Drug price 'gag clauses' make your medicine more expensive. Now, they're under fire nationally

Nancy Gordon, 75, is a retired insurance agent and even she can't figure out how much her medications will cost through her Medicare Part D plan. She was shocked – and angry – to find that one medication she takes to treat atrial fibrillation, would be cheaper paid for in cash.

Nancy Gordon is a retired insurance agent, fluent in health-care industry jargon, and even she can’t make sense of the prices she pays for prescription drugs.

Last year, a three-month supply of Eliquis, which prevents blood clots, cost from $116 to $466 through her Medicare Part D prescription plan.

The 75-year-old Philadelphia resident was thrilled to discover a website that compares cash prices. Then she learned how much she was overpaying for another medication to treat her irregular heartbeat.

“It shouldn’t be like this; it really shouldn’t,” Gordon said. “It’s no wonder people can’t figure any of this out.”

Americans face high, confusing, and widely varying drug costs because of many factors. But there’s one idea advocates are latching onto — and it even got an endorsement from President Trump last week.

“Gag clauses” that forbid pharmacists from telling consumers when they could save money by paying cash instead of their insurance copay have been part of some contracts between pharmacies and the companies that manage prescription drug programs for insurance plans. The largest of these pharmacy benefit managers, or PBMs, insist that their contracts do not have gag clauses, and that their members are offered the lowest available price.

But contracts are considered proprietary legal documents, not to be made public. Even a contract template of Express Scripts, among the largest PBMs, with a plan sponsor was removed from the website of media organization Axios after the company complained of copyright infringement.

A typical pharmacist may deal with several different PBMs, each with different rules, and the uncertainty about gag clauses can contribute to fear of running afoul of a powerful corporation.

“Part of it is, we don’t know” what’s in the contracts, said Patricia Epple, CEO of the Pennsylvania Pharmacists Association. “All of it is done under the guise of, ‘This is proprietary information.’”

Eliminating gag rules is a small step toward price transparency that dozens of states are pursuing.

Pennsylvania’s legislation, sponsored by State Sen. Don White (R., Indiana), aims to hold drug manufacturers, insurers and others in the supply chain accountable for prices by increasing reporting requirements, and includes a ban on gag clauses.

During his long-awaited speech on drug costs last week, Trump suggested banning gag clauses in pharmacy contracts, giving a national platform to an issue that states have been grappling with quietly for some time.

He also made a few digs at PBMs, calling them “middlemen,” though he had no specific plans to rein in an industry that touches the lives of nearly all insured Americans.

>>READ MORE: A night of pain sent them to the ER. A surprise bill from the doctor added to the misery. 

Rising drug costs, plus spikes in prices for commonly prescribed medications – the allergy rescue medicine EpiPen can cost more than $500, compared with $57 a decade ago – have raised debate about what PBMs actually contribute to controlling  consumer prices.

Pharmacists and patient advocates long have offered anecdotes about consumers overpaying for medicines, and a University of Southern California study produced evidence to back up the claims.

Researchers compared 9.5 million pharmacy claims to the average price commercial insurers  paid to pharmacies. In 23 percent of cases, members’ co-pay exceeded the insurer’s cost. In those cases, consumers covered not only the cost of their medication, but also an average of $7 extra that went to the insurer or pharmacy benefit manager, said Karen Van Nuys, a professor at USC’s Leonard D. Schaeffer Center for Health Policy and Economics, who led the study.

“The term co-payment suggests [consumers are] sharing the payment,” Van Nuys said. “The phenomenon we’ve just documented is that, actually, you’re not sharing the burden.”

Though it will take much more than banning gag clauses to rein in the $375 billion spent on prescription drugs every year, it’s a starting point, advocates – including pharmacist groups — said.

“It’s easy to understand,” said Josh Archambault, a senior fellow with the Foundation for Government Accountability, a Florida-based public policy think tank. “The solution, too, feels really easy.”

Two of the largest PBMs, Express Scripts and CVS Caremark, say they don’t use gag clauses.

Both said that their members are charged the cash price for their medication if it’s cheaper than their plan’s negotiated rate, and that they support more transparent prices — and anti-gag-clause legislation.

“We’ve always worked to ensure our members have access to the lowest-cost drug options and provide them with tools to obtain the information they need to make the most cost-effective medication decisions,” said Jennifer Luddy, a spokeswoman for Express Scripts, in an email.

>>READ MORE: How having health insurance spiked her hospital bill by $400.

Yet without a clear ban on gag clauses in contracts, the size and power of PBMs can have a chilling effect on pharmacists, said David Hyman, a law professor at Georgetown University.

Contracts are complex, change frequently, and may vary from one PBM to the next. Rather than risk losing a contract that controls part of their business, pharmacists may be inclined to keep quiet, he said.

“The power dynamics here are an important factor in why pharmacists are agitating for anti-gag legislation,” Hyman said.

For many consumers, especially people like Gordon who spend thousands of dollars a year on medicines, pharmacists are important sources of information.

Gordon has the internet access and know-how to research prices, now that she has discovered how important it is to do so. But what about others who can’t do this work, she asked. “How could they figure it out?” she wondered. “How badly are they being ripped off?”

Share your own experience — and what you paid — at Philly Price Check or by emailing healthcosts@philly.com. Or leave a voicemail message at 215-854-2500 describing the billing issue you would like to share.