April 26th, 2024

Hey, Insurance Companies and Pharmacies — Stop Messing Around with the Price of Cheap Generic Drugs

Photo by Markus Winkler on Unsplash

If you’re practicing medicine these days, you’ve likely experienced some version of this painfully annoying scenario.

  1. You prescribe a generic medication, one that’s inexpensive.
  2. Your patient goes to the pharmacy, and the pharmacist says that it requires a prior approval.
  3. They leave without getting their meds.

Here’s a recent example from one of my patients (details changed to protect confidentiality):

A 74-year-old man goes to the emergency room with facial cellulitis. I am called by the emergency room clinician, who wants to prescribe cephalexin plus trimethoprim-sulfamethoxazole. (He said Keflex and Bactrim because he just can’t quit the trade names.) I suggest linezolid, which has been available as a generic for years. A 10-day treatment course of linezolid is prescribed by the ER doc and sent electronically to his pharmacy. When my patient gets there — face all swollen, in pain — he is told that the prescription “requires a prior approval.” He leaves with nothing. The emergency room doctor is off their shift, so the patient’s daughter pages me to get the prior approval done.

Why is this insane? Because linezolid, which used to require prior approvals due to high cost, is now good value without insurance coverage. Requiring a prior approval makes zero sense when you can get the generic for such low out-of-pocket costs.

GoodRx says that with one of their coupons, the price could be as low as around $35 for 10 days.

CostPlus drugs charges around the same for 15 days, and they’ll mail it to you.

But you’ll note on the GoodRx site that there’s quite the range — the “retail prices” can be as high as $3500! And one of the big pharmacies still charges over $800.

These shenanigans have been going on for years with drugs far more commonly prescribed than linezolid. From a 2017 article in The New York Times:

In an era when drug prices have ignited public outrage and insurers are requiring consumers to shoulder more of the costs, people are shocked to discover they can sometimes get better deals than their own insurers. Behind the seemingly simple act of buying a bottle of pills, a host of players — drug companies, pharmacies, insurers and pharmacy benefit managers — are taking a cut of the profits, even as consumers are left to fend for themselves, critics say.

Here’s what I think is happening with linezolid, but who knows. The payers (or their henchmen the Pharmacy Benefit Managers) require a prior approval because linezolid used to be so expensive, and they haven’t updated their policy. And pharmacies (who may be owned by the same mega-company), try to get patients to use their insurance to get the higher price covered.

But this strategy can clearly be harmful to patients. And it’s dishonest almost to the point of being fraud.

I confess that I don’t know with 100% certainty why some payers and pharmacies require a prior approval for linezolid, but I very much do know what the ethical thing to do would be. The beleaguered, overworked frontline pharmacist — and I am very sympathetic to their plight! — would, on seeing that an inexpensive generic drug requires a prior approval, say the following:

I’m sorry, Mr. Smith. Your insurance company says you need a prior approval for this drug before I can fill your prescription here. But if I were you, I’d ask your doctor to send a prescription to pharmacy X, Y, or Z, where they will give you the generic for way less money if you don’t use your insurance. For that matter, your out-of-pocket payments there may be even less than your co-pay if you fill your prescription here with your insurance.

There are a lot of things to be proud of when you’re a U.S. citizen. But this crazy healthcare system we have sure isn’t one of them.

20 Responses to “Hey, Insurance Companies and Pharmacies — Stop Messing Around with the Price of Cheap Generic Drugs”

  1. Ronald G Nahass says:

    Actually you can go to a pharmacy and pay the cash price of 15 to 30 dollars for the drug and skip the PBM.

    • Paul Sax says:

      Agree! That’s my point — the administrative middlemen here drive up the costs unnecessarily.

  2. JDB says:

    Hospitalist perspective here. It’s an especially common problem when patients are discharged from the hospital, and are sent out with prescriptions that everyone thinks will be covered and then they are told will require a PA. You can understand that patients might not know they should “shop around” for a better price, but that’s what we’re unfairly asking them to do!

  3. Paul Terrill says:

    The Minnesota legislature is currently considering legislation to limit PA requirements, including for generic meds. But it will cost the state too much money. Because the state Medicaid program gets rebates (kickbacks) from pharma companies for brand-name drugs. It will cost more to lose the kick-backs than to drop PA for generics. At what point do we start calling this what it is, organized crime?

  4. Jeff Kirchner says:

    Thanks for the video – Whiskey, Soda… Rock and Roll 🙂
    One comment on your insightful (as always) piece = greed.

  5. Loretta S says:

    Yes, I see this all the time. Maddening! I had an insurance company require a PA for sertraline. Generic Zoloft — it’s been generic forever. To my thinking, that is just gatekeeping, barricade-constructing, etc. The insurance company or PBM, or whatever other middleman company there is, is probably hoping the patient or the prescriber will just give up and go away.

  6. Alisa says:

    I’m a FM PCP and another thing I find maddening are the messages that “insurance requires a 90 day supply.” Whelp, I’m still titrating the amlodipine, patient has an appointment in 10 days for reassessment, and if the insurance or PBM is gonna be ridiculous, she can pay out of pocket for 30 days of what should be an inexpensive generic medication.

  7. Abigail Zuger says:

    Actually…it’s even more outrageous and nefarious than you have outlined, Paul. Because of secret contractual arrangements between insurers, manufacturers, and PBMs, it is often in all their interests for pts to get brand rather than generic meds. The list prices of the brand drugs are hugely inflated, but everyone’s commission is based on a percentage of those numbers. And so, patients get “discounts” for the branded drugs, and the generic rx’s are discouraged and need that PA. It’s quite unbelievable. See work of Mariana Socal at Johns Hopkins (Socal MP, Bai G, Anderson GF. Favorable Formulary Placement of Branded Drugs in Medicare Prescription Drug Plans When Generics Are Available. JAMA Intern Med. 2019;179(6):832-833. doi:10.1001/jamainternmed.2018.7824 and many other refs)

  8. Vincent P Andolina says:

    Another troublesome aspect of needlessly high drug prices is the PBM’s assigment of drugs to preferred tiers based on their cost (including “rebates” i.e. kickbacks) rather than the list price, or the patient cost. For example, one branded product in a drug class might strike a deal with a PBM to be placed in a certain tier, and its branded and / or generic competitors are placed in a higher tier, increasing patient cost.

    See the cited article for details:

  9. Justin Graham says:

    This is a great podcast series that explores the outrageous economics of our healthcare system. https://relentlesshealthvalue.com/episode/ep420-paying-cash-for-generic-drugs-some-finer-points-that-had-totally-gone-over-my-head-with-ge-bai-phd-cpa

  10. Kathleen Todd MD says:

    Also remember that while a prior authorization delays the filling of the prescription, the insurance company gets to keep its money in the stock market earning money. And they may end up filling only 48 weeks total medication for the year instead of 52. Even if no one gives up and either skips the prescription or pays for it out of pocket (which many will do), putting off the filling of medications (using physician and pharmacist and patient time that they don’t have to pay for) makes money for the insurance companies.

  11. Glen Hiss says:

    I had a patient newly diagnosed with hypothyroidism. Prescription for levothyroxine ordered, insurance cost $30/month. They asked the pharmacist and paid cash, 100 tablets for $20, no insurance involved! (But they had to ask! No one volunteered the information)

    • Darren Mensch says:

      Pharmacists are technically unable to give cash prices unless asked due to contracts with insurance companies. If they breach contract, they lose contract. Given +80% of claims are through Big 3 PBMs, you can’t afford to lose any of them.

  12. Robin Dibner says:

    Why do we continue to refer to this chaos as a healthcare SYSTEM? It has none of the attributes of a system. It is the responsibility of those of us in the medical profession who recognize this to call attention by referring to it as a non- system. A better term would be welcome if anyone will suggest one.

  13. Patrick Zimmerman says:

    A patient (high level technology consultant) once told me, “points of friction are where profit is generated best and those in power know how and where to create that friction”. Thus, we should not marvel at all at inefficiencies in healthcare delivery such as this. Someone is reaping the profit from the inefficiency and let’s be honest, America worships the dollar more than anything else. Placing “In God We Trust” on our currency is only there to make us feel better about it.

  14. Allen Cheng says:

    Won’t pretend that the Australian system is optimal, but the government funded Pharmaceutical Benefits Scheme means that patients pay A$31 for a script (A$7.70 if they have a concession card). There are also safety nets so that patients don’t pay more than $1600 per year for medications ($277 for concession card holders).

    (that said, linezolid isn’t on the PBS and would be provided by hospitals, but we probably could get away with flucloxacillin or cephalexin for cellulitis here)

  15. Suznne Light says:

    Please remember the chain pharmacies & the Insurance companies (& the Pharmacy Benefit Manager = PBM) are in “bed together” and unwilling to help patients. These chain pharmacies will jack up the price of generic medications to compensate for brand name drug reimbursement. Small independent pharmacies help patients!! We are not all created equal.

    Pharmacies are in the middle of this health crisis. We are only the messengers to patients and physicians about INSURANCE REQUIREMENTS.

    Thirdly, even though Linezolid is generic it is not necessarily cheap. The price to purchase for a Pharmacy could range from $40 for 20 tablets to & to $400 for #20 tablets. The brand name is $5000+ for #20 tablets. The wholesaler and pharmaceutical companies are the other crooks here not the pharmacy. The pharmacy then also has to navigate drug shortages and the negative reimbursement for the patients insurance!!

  16. Dawn Peterson, APRN, FNP-C says:

    I am a provider in a free clinic serving uninsured, low income clients. In the past years, I have seen the $4 plans at Walmart and other pharmacies shrinking in size. We have become adept at checking all the discount plans at multiple pharmacies to make the medications affordable for our patients. Another point of contention: patients with government sponsored insurance are not supposed to be able to get Rx’s for a discount. We have seen several pharmacies refuse to fill their “cash price” for an elderly person who SHOULD have medicare, even if they have never seen them. This has to be stopped; those of medicare are often just as vulnerable (if not more so) than my uninsured, low income patients.

  17. Jonathan Blum says:

    Sorry my response is so late. There is another factor here. In some cases, patients may pay less if they purchase the drug with their own money than if they use their insurance benefit and pay a co-pay. However, the pharmacist may not be allowed to inform patients of this fact because of agreements between the pharmacy and the drug dealers, I mean suppliers, not to inform patients. The pharmacist can answer the question if asked, but who would think to ask?

Leave a Reply

Your email address will not be published. Required fields are marked *

Note: This is a moderated forum. By clicking on the "Submit Comment" button below, you agree to abide by the NEJM Journal Watch Terms of Use.

Our physician bloggers cannot respond to requests for personal medical advice, and recommend patients discuss health issues with their individual physicians.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

HIV Information: Author Paul Sax, M.D.

Paul E. Sax, MD

Contributing Editor

NEJM Journal Watch
Infectious Diseases

Biography | Disclosures | Summaries

Learn more about HIV and ID Observations.