Did you know that health insurance companies actually profit every time you use your insurance? It sounds counterintuitive, but a recent investigation by The New York Times shines a bright light on how this works. The article dives deep into how pharmacy benefit managers (PBMs)—the middlemen of our healthcare system—are siphoning off huge profits at the expense of local pharmacies, patients, and even employers. Let’s break it down and focus on some of the shocking ways they’re hurting all of us.
One key takeaway from the article is how PBMs systematically underpay small, independent pharmacies, forcing them out of business. PBMs control about 80% of the prescription drug market in the U.S. (thanks to the "big three": CVS Caremark, Express Scripts, and Optum Rx). These giant corporations decide how much pharmacies get reimbursed for the drugs they provide, and in many cases, the amount they reimburse doesn’t even cover the cost of the drug.
The story of Jon Jacobs, the owner of Yough Valley Pharmacy in Confluence, Pennsylvania, is just one example. After running his pharmacy for decades, Jon was forced to close it because PBMs were consistently paying him less than the cost of the medications he dispensed. To keep his business alive, Jon dipped into his savings, took out loans, and borrowed against his life insurance policy, but it still wasn’t enough to offset the losses. Ultimately, Jon’s pharmacy couldn’t survive in a system where PBMs both decide what they’ll pay pharmacies and compete against them with their own mail-order businesses. His pharmacy was closed, and the rural community it served was left without a single healthcare provider.
The Profit Trap: Spread Pricing
Here’s where things get even more frustrating. The PBM business model relies heavily on a strategy known as spread pricing, which is designed to line their pockets while you pay the price. Here’s how it works:
Imagine a pharmacy buys a medication for $20. You go to pick it up, and your insurance charges you a $10 copay. But behind the scenes, the PBM has charged your employer $30 for the same medication while reimbursing the pharmacy only $10. That’s a $40 total cost—$30 charged to your employer and $10 from your copay—yet the insurance company only paid out $10 and pocketed the remaining $20.
This isn’t just a rare occurrence. According to The New York Times, this type of spread pricing is happening on a massive scale, especially with popular medications like Eliquis, Jardiance, and Trulicity. In Jon Jacobs’ case, for example, he often lost money on every prescription he filled. For Eliquis, a blood thinner, PBMs were paying him $53 less than what he had to pay to purchase the drug from his wholesaler. PBMs are pushing local pharmacies to the brink with reimbursements that make it impossible to turn a profit while charging employers—and ultimately you—far more than the true cost of the drug.
What’s worse, the very same PBMs that are underpaying independent pharmacies often reimburse their own pharmacies more for the same exact drugs. PBMs own and operate large mail-order and retail chains, like CVS and Express Scripts, and as a result, they steer patients away from local pharmacies to their own businesses. In one case from the Times article, a patient named Pam Miller switched from Jon Jacobs’ local pharmacy to Express Scripts’ mail-order service after Jon’s pharmacy closed. For one of her medications, Express Scripts had been paying Jon’s pharmacy $9, but once Pam switched to their mail-order pharmacy, they reimbursed themselves $26 for the same drug.
How This Affects You
The thing is, it’s easy to miss what’s really going on because most of us are focused on our copay amounts. That $10 or $15 you pay for a prescription might not seem bad—after all, you’re using your insurance, and it feels like it’s helping. But behind the scenes, PBMs are profiting off spread pricing and driving up costs. They charge your employer more than they reimburse pharmacies, and those extra costs contribute to the rising premiums we all experience. So while you’re paying a seemingly reasonable copay now, you’ll feel the impact in the long term when your insurance premiums keep increasing year after year.
This hidden cost is a key reason why our healthcare system feels like it’s getting more expensive, even when we’re supposedly covered by insurance. And when local pharmacies are driven out of business by PBMs, we lose access to personalized care. As the Times highlighted, many independent pharmacies in rural and low-income areas act as critical healthcare providers. They offer advice, give vaccinations, and provide easy access to medications. But once they’re gone, communities turn into "pharmacy deserts" forcing residents to drive long distances just to get their prescriptions or rely on impersonal mail-order services.
In the case of Confluence, Pennsylvania, the nearest pharmacy is now 14 miles away, and patients who once relied on Jon Jacobs for medical advice and quick prescription refills are left scrambling. Some are even delaying their medications because it’s too inconvenient to make the long drive. According to research referenced in the article, older customers are less likely to consistently fill their prescriptions after their local pharmacy closes, leading to missed doses and worsening health outcomes.
Why We Do Things Differently
At Forest Park Pharmacy, we’ve taken a stand against this broken system. By cutting out the PBM middlemen, we’re able to offer transparent pricing and significantly lower costs on most prescriptions. There are no hidden fees, no spread pricing, and no inflated costs that drive up your premiums. When you fill your prescription with us, you’re paying for the medication, not for a PBM’s profit margin.
We believe that patients deserve to know the true cost of their medications and shouldn’t have to pay more just to enrich middlemen. That’s why we invite you to check out our price checker tool. You’ll be able to see how much we can save you compared to the inflated prices from PBMs.
It’s time to take control of your healthcare and stop letting PBMs profit off your health. Support your local pharmacy and get transparent, fair pricing without the middleman. Let’s fix this system!