Many people are surprised when they can get a better price on their prescriptions when paying cash instead of using their insurance. It is estimated this occurs approximately 10% of the time in the United States. This equals over 390 million prescriptions annually. The reason for this is complicated and confuses many consumers as well as individuals who work in the pharmaceutical industry.
Pharmacy Benefit Manager (PBM)
PBM is an organization that acts as an intermediary between insurance companies and other areas of the healthcare industry. It is large enough to be in a position of successfully negotiating large consumer contracts. They are able to negotiate with pharmaceutical companies as well as local pharmacies to obtain the best rates for medication. This often does not happen with many types of generic drugs. When insurance companies make deals with drug companies for generic drugs, it is done in batches. This means a low price will only occur on the negotiated generic drugs but not on all of them. It has resulted in complicated layers of different negotiations and different insurance companies paying different rates for the same drug.
Clawback Fees
Some insurance companies provide plans that require customers to pay a copayment no matter what the cash price of the drug. When the cost of a person’s prescription is less than the cost of their copayment, and they end up paying the copayment as well as the cost of the drugs, this is known as a clawback fee. It’s a name that refers to an insurance company clawing back money from their customers. The insurance company keeps the difference between the cost of the drug and the copayment. It often happens because most insured people don’t know the true cost of the drugs they need to purchase. Some insurance plans charge their customers penalties if they don’t use the insurance and pay cash for their prescriptions. It’s also possible an insurance company won’t permit their customer to apply the prescription purchases cost to a policy’s out-of-pocket spending maximum or the deductible.
Hold Down Costs
According to representatives from the insurance industry, patients only pay the amounts determined by their insurance plans. According to them, any amount of money the companies take back decrease the chance of a future premium increase. Lawmakers in some states like Louisiana have decided to take action. They have passed legislation requiring pharmacists to inform consumers about all the options available to them for their prescriptions. This would include any type of cheaper alternative medication. Some state lawmakers such as those in Arkansas have put laws in place to prevent drug companies from collecting more for medication than a pharmacy will be paid.
Cash Paying Customers
A number of companies in the pharmaceutical industry have joined together in an effort to accommodate customers who want to pay cash. This includes GoodRX, Blink Health as well as Express Scripts and more. Other large companies including Amazon are considering a move to accommodate customers who want to pay cash for their prescriptions.
The only way a consumer can avoid experiencing unexpected drug costs is to ask about the costs of the drugs. In many cases, purchasing generic medication instead of name-brand drugs can save people over 89% on the cost of their prescriptions. It’s also good to look for a pharmacy that is accommodating to a person’s individual situation. Once a preferable pharmacy is determined, the consumer needs to keep refilling prescriptions there. Using multiple pharmacies runs the risk of prescription duplications and more.
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