What is the AARP up to these days? One of the bigger disasters coming from the more general disaster of Obamacare was the abject failure of the program to rein in rising costs for prescription drugs. In fact, as we’ve discussed here in the past, price increases accelerated after the program went into effect. But the reasons for why prices keep climbing are complicated. One factor is the practice of having pharmacy benefit managers (PBMs) at healthcare organizations who are able to select which drugs are included on their list of medicines that are covered by their healthcare plans.
Obviously, drug manufacturers are eager to have their drugs appear on these lists and they pay kickbacks to the PBMs. (They call them “rebates.”) This drives up the total costs and the net effect is your prescriptions cost more. The administration is trying to change the rules via Health and Human Services to end these kickbacks, but AARP sent in their own comments opposing the rule change. They claim that it’s not the fault of the PBMs, but the pharmaceutical companies themselves. But there’s a catch to this story. As the Daily Caller points out, AARP may have an ulterior motive here. They’re in a partnership with one of the biggest PBMs out there and it earns them hundreds of millions in royalties.
Philadelphia-area pediatrician Marion Mass, co-founder of Practicing Physicians of America, connects AARP’s stance to its partnership with UnitedHealth Group (UHG), which runs PBM Optum Rx.
“AARP, in your relationship with mega PBM Optum, you’ve defined yourself as being for kickbacks that are costing the American patient money at the pharmacy counter and in hospitals. … You don’t stand for America, you stand for yourselves,” Mass told TheDCNF in a phone interview.
Much of AARP’s revenue comes from its connection to UHG. While AARP collected about $301 million in membership dues in 2017, the organization took in about $627 million in royalties from UHG that year, according to AARP’s financial statement. That’s out of a total operating revenue of roughly $1.6 billion.
As I said at the top, this is complicated, so read through the entire Daily Caller report yourself. AARP claims that the $627 million in royalties they receive has nothing to do with the position they are taking and that the rule change could actually wind up costing Medicare nearly $200B and not substantially impact prescription prices. Their figure is pretty close to what the CBO estimated when they examined the proposed rule change (around $170B). But those two possibilities are not mutually exclusive, are they?
It seems as if the change could shovel more costs onto Medicare (something we probably don’t want) but still reduce drug prices at the pharmacy. In the end, however, it still seems like the biggest drivers of prices are the pharmaceutical companies themselves. Until their development process can somehow bring drugs to market faster and more efficiently (without killing people in the process), I don’t see that situation changing much. The availability of generics is another big puzzle to solve because Big Pharma regularly uses marketing tricks to prevent competitors from bringing those generic versions to market.
If there’s an easy solution to this, I’m clearly too dense to see it. But this is the sort of thing elected officials are supposed to take care of if they want to stay in office. The White House needs to sort this out and explain it to the country in easily digestible terms.