How Prescription Drug Coverage Works: Formulary Tiers, PBM, Rebates, Spread-Pricing Explained

Learn How Prescription Drug Coverage Works with Health Insurance:
1) Formulary: There are Formulary and Non-Formulary Medications. Formulary Medications are Covered by Insurance. Non-Formulary Medications are Not.
2) Formulary Tiers: Typically Formularies Have Tiers 1-4 for Generics, Preferred Brand, Non-Preferred Brand and Specialty Medications.
3) Pharmacy Benefit Managers (PBMs): Negotiate the Formulary Tiers for Health Insurance Coverage in Exchange for 'Discounts' from Pharmaceutical Manufacturers. Also, PBMs Process the Pharmacy Claims for a Health Insurance Plan.
4) How PBMs Make Money:
A) Rebates - Commissions Paid by Pharmaceutical Manufacturers to PBMs, Which the PBMs in Turn Pay Out--in part--to Their Employer Customers.
B) Spread Pricing - The Markup PBMs Place on Generic Medications, Which is Then Paid by Their Employer Client.
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[@ethanliao4383]

On behalf of all community pharmacies, I'd like to reiterate that your local pharmacists and pharmacy technicians have ZERO clue why your copay would have changed. Don't bother complaining to them because none of the entities in this video communicate this information with them. Your dog has about as much power as them in this situation. Good video.

[@ahealthcarez]

Thank you for sharing your thoughts.

[@henrimattila6864]

Watching your videos over the last couple days are doing more to help me understand drug pricing mechanism better than the last 2 years of reading

[@ahealthcarez]

Super! Thank you for watching.

[@ryanprasad2090]

You're doing the Lord's work here on KZbin, Dr. Bricker. Thank you!

[@ahealthcarez]

Thank you for watching and for your support.

[@colleenc4621]

I'm so excited you addressed this. I'm a retail pharmacist and 2 retail pharmacies closed in the town where I work, which is composed of mostly retired people. It's been like a war zone and it's difficult to hold back the tears when a very elderly, slow moving gentleman, who waited in line for an hour, is there to get meds for his wife who was just released from the hospital and there's a 50/50 chance they're ready. Or when an elderly woman whose Rx has been billed but being held hostage at a closed pharmacy has to put forth over $500 for a 30 day supply of essential blood thinner. A lot of frustration is taken out on the techs who are working harder than anyone for scrap pay and threatening to quit. All over town vaccines have been temporarily halted due to staffing issues (need I remind anyone it's COVID/FLU season and our population needs shingles shots. Dr. Bricker, I've referenced you to some of our patients and I will continue to do so. Your videos help me stay calm because I'm that much more informed about the source of these situations. I thought in business demand and monetary compensation were directly proportional. Not sure anymore.... Thank you again your videos are so valuable

[@ahealthcarez]

Thank you for your comment. So sorry to read was happening near you.

[@elmahenderson9089]

I work on the hospital side to help patients get 340B "meds to bed" before they discharge

[@vincentkingsdale8334]

​​​@@ahealthcarezin your example of spread pricing, how much is the pharma company getting paid by the PBM? I see the PBM negotiated an 80% discount, for $6. But it sounds like you said the PBM gets $4, and pharmacy gets $2. So does the pharmacy pay $0.30 to the pharma company (NADAC), and the PBM pays nothing to the pharma company? Did I get that right?

[@rufussweeneymd]

PGY-1 here: I have binged your videos for the last day and a half. You are blowing my mind over and over. Thank you for exposing the rent seekers in healthcare and showing us how the sausage is made.

[@ahealthcarez]

Super! Thank you for watching. Favor to ask… tell your colleagues. 😉

[@rufussweeneymd]

@@ahealthcarez will do!

[@barbgardetto3633]

Dr. Bricker thank you so much for all your educational videos! Learning much!:)

[@ahealthcarez]

Thank you for watching and for your encouragement.

[@ajjubhaiyaji]

I was very frustrated at the time when i need to learn pharma value chain in USA, then i discovered this video. My gosh, you explain this in the simplest way that even a 5th standard student will understand. Thankyou for this informative video. It helped me a lot.

[@ahealthcarez]

Super! Thank you for watching.

[@revanthtiruveedhi3842]

Thank you so much for this video! I’ll be viewing many more from your channel. Very clear!

[@ahealthcarez]

Thank you for watching and for your feedback.

[@MeherScholar]

I never knew a topic like this could be so exciting. Such a passionate speaking style. I feel like I'm in college again, listening to a star professor. I look forward to watching more of your videos.

[@ahealthcarez]

Thank you for your support.

[@chewyjello1]

I'm watching this because I was just hired as a customer service rep for CVS Caremark and I'm trying to figure out what exactly it is that we do. Great info. Thank you!

[@ahealthcarez]

Thank you for watching and for your comment!

[@jenifad9959]

Dr. Bricker thank you for your wonderful videos.

[@ahealthcarez]

Thanks so much for watching and for your comment!!

[@DU85]

I’m reentering the healthcare space after 6 years away… these videos are helping me so much to refresh my memory and learn new things in this space. Thanks!

[@ahealthcarez]

Super! Thank you for watching!!

[@user-vf2op9pv1j]

I just want to point something out. If there is a name brand medication that has a direct generic like Zocor to Simvastatin, the Zocor would most likely be bumped to a tier 3 since there is a direct generic out there for the brand. Typically preferred brands are medications that don't have a direct generic. Once a generic comes out, that brand gets bumped up to a tier 3. So for example, before Simvastatin came out, Zocor may have been a preferred brand on some plans, once the generic came out, it became a non-preferred brand or tier 3, to encourage people to take the generic. Some plans have the option for doctors to submit tier exceptions for their patients which bump the tier 3 price back down to a tier 2 price if they tried and failed 2 generic options in the same medication class. They typically would have to fill out a form outlining the therapeutic failures or adverse reactions. Just wanted to throw that out there. Good info still....

[@ahealthcarez]

Thank you for the additional information.

[@randin1706]

Thank you doctor, your videos are so helpful, and I have learned so much from them.

[@ahealthcarez]

Thank you for watching and for your feedback.

[@roro88690]

Excellent, simple, and well thought out presentation of a compilcated structure. The best video I have seen articulating such a complex system.

[@ahealthcarez]

Thank you for watching and for your feedback.

[@lorilewis5495]

This is a great video to watch as a CPhT!

[@ahealthcarez]

Thank you for watching and for your feedback.

[@jeremyhuynh7106]

Great videeo!! Would love a breakdown of how Mark Cuban Cost Plus Drug Company can get medications for cheap!

[@ahealthcarez]

Thank you for your suggestion.

[@RabbitWatchShop]

Prescription insurance: we take as much as we can from our clients while simultaneously paying out as little as we can for your coverage by way of denials, prerequisites, and requirements.

[@ahealthcarez]

#Yup. Thank you for watching.

[@BrodieKurczynski]

Awesome video! I'm trying to understand why my meds are so damn expensive and this was very informative. Knowing all this now, why can't pharmaceutical manufacturers go straight to pharmacies without a PBM? I know why this hasn't happened historically (from watching your video), but why don't they start to do it now?

[@ahealthcarez]

Great question. Because in order for insurance to pay for prescriptions, the transaction has to be run through the PBM.

[@nathanshatzer1646]

Well explained

[@ahealthcarez]

Thank you for watching and for your feedback.

[@Nnnnebebe]

If that’s the case, why do we allow PBM to even exist and what can we do about it?

[@ahealthcarez]

They are toll takers for prescription drugs. Politically powerful so government protects them.

[@joycewaterhouse5428]

I love your videos Dr. Bricker, but I have trouble finding certain ones that I want to share with other people and they don't turn up with internet searches and I can't find a search function on your website. I'm looking for the one or actually there's two of them where you discussed Dr. Lustig's work. And in one of them you mentioned you're going to have another one following up on that one, so I wish you would add a search function or maybe have a new playlist with things related to Dr. Lustig and diet.

[@ahealthcarez]

These might be the Lustig videos: kzbin.info/www/bejne/hF6po6CQnMulrq8feature=shared kzbin.info/www/bejne/qHqWmaufippsjaMfeature=shared

[@UdhayaKumar-iw8xj]

Hi Dr. Bricker. I'm a big fan of your videos. I'm doing a study on PBMs and wanted to connect with you regarding how the new IRA regulations will impact PBMs (especially how the new IRA regulations will impact PBM revenues). Would be great if I can connect with you regarding this.

[@ahealthcarez]

Thank you for watching. This link is helpful: www.frierlevitt.com/articles/did-the-inflation-reduction-act-spare-pbms/?amp

[@chandradarshanjain6967]

Always find your content helpful. Just one request, could you please use a mic to reduce all the noises. Thank you :-)

[@ahealthcarez]

Thank you for watching and for your feedback.

[@ssjp100]

Dr bricker, your videos is what the industry needs. I am a pharmacist working at an independent pharmacy and am being hammered by these pbms. I am constantly trying to educate and raise awareness on the benefits of self funding and selecting the correct pbms for pharmacy needs. How can one get in touch with you?

[@ahealthcarez]

You can message me through LinkedIn if you like. 👍

[@holtonian]

HDHP can have copays. As long as deductible is satisfied and is above the federal minimum high deductible level

[@bunnya2377]

Okay. I'm about halfway through this. I'm listening to you talk about methotexate and I feel like you're Over simplifying the options. We put my son on everything under the Sun that wasn't a specialty Pharmacy drug including methotrexate. His body got damaged extensively more than if we had just gone straight to Humera or rhemicaid or embrel. I have another situation where my daughter is taking invega Sustenna.and my insurance has chosen not to cover it. This is the first mental health medicine that has worked on her in 7 years and the fact that it's an injection once a month makes compliance so much better. Some of these expensive medicines Are the deference between life and death or quality of life or damage to the body.

[@ahealthcarez]

Thank you for sharing your experience.

[@Bama_Rose]

AGREED! My employer switched plans, and it was like NOPE you can’t meds you’ve been stable on for 30yrs, UNLESS you do 2 fails for 30days each with proof, OH but wait, we don’t cover ANYTHING in that category nor offer a PA. I think they should be required to pay for meds that a patient can proved they’ve been taking for many years w/o issues and did the fails way back 30yrs ago……. {Sad part of this is, it affects my job performance!}. **sorry, for my rant😢**

[@builschouten2763]

What is the differences and relations in between PBM and GPO and wholesale company , like McKesson?

[@ahealthcarez]

Great question. Very confusing. The PBM processes the payment, but does not literally distribute the meds to the hospitals and pharmacy. McKesson is on of the physical distributors (think wholesaler). GPOs are a whole other can of worms. Here is a video on them: kzbin.info/www/bejne/hGGlYZWLn7Gli6c

[@chrislemaster2695]

I use good RX Gold and I save 65 percent over the insurance PBM co pay.

[@ahealthcarez]

Super! Great to hear.

[@Bama_Rose]

@@ahealthcarez It would great to do a video on how these “coupons” work….. ie: GoodRX, Single Care etc. I HATE PBMs…. They literally DO NOT CARE and the employers are being lied too… while they line their pockets!

[@alexcipriani6003]

After I lived and experienced the healthcare system in EU for 25 years how is this even legal in the US … I needed $400 topical cream that my insurance refused to pay I had my dad purchase it in a local pharmacy in my home country no prescription no insurance $25.

[@ahealthcarez]

Yes, it is ridiculous. Thank you for watching and for your comment.

[@JoesFastestStarcraftCasts]

Can you have traditional and pass-through pricing at the same time?

[@ahealthcarez]

No. I do not believe so. Thank you for watching.

[@JoesFastestStarcraftCasts]

@@ahealthcarez if it’s pass through, then the price for the drug will just be higher than the same drug for a traditional pricing? For example, pass through would set drug at $100 vs traditional would set same drug at $50? I guess I get confused by the rebates. In traditional, does the insurance still get a rebate? In pass through the employer gets the full rebate passed through to them correct? Also do you have a video on copay maximizers and accumulators? Thanks again for your videos!

[@CharlieSpecter]

That hepatitis c drug does CURE the disease though. It is expensive but most specialty drugs treat symptoms not cure disease

[@ahealthcarez]

Thank you for sharing your point of view.

[@veerkar]

Can you please get a laravel mic?

[@ahealthcarez]

Yes, I have for new videos. Thank you for your feedback.

[@bdpatton2]

Is it a poor incentive for PBMs to make more money selling higher costing branded drugs for the country?

[@ahealthcarez]

#Yes. Thank you for watching and for your question.

[@bunnya2377]

As I am listening the rest of this, I am just dumbfounded. No wonder participants can not get the coverage we need for a medicine the DOCTOR feels is best suited for our specific health needs.

[@ahealthcarez]

Thank you for your comment.

[@coffeepandacat]

AHHHHHHHHHHHHH

[@garynapolitano1270]

WRONG! If cost of medicine is less than the copayment, the patient pays the lesser.