Insurers Bet Big on Bribing Patients Save

Last month, psoriasis patients covered by Cigna received a curious letter from the insurance giant's pharmacy management division. They could receive a $500 debit card from Cigna, with just one string attached: they would have to switch to a different medication, one preferred by the insurer. Shortly thereafter, the patients' treating physicians received a letter containing the same message.

As a patient-facing rheumatologist and the manager of a busy rheumatology practice, few things surprise us anymore when it comes to the tangled web of pharmaceutical pricing. Yet, if ever a single letter succinctly encapsulated the insanity of the U.S. drug pricing system, this was it.

At a minimum, the letter raised a basic question: how much does Cigna stand to gain from a non-medical switch if they can send cash benefits to patients and still come out ahead? That is a question no player in our opaque pharmaceutical supply chain wants to answer. Indeed, even members of Congress have a difficult time obtaining straightforward answers, no matter how many hearings they hold on the topic of drug pricing.

Only one thing is clear: Cigna shareholders' net income is skyrocketing, increasing from $5.1 billion in 2019 to $8.5 billion in 2020. The basic business model is that pharmaceutical companies pay ever-growing rebates, discounts, and fees to pharmacy benefit managers (PBMs) in exchange for preferred formulary placement. Patients supposedly get the benefits of low premiums and low drug prices.

So, how's that going? Not well, as it turns out: last year, research from the University of Southern California found that a $1 increase in rebates was associated with a $1.17 increase in list prices. In other words, the rebate system is driving the list price upwards. This becomes a double hit for patients, since their coinsurances are often based on the list prices, which do not reflect the rebates and discounts paid by the pharmaceutical companies.

The system is befuddling at best, immoral at worst. In fact, one of the few bipartisan areas of agreement on the topic of drug pricing is that no one can make sense of it. That's the point of it, of course: it's so complicated that we've become convinced any reform might inadvertently make it worse. Not surprisingly, the people harmed by this system are patients suffering from serious chronic conditions like diabetes and rheumatoid arthritis. They are left holding an ever-ballooning bag of deductibles and coinsurances for expensive specialty drugs with massive rebates pocketed by the PBMs and insurance companies.

It should surprise no one that patients will eagerly accept $500 when they face 20% coinsurances on a drug with a monthly list price of $5,000, which they will need for the rest of their lives. Cigna has taken advantage of that fact and is enticing patients to gamble with their health for $500.

Currently, pharmaceutical companies are granted a special exemption from kickback laws for the rebates and discounts they pay to PBMs and insurers. Putting an end to these exemptions is one way to dismantle our harmful system.

These payments meet the definition of kickbacks under any reasonable definition of the word, and it's time to treat them as such. The Trump administration proposed eliminating these kickbacks, but the PBM industry sued to stop this proposal. And now, the Biden administration has delayed the rule's implementation for 1 year to give themselves time for a full review.

To protect patients, the Biden administration must let this regulation go into effect and eliminate the kickbacks. Doing so will bring us closer to a system in which pharmaceutical companies compete based on the clinical benefits of their product and the price to patients, instead of to insurance companies.

Madelaine Feldman, MD, is president of the Coalition of State Rheumatology Organizations and a rheumatologist based in New Orleans. Jay Salliotte is president of the National Organization of Rheumatology Management and manages a rheumatology practice in Lansing, Michigan.