The Gag Clause: Why You May Pay More for Prescription Drugs - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

The Gag Clause: Why You May Pay More for Prescription Drugs

Posted: May 01, 2018 3:17 PM Updated:
(Photo: CBS) (Photo: CBS)

FRUITLAND, Md. – Take a deep dive into the pharmaceutical industry and you might start to feel like you’re drowning, and fast. From the drug-makers and the drug reps, to the insurance companies and benefit managers, the employer who offers you your prescription plan and the pharmacy that doles those prescriptions out, it’s a complicated sport with a lot of players.

Within that sport, there’s a common rule a lot of people don’t know about. It’s called the “Gag Clause”, a contractual agreement that prohibits pharmacists from letting the customer know if the cost of a prescription drug would be cheaper without insurance.

Jeff Sherr runs Apple Discount Drugs, an independent pharmacy with several locations on the Eastern Shore of Maryland. Sherr has been fighting to get rid of the gag clause.

"In your case and to the viewers at home,” Sherr said, “they don't know what they don't know and the fact is we do know and we see the travesties that are occurring and it's wrong."

Sherr’s fight has paid off. Maryland lawmakers recently passed a bill prohibiting the gag clause.

According to Sherr, the law will take effect in October 2018. When it does, Maryland will fall in line with actions taken by roughly 32 states in the U.S., that’s according to the National Academy for State Health Policy, or NASHP. 

So where does the gag clause come from? According to Sherr, the restriction is part of a contract that comes from the Pharmacy Benefit Manager, or PBM. The PBM is in many ways a middle man between the pharmacy and employer. The PBM’s role is to essentially purchase various prescriptions in bulk, which, in turn, is aimed to give the customer access to more drugs at better prices.

However, local pharmacists argue PBM’s are making most of their money by pocketing many of the discounts offered.

WBOC reached out to the Pharmaceutical Care Management Association, a group that represents the PBM industry. PCMA said it does not agree with gag clauses either. It said, in part, “We support the patient always paying the lowest cost at the pharmacy counter, whether it's the cash price or the copay...We would oppose contracting that prohibits drugstores from sharing with patients the cash price they charge for each drug.”

Yet, the clause still exists and many states, including Delaware, do not have legislation against it.

WBOC spoke with a pharmacy owner in Delaware who asked to remain anonymous but said the gag clause isn’t their biggest concern. Instead, the clause is a piece of the bigger problem; a lack of transparency on the part of PBM’s. The owner, as well as other pharmacies who spoke with WBOC, would like to see a requirement that PBM’s be 100 percent transparent. That would keep them from being able to pocket rebates instead of passing them along to the customer. 

"They're really the ones that are making the biggest profit,” said Sherr. “They try to keep things quiet. Really what the pharmacy wants is transparency."

If you do deal with a pharmacy that must comply with the gag clause, Sherr recommends asking for the cost of a prescription drug before insurance is entered into the system. It is a workaround that should help as he and other pharmacies continue to push for the “gag clause” to end nationwide.

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