Copay Clawback Fees Could Lead to Big Insurance Overcharges

Health insurers who overcharge for drugs and services using copay clawback fees could be creating grounds for a wave of litigation.

Copays for prescription drugs are set by companies known as pharmacy benefit management firms, or PBMs. While some PBMs are independent entities that contract with insurance companies, others are actually owned by the companies they work for.

These PBMs are in a position to overcharge insured persons for their prescription drugs by setting their copay above what they would pay for the drug if they paid for it themselves, without insurance coverage.

The pharmacy charges the patient the excessive copay, then the PBM recoups the overcharged money from the pharmacy.

These overcharges are known as copay clawback fees. They can be astonishingly high, sometimes resulting in hundreds of dollars in overcharging.

According to one report, one insurance company claimed a copay of $270 for a certain nausea drug even though it only paid the pharmacy $4.50 in costs and fees to dispense the drug.

Survey: Copay Clawback Fees Are Common

The bad news isn’t just coming from patients getting his with copay clawback fees. Pharmacists also report finding pricing irregularities among some of the drugs they’ve been dispensing.

According to a survey of pharmacists conducted by the National Community Pharmacists Association, many independent community pharmacists regularly spot copay clawback fees among the drugs they dispense.

Eighty-three percent of the survey respondents said they had witnessed them at least 10 times during the previous month. About two-thirds of the respondents said the practice is limited to certain PBMs.

Most respondents said the practice isn’t limited to purely commercial health plans. They believe some Medicare Part D plans also use copay clawbacks.

Pharmacists also report that certain PBMs require them to agree to “gag clauses” that prohibit them from alerting customers to the money they could save if they paid for their drugs in cash rather than through their insurance coverage.

Most of the pharmacists who responded to the survey said they encountered such a restriction at least 10 times in the past month.

The NCPA points out that persons who get prescription drug coverage presume that purchasing drugs using their insurance coverage and their plan’s designated health care providers will save them money.

Copay clawbacks turn that logic on its head, leading some insureds to pay vastly more than they would if paying in cash.

The problem isn’t just limited to prescription drugs, either. Services like X-rays or lab work can also be subject to copay clawback fees.

What an insurance company pays a lab for a particular round of bloodwork, for example, may be just a fraction of what a patient would pay out their own pocket if they were to pay for it themselves.

By one estimate, as many as 80 million U.S. insureds may have been overcharged through the use of a copay clawback. These persons don’t have to take it sitting down, though.

A health insurance fraud class action lawsuit investigation is now underway to determine whether certain insured persons may have a legal claim against their insurers. Participation in the investigation is free for qualified persons.