained a huge premium increase with decreased benefits.
But the same company offered another box of chocolates for 2016 with a different product that lowered the premium, increased the cost of the same generic drugs by 33%, along with a deductible increase over the previous year from $320 to $360.
Raising the cost of the prescriptions in this plan along with increasing the deductible to $360 meant the Medicare beneficiary would pay more for the medications until the deductible was met in the 6th month when co pays would be reduced. At the end of the year, this box of chocolates would contain a $220 savings when compared to our client’s renewal plan for 2016.
We compared the cost of our client’s generic medications in both plans offered by the same insurance provider for 2015, and they were priced exactly the same.
The insurance provider increased the cost of the generic drugs in one 2016 product to show a benefit when the deductible was met, and lowered the cost of the same drugs in our client’s 2016 renewal product so his deductible would not be met. But, his premium was increased.
This lack of transparency in drug pricing is costing Medicare beneficiaries and tax payers billions of dollars and there’s no letup in sight. Since our Medicare Coach advising service began in 2010, we have saved our clients more than $1 million dollars by reviewing their plans.
All Medicare beneficiaries should listen to Mama Gump’s wisdom and take a peek in their prescription renewal box of chocolates every year and ask a trained Medicare advisor to examine the contents before accepting the box because, “you never know what you are going to get.”
Medicare Coach
