That often results in patients with high deductibles or coinsurance being more likely to stop taking medications as prescribed or even abandoning their prescriptions at the pharmacy. That in turn can expose them to higher risk for trips to the emergency room, otherwise avoidable hospitalizations and resulting poorer health.

According to a report in The American Prospect, the problem is pharmacy benefit managers, who act as middlemen in managing prescription drug benefits for health plans, "contracting with drug manufacturers and pharmacies in a multisided market."

Since PBMs began as intermediaries, they have grown and consolidated until they are "significant controllers of the drug pricing system, a black box understood by almost no one," the report says, continuing, "Lack of transparency, unjustifiable fees, and massive market consolidations have made PBMs among the most profitable corporations you've never heard about."

PBMs negotiate discounts from drug companies and pharmacies, which agree to the discounts to gain access to the patient networks the PBMs have aggregated. PBMs control which drugs are listed on the formulary, the list of reimbursable drugs for the networks they serve. And, according to the report, when they get rebates from drug companies in exchange for the formulary listing, rather than disclosing the rebates to health plans or passing them along to pharmacies or consumers, they retain them.

According to the report, "Controlling the formulary gives PBMs a crucial point of leverage over the system." If a PBM excludes a drug from a formulary, it adds, "[t]his can result in patients getting locked out of their medications without an emergency [exemption.] And there are indications that PBMs place drugs on their formularies based on how high a rebate they obtain, rather than the lowest cost or what is most effective for the patient."

The loser in this is not just the patient, but also the independent pharmacy dispensing the medication, the report says, since "pharmacists have no idea how much money they'll make on a sale until the moment they sell it." Instead, a reimbursement process determines what the pharmacist will make. In fact, for generics, an algorithm rather than a price list sets the price at the time of sale — so there's no way to determine in advance what that price will be.

Oh, and Medicare suffers, too. Patients paying higher drug prices hit the "donut hole" in Medicare faster, ending up paying full price for their medications, and patients who use a lot of prescriptions end up in catastrophic coverage faster, causing Medicare to pay more as well.