Hello, Dr. Keith Smith with you here on behalf of the Free Market Medical Association, thank you for joining us. We’re going to continue our lies you believe series and dive into Big Pharma. If I told you there is nothing wrong at all with the pharmaceutical industry, you would know I was a liar. We have our expert, Chad Schmidt here, to help us understand and get to the bottom of this. Chad, thank you for joining us.
Chad: My pleasure.
Keith: When somebody buys a car and the dealer is receiving a rebate, he’s not really lying by not disclosing that. But, if I were to ask what kinds of incentives exist, that would a very interesting answer. Isn’t some of that true in the pharmaceutical industry as well?
Chad: It’s unbelievably true. You can’t fault the dealer for not telling you how they are being incented to sell cars. The same is true in the pharmacy industry. If the pharmacy benefit manager companies, there’s 200 or so nationally with 3 primary players, but if you have to ask them about rebates it’s not really a lie. It’s a lie by omission. It’s revenue to the bottom line. There are companies out there that will disclose that, but if you don’t know the right questions to ask they’re typically not going to offer that. Just like a car dealer, you go to a good car dealer and they have incentives, they are going to tell you “I’m going to sell you this car for a net cost.“ But, if they can retain that and they are not one of the “white-hats”(there are white-hats and black-hats in our industry), if they are one of the black-hats they are going to retain that money and not tell you about it until you know to ask and most of the time, you don’t know to ask.
Keith: So, while it’s true that a rebate on a car dealer’s lot on one particular car might be higher and that’s why the salesman and the dealer want to push a certain car along, that’s true also in the pharmacy industry is it not? There are certain drugs, where the undisclosed rebates that are coming back to the Pharmacy Benefit Managers, the brokers or the TPA’s is that also true?
Chad: Oh, very much so. If a group is under a certain size, say 1000 or below, which is most of Oklahoma they are not being offered rebates. If they’re on a fully-insured basis with one of the carriers, they are not being offered for sure. If they are with a third-party administrator, typically the white-hats won’t retain any money from the pharmacy benefit manager, but they will pass that on and disclose that to the client. That’s why you need to rely on your white-hats, your good brokers, your good consultants and your good third-party administrators to disclose that.
Keith: So these are lies of omission, things that many of you watching this may not know to ask. When you go to the pharmacy and you have a prescription from your doctor and it says here’s the drug I want you to have and that’s not on your formulary, Chad just gave you the answer why. There was not enough undisclosed revenue made on the back-end to offer you that drug.
If you’re not mad and you don’t see this as a true lie that many of you don’t understand or believe, then I would encourage you to start this one over and watch it again. We have much more to come from our friend Chad Schmidt.