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Image: Kaiser Health Network
Almost 70 % of all employers who are the payers for employee drug insurance programs do not pass along the rebates they receive from insurers who receive them from drug manufacturers. Employers say they use the funds to reduce costs. Though we do see corporations passing along the costs to employees with higher deductibles according to the Kaiser Family Foundation research report discussed in our blog on Health Insurers and keeping the rebates to themselves.
Source: Pharmacy Benefit Management Institute, The Wall Street Journal – 3/6/18
What is really happening is drug insurers like United Healthcare, are offering discounts to employers who can pass them along to employees but they don’t pass the dollars along. Instead they say they put them into reducing the costs of drugs overall. Yet, that is not happening, as a Kaiser survey found that with drug costs going up 58 % from 2006 to 2016 yet the cost of worker contributions went up 78 %. Companies are picking up a health insurance reduction premium saving it for themselves of 20 %.
When companies reduce health costs, the result is increased profits (made from increasing costs to employees), which increase the value of company stock which is held mostly by executives and shareholders who are in the top 10 % in income.
Next Steps:
We applaud that United Healthcare is going to begin offering next year direct to consumer drug rebates for a subset of their employer based programs. Yet, that not enough, we see a need for legislation calling for transparency in drug pricing and insurance similar to the laws in place on bank mortgages disclosing the real cost of a home loan. Second, we recommend legislation that requires drug insurers pass along any drug manufacturer rebates, discount or other cost savings directly to consumers to prevent the cost reductions from being syphoned off by employers.
In the end, the added layer of insurers we don’t need when we already have the Medicare program in place for 55 million Americans and 44 million of those are enrolled in Medicare Part D for drug insurance. We have one drug formulary in Medicare, let’s use it, let the Medicare administration to directly negotiate drug prices, end stock buybacks by drug companies and direct advertising of prescriptions drugs, then we would see a significant reduction in drug costs.