‘It’s beyond unethical’: Opaque conflicts of interest permeate prescription drug benefits

Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts.

But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.

Consulting firms can collect at least $1 per prescription from the largest PBMs, according to more than a dozen independent drug benefits consultants and attorneys involved with employers’ PBM contracts. That can go as high as $5 per prescription in extreme cases, three of those people said. Consulting firms and brokerages may receive a certain dollar amount for each covered employee and member. Or they may share in the rebates that the PBMs pluck from pharmaceutical manufacturers — money that otherwise could be used by employers to lower premiums for their workers.

As the United States spends more than $600 billion per year on medicines, these little-known arrangements could add up to billions of dollars on their own, some experts estimate.

In exchange for the payments, the dominant PBMs get steady business from employers that rarely switch vendors, and they make it more likely that consulting firms and brokers won’t tattle if PBMs bake in more ways to extract profits from employers, nearly all of STAT’s sources said.

“The broker not only gives bad advice to the employer that’s in the broker’s self-interest, but the broker also allows the big PBM to write crazy terms into a contract,” said Jon Levitt, an attorney at Frier Levitt who represents employers and analyzes PBM contracts.

“It’s unethical,’’ he said. “It’s beyond unethical.”

STAT’s yearlong investigation is the first in-depth examination into these opaque financial relationships between consulting firms and PBMs. STAT spoke with more than two dozen benefits consultants, attorneys, pharmacy benefits executives, and employer representatives, and reviewed court filings and an internal document.

This comes as Congress is probing PBMs, whose main jobs are negotiating drug discounts and creating lists and tiers of covered drugs. Congress is considering legislation that would rein in some of their practices, although these behind-the-scenes payments remain mostly unknown.

The consequences of these fees are far-ranging. They can lead to excessive drug spending for employers, which often translates into less money in employees’ pockets through stagnant salaries or diluted medical benefits.

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