Author: Seth Bilbrey

Pharmacy Benefit Managers (“PBMs”) have come under intense scrutiny recently. A recent report by the Federal Trade Commission (“FTC”) noted that PBMs are profiting “at the expense of patients.” However, before discussing the recent scrutiny of PBMs, it is important to understand what role PBMs play in the overall United States healthcare industry. 

What we consider everyday happenstance today—pharmacies dispensing prescription drugs—emerged in the early 1910s, for narcotics, and in the 1950s for nonnarcotics. Soon after pharmacies began dispensing prescription nonnarcotics, pharmacists founded PBMs. However, not long after PBMs were established, their industry underwent rapid horizontal and vertical integration. The FTC report stated that this integration has led to “the top three PBMs [to process] nearly 80 percent of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023, while the top six PBMs processed more than 90 percent.” 

This integration has also caught the attention of antitrust authorities – in 2017 the Department of Justice (“DOJ”) blocked mergers of major health insurers Aetna-Humana and Anthem-Cigna. However, DOJ’s challenges opened the door for two of these insurance companies to merge with some of the largest PBMs in the market. In 2018, CVS Health (the largest PBM, with a 21.3% share of the market) acquired Aetna, while Express Scripts (the third largest PBM, with a 17.1%share of the market) merged with Cigna. PBMs merging with insurers seems to be the current trend—the FTC report noted that “five of the top six PBMs are now part of corporate healthcare conglomerates that also own and operate some of the nation’s largest health insurance companies, including three of the five largest health insurers in the country.”

Now that we know when PBMs originated and how they fit into the broader healthcare industry, it’s important to clarify their role. Essentially, PBMs are the middlemen between “drug companies, insurers, and pharmacies.” PBMs operate within a complex framework, and an entire paper could be written on what role they play; importantly, PBMS:

Act as negotiating entities between several actors in the prescription drug supply chain. Insurers work with PBMs as third-party contractors that manage their prescription drug benefits. PBMs create and update formularies of preferred drugs, with different prices and cost-sharing amounts that influence what beneficiaries pay out of pocket and which medications they can access through their insurance. PBMs negotiate rebates and discounts for an insurance plan from drug manufacturers and determine the prices insurers pay and the payments pharmacies receive. PBMs can also take on the administrative role of directly reimbursing retail pharmacies on behalf of an insurer. Both public and private insurers, including Medicaid, Medicare Advantage plans, employer-sponsored insurance plans, and individual market plans, use PBM services.

So what’s the problem? Along with the FTC report noting that few PBMs dominate the market, PBMs and insurers are generally a part of the same large conglomerate, the FTC importantly noted that PBMs are putting “profits before patients.” PBMs ensure their profits in a variety of ways. As mentioned above, just six PBMs control 90% of the market, so these PBMs, which decide which medicines you may receive and at what price, tend to steer people to the pharmacies they own. The FTC report noted that this creates a conflict of interest which would only lead to an “increase in medicine costs.” Further, PBMs make money through rebates and fees they charge, charges that are dependent on the price of the medicine they are selling—which means when the price of medicine rises, so do the profits of PBMs. Finally, it is worth noting that “PBMs get billions of dollars in rebates and discounts that reduce the cost of brand medicines by 50% or more … [y]et they often force patients to pay based on the full price.” So while PBMs dominate the market and can negotiate the cost of medicine, this cost-saving rate is not reflected in customer costs, who are still expected to pay full price. 

On September 09, 2021, President Biden issued Executive Order 14,042 (“the Order”). In the Order, President Biden required all executive agencies to include a clause in their contracts stating both contractors and subcontractors would “obey COVID-19 safety guidance issued by the Safer Federal Workforce Task Force.”  On September 24, 2021, the Task Force issued its guidance, which required all contractors and covered employees be vaccinated against COVID-19.

With the World Health Organization rescinding its classification of COVID-19 as a global health emergency in May 2023, you may be wondering why we are discussing the Order. Well, this was not the first global pandemic, and it will not be the last. The first pandemics emerged once hunter-gatherer tribes settled in larger communities, as the formation of these communities, as well as increased agriculture and war, made it easier than ever for diseases to spread. The first recorded pandemic, the Athenian Plague, occurred in 430 BC Athens, and experts predict that there is a 47-57% probability that the world will experience another deadly pandemic before 2050.

Circuit courts around the country are split on whether Executive Order 14,042 was constitutional, with the most recent circuit, the Ninth Circuit, ruling that the Order could stand. In the Order, President Biden asserted power stemming from the Federal Property and Administrative Services Act of 1949 (also known as the “Procurement Act”). The Act was originally signed into law to “increase the efficiency and economy of Federal government operations with regard to the procurement, utilization and disposal of property.” Since its codification, Presidents have used the Procurement Act to require contractors to use immigration status verification systems and to establish paid sick leave for federal contractors.

            The Procurement Act notes that, “[t]he President may prescribe policies and directives that the President considers necessary to carry out this subtitle. The policies must be consistent with this subtitle.” Two Circuits have analyzed this language and created tests to determine whether Presidential orders are consistent with the Procurement Act’s requirements. The Fourth Circuit, in Liberty Mutual Insurance Company v. Friedman, introduced the reasonably-related test, which states that there must be a finding that the executive order’s policies are “reasonably related to the Procurement Act’s purpose.” The D.C. Circuit, in American Federation of Labor and Congress of Industrial Organizations v. Kahn, introduced the sufficiently close-nexus test, which states that the executive order issued must have a sufficiently close nexus to the Procurement Act and the statutory goals of economy and efficiency.

            What we learn from the two tests is that the President’s order must relate back to the Procurement Act’s goals of economy and efficiency in contracting; however, when the next pandemic hits and the Supreme Court has to decide which test to apply when analyzing an Executive Order passed under power granted from the Procurement Act, which test should they choose (granted they do not create their own)? The Court should adopt the D.C. Circuit’s “sufficiently-close nexus” test; all though this test can sometimes be interpreted more leniently than the Fourth Circuit’s “reasonably-related” test, the “sufficiently-close nexus” test’s language and standards are more stringent. When handling health law policy, typically reserved for the states, and vaccinations that could impact millions of people, the Executive branch should be able to decide whether to issue an executive order; however, it should require a serious and sufficient justification.

Although the word telehealth is new in most of our vocabularies, the idea itself is not. As early as 1925, doctors were diagnosing patients over the radio, and in 1959 patients and physicians were using video telecommunications to connect with one another. 

Telehealth now, however, is booming. In the year between March 2019 to March 2020, Telehealth usage increased an astounding 154%. Among Medicaid beneficiaries in a select five states, telehealth usage increased 15x from the pre-pandemic usage of 2.1 million visits per year, to over 32 million visits from March 2020 to April 2021.

Although telehealth has its inherent benefits , such as allowing patients to visit doctors from the comfort of their homes, thus saving them time, money, and allowing for fewer missed hours from work, it also has its drawbacks. Disadvantages to telehealth include racial disparities , possible technical difficulties between patient and doctor, misdiagnosis, and privacy concerns.

One of the leading disparities in telehealth is the digital divide. In a study conducted by the University of Houston, head researcher, Omolola Adepoju, found that only one in four families earning $30,000 or less have a smart device capable of running telehealth communications software such as Zoom or Skype. Further, the study found that 66% of African Americans and 61% of Hispanics have high-speed internet access, compared with 79% of white households.

Further challenges were illustrated by the National Center for Biotechnology Information (NCBI), which extracted 27 studies from seven databases, and organized the barriers and challenges to telehealth into seven categories. In order of frequency (most frequent challenge to telehealth, to least frequent): technical aspects, privacy/data confidentiality and reimbursement, physical examination and diagnostics, special populations, training of healthcare providers and patients, doctor-patient relationship, and acceptability and satisfaction.

The second biggest barrier to telehealth, as reported in the NCBI’s report, was privacy/data confidentiality concerns. Patients were afraid that using a telehealth service would subject their intimate data to security breaches. These fears were not baseless. During the COVID-19 public health emergency, the Department of Health and Human Services Secretary Alex Azar issued temporary waivers that waived Medicare’s licensure requirements and allowed health providers to use mainstream video-conferencing platforms like Zoom and Google Meet. Further, smartphone apps, sometimes used in place of Zoom and Google Meet, have been found to share personal health information  with third parties.

Although federal policies allowed for health care providers to use popular third party vide conferencing platforms, there are some simple steps we can take to ensure privacy when meeting with health care providers via telehealth. When sharing sensitive health information online, it is important to remember a few precautions we can take to limit the possibility of our information being hacked. First, make sure to keep your devices up to date with antivirus software; second, avoid using public Wi-Fi when accessing telehealth services; and third, avoid accessing telehealth appointments on shared devices. Further, once in an appointment, try to ensure that you are in a private room away from others, and if impossible, let your healthcare provider know, and then you may be able to send sensitive information via text or email through their own protected portal rather than speaking aloud.

As COVID-19 cases are trending down and are presenting less of a public health emergency (which the Department of Health and Human Services plans to officially end on May 11, 2023), it is time for lawmakers and politicians to seriously think about the impacts unregulated telehealth has on the privacy of its users, especially as it relates to marginalized groups.