A Trump administration proposal to help seniors with the escalating cost of prescription drugs has come under opposition from, of all groups, the AARP. Critics of the current drug payment system in America say they know why.
AARP is tied to a middleman organization that critics say jacks up prices. While the organization has a stated policy of being nonpartisan, it made almost $3 billion dollars supporting Obamacare and ran negative ads aimed at Trump voters in 2017.
Middleman organizations, pharmacy benefit managers (PBMs), like the ones tied to AARP are currently protected by certain parts of the Anti-Kickback Statute. Drug manufacturers pay rebates to PBMs, in order to place their drugs on the formularies of health plans. Anyone who uses Medicare or Medicaid who has had problems getting a prescription filled was probably denied because the drug they need isn’t on their plans formulary list.
Health and Human Services (HHS) Secretary Alex Azar calls these rebates to PBMs, “kickbacks”.
AARP blames drug manufacturers, not PBMs. A representative of the organization told The Daily Caller News Foundation (DCNF), “We strongly agree with President [Donald] Trump on the need to address soaring drug prices, but on the rebate rule, [the Congressional Budget Office] has said it would raise all seniors’ Part D premiums, cost Medicare nearly $200 [billion], and have little impact on drug prices.”
While AARP’s opposition to Trump’s plan seems reasonable on the surface, there is more than meets the eye.
Marion Mass, co-founder of Practicing Physicians of America and Philadelphia-area pediatrician says that AARP has a direct partnership with one of those PBMs — UnitedHealth Group (UHG), which runs PBM Optum Rx. Mass said, “AARP, in your relationship with mega PBM Optum, you’ve defined yourself as being for kickbacks that are costing the American patient money at the pharmacy counter and in hospitals. … You don’t stand for America, you stand for yourselves.”
In AARP’s case, it collected over $300 million in membership dues in 2017 while receiving $627 million in royalties from United Health Care Group year. Royalties from UHG make up a full third of AARP’s $1.6 billion annual operating budget.
As the fictional movie character said, “Show me the money”. In AARP’s case, critics have done just that.
According to Forbes, the organization has made huge profits by allowing UHG to sell Medicare Part D and Medicare Advantage health benefits since 1997. It also makes hundreds of millions of dollars each year through its investment in its grantor trust, again funded through participating members who purchase UHG products.
Paul Cornell, CEO of AARP competitor American Seniors Association, told DCNF, “The two of those together are an absolute powerhouse in the Medicare industry. We believe that it’s almost criminal what the two companies do. They coordinate to make additional profits when AARP plays itself out to be an organization to benefit and help seniors save money, so it’s a big farce.”
The federal government subsidizes approaching 75 percent of basic Medicare Part D premiums. Should plans not be allowed to directly receive rebates, without going through middlemen PBMs, the Congressional Budget Office (CBO) contends premiums will go up resulting in the federal government paying even more.
CBO predicts the rebate rule opposed by AARP would able senior citizens “to better adhere to their prescribed drug regimens” while cutting $10 billion from Medicare spending between 2020 and 2029.
Mass is in favor of the rule but says it doesn’t go far enough. She said that PBMs and other groups purchasing organizations “decide who’s going on the formularies and what products are used in hospitals and nursing homes.” She questions why anyone should get “legalized kickbacks.”
Mass adds, “Why should anyone have legalized kickbacks? … There’s three giant PBMs, there’s four giant group purchasing organizations, and these companies are pretty much running the American pharmaceutical supply.”
The rebate rule that AARP opposes is part of a push by the Trump administration that has already shown results. Drug prices, for example, will be included in television ads, once the White House finalizes the proposal May 7.
In a rare bi-partisan statement, Republican Iowa Sen. Chuck Grassley and Democrat Illinois Sen. Dick Durbin supported the Trump proposal saying, “We applaud HHS for taking this important step to help Americans struggling with skyrocketing drug costs.”
Meanwhile, Trump supporters applaud a president who keeps his campaign promises.
