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Paying Cash For Prescriptions Could Save You Money 23% Of Time, Analysis Shows

As a health economist, Karen Van Nuys had heard that it’s sometimes cheaper to pay cash at the pharmacy counter than to put down your insurance card and pay a copay.

So one day, she asked her pharmacist how much her prescription would cost if she didn’t use her health coverage and paid cash.

“And sure enough, it was [several dollars] below my copay,” Van Nuys said.

Van Nuys and her colleagues at the University of Southern California Schaeffer Center for Health Policy & Economics decided to launch a first-of-its-kind study to see how often this happens. They found that customers would be better off paying cash 23 percent of the time and would save an average of $7.69 using cash for those transactions.

The USC study, released Tuesday, analyzed the prices that 1.6 million people paid for 9.5 million prescriptions in the first half of 2013, based on data from Optum Clinformatics, an organization that sells anonymized claims data for analysis, and National Average Retail Price (NARP) data, which contained drug prices paid by insurers and was based on a national survey of pharmacists.

It showed that the overpayments totaled $135 million during that six-month period.

The practice of charging a copay that is higher than the full cost of a drug is called a “clawback” because the middlemen that handle drug claims for insurance companies essentially “claw back” the extra dollars from the pharmacy. (The middlemen, known as pharmacy benefits managers, include Express Scripts, CVS Caremark and OptumRx.)

Here’s how it works: After taking your insurance card, your pharmacist says you owe a $10 copay, which you pay, assuming that the drug costs more than $10 and your insurance is covering the rest. But unbeknownst to you, the drug actually cost only $7, and the PBM claws back the extra $3. Had you paid out-of-pocket, you would have gotten a better deal.

Until Van Nuys and her colleagues went digging, no one knew how common the practice was.

“Clearly this is going on [at a] much higher frequency than most people imagine,” said Geoffrey Joyce, who directs health policy at the center and was a coauthor on the study. “You’re penalizing people for having insurance.”

The findings cover only a small portion of the population over a short time span, so they might not be perfectly reflective of what’s going on nationally, Joyce said. But they debunk the perception that clawbacks are rare.

Steve Hoffart, who owns Magnolia Pharmacy, an independent compounding and retail pharmacy in Magnolia, Texas, said clawbacks are still happening — even though Texas legislators passed a law to prohibit them. Hoffart said he collects and sends $1,100 or $1,200 a month in clawbacks to the PBMs.

The National Community Pharmacists Association, of which Hoffart is a member, said the new research “is illustrative of just one of many ways that PBMs’ lack of transparency disadvantages pharmacy patients. … If you want to reduce prescription drug costs, policymakers must demand greater transparency from PBMs.”

The trade group for the PBMs, the Pharmaceutical Care Management Association, said that overall the PBMs bring down the total cost of prescription drugs, lowering costs for patients and insurers.

“We support the patient paying the lowest price available at the pharmacy counter,” the group said in a statement.

The USC researchers found that brand-name drugs had the highest clawbacks — an average overpayment of $13.46 per prescription. Clawbacks on generic drugs were $7.32, on average. The drug with the most frequent clawbacks was zolpidem tartrate — generic Ambien, a drug used to treat insomnia.

Although the research team was able to obtain copay data, it didn’t have data on what the PBMs paid for the drugs, said Van Nuys, the lead study author and executive director of the Schaeffer Center’s life sciences innovation project. As a stand-in, the reserachers used the National Average Retail Price data, which existed for a short period in 2013. They included clawbacks only of $2 or more.

Sometimes, the clawbacks are stunning. The day before Hoffart testified in favor of Texas’s new anti-clawback law, a patient was charged a $42.60 copay for a generic version of simvastatin, a statin drug. The patient could have paid $18.59 out-of-pocket, and the clawback was $39.64, Hoffart said, adding that the clawback made him lose money on the transaction.

Patients often aren’t told they could pay less without using insurance unless they ask.

“If they don’t ask, they’re not going to get the information they need,” Hoffart noted.

But even then, some insurance plans prohibit pharmacists from telling patients due to gag clauses. Six states have prohibited the gag clauses and 20 more are considering similar legislation, according to the National Conference of State Legislatures.


Oregon Medical Students Face Tough Test: Talking About Dying

The distraught wife paced the exam room, anxious for someone to come and tell her about her husband. She’d brought him to the emergency department that afternoon when he complained about chest discomfort.

Sophia Hayes, 27, a fourth-year medical student at the Oregon Health & Science University, entered with a quiet knock, took a seat and asked the wife to sit, too.

Softly and slowly, Hayes explained the unthinkable: The woman’s husband had had a heart attack. His heart stopped. The intensive care team spent 45 minutes trying to save him.

Then Hayes delivered the news dreaded by doctors and family members alike.

“I’m so, so sorry,” she said. “But he died.”

The drama, played out on a recent Friday afternoon, was a scene staffed by actors and recorded by cameras, part of a nerve-wracking exam for Hayes and 143 other would-be doctors. OHSU officials say they’re the first medical students in the U.S. required to pass a tough new test in compassionate communication.

By graduation this spring, Hayes and her colleagues must be able to show that, in addition to clinical skills, they know how to admit a medical mistake, deliver a death notice and communicate effectively about other emotionally and ethically fraught issues.

It’s a push started in the last two years by Dr. Susan Tolle, director of the OHSU Center for Ethics in Health Care, who wants to improve the way doctors talk to patients, especially in times of crisis.

Tolle has seen doctors who don’t make eye contact, those who spout medical jargon and still others who appear to lack basic compassion for patients and their families.

“They’ll stand in the doorway and say something like, ‘You need to call a funeral home,’” Tolle said.

Part of the problem is that, in the past, aspiring doctors were taught too little, too late about difficult communication and its nuances, said Tolle.

“My generation of faculty were not taught,” she said. “I had history-taking, but it was more about, ‘How long have you had chest pain?’ I did not have [instruction in] how to give bad news.’”

At Tolle’s urging, the OHSU officials revamped the medical school curriculum to include new lessons in — and standards for — communication, ethics and professionalism woven through the coursework, said Dr. George Mejicano, the senior associate dean for education.

“Most of the emphasis has been on the simplest aspects of communication,” he said. “The whole idea here is, how do you tell someone they have a life-threatening or even a fatal illness? How do you tell someone, ‘I’ve actually made a mistake?’”

OHSU isn’t the only center to focus on communication. All medical schools and residency programs in the U.S. are required to include specific instruction in communication skills to gain accreditation, according to Lisa Howley, senior director of strategic initiatives and partnerships for the Association of American Medical Colleges, or AAMC. Residents are required to prove competency in order to graduate from training and be eligible for board certification for individual practice. And there’s been a larger effort nationwide to help practicing doctors learn to talk to patients about dying.

But Dr. Mark Siegler, director of the MacLean Center for Clinical Medical Ethics at the University of Chicago, who closely follows communication issues, said he believes OHSU’s approach is new.

“So far as I know, there is no other school in the U.S. that has any such standard,” said Siegler. “No other program has both a teaching effort and an evaluation effort.”

Hayes, the OHSU medical student, said she and her fellow students were nervous before the recent exam. But the practice with “standardized patients” — actors trained to portray people undergoing medical care — was crucial to understanding the right way to talk to families in a real-world situation.

“You realize you have this horrible information they don’t have yet,” she said.

Tolle wants to improve the way doctors talk to patients, especially in times of crisis. (Jordan Sleeth/Courtesy of the Oregon Health & Science University)

Hayes did quite well and passed the test, Tolle said. So did most of the other OHSU medical students. But several — she wouldn’t say exactly how many — will need remedial coaching and testing before graduation.

Some of those students failed to introduce themselves properly or to find out what the family member had already been told, Tolle said. Instead, they bluntly announced they had bad news and quickly added that the patient was dead.

“You watched the screen and it looked like you hit [the spouse] with a truck,” Tolle said. “It comes across as incredibly uncaring.”

In real life, such botched conversations can have far-reaching effects. Mary George-Whittle was just 24 when her father had emergency open-heart surgery in 1979. When the surgeon emerged from the operating room to face the family, his message was jarring.

Mary George-Whittle’s parents, Louie and Ella George, in the early 1970s. (Courtesy of Mary George-Whittle)

“He blurted out that Dad had died, that he had too little to work with, that Dad’s veins were like working with the veins of a turkey,” recalled George-Whittle, now 63 and retired after a career as a chaplain in Oregon. “He told us he had Dad’s blood all over him.”

Nearly 40 years later, she and her 11 siblings can still remember the shock.

“The impact that that still has is like PTSD,” she said. “The experience gets caught up in how poorly the news was given.”

This year’s test is a first step, Tolle said. It will be reviewed and refined for future classes. Students who need help will get it. At the same time, OHSU faculty will be offered sessions to help improve their communication skills so they can model what students are taught.

The long-term goal is to raise the bar across the profession, said Tolle, who’s had some practice shifting paradigms. She’s the co-creator of the Physician Orders for Life-Sustaining Treatment, known as POLST, a document credited with revolutionizing end-of-life instructions across the U.S.

In the same way, Tolle said, the culture of communication among doctors can change, too, starting with the latest generation.

“Our biggest goal is not to do a kind of ‘gotcha’ thing for the current medical students,” she said. “It’s to find where the pieces are missing.”