$140 With Insurance or $25 in Cash: Why Patients Skip Their Plan
"They come to us because our cash price is often lower than what their insurance plan asks them to pay. That tells you something is wrong."
Mark Cuban delivered that line to Texas House lawmakers on Sept 1, explaining why so many customers at Cost Plus Drugs already carry health insurance cards in their wallets.
A study in Annals of Internal Medicine backs him up with 62 million commercial generic prescription claims. Researchers matched employer-sponsored insurance claims against direct-purchase cash prices at Cost Plus Drugs, including a $5.25 shipping fee on every prescription.
Whenever a patient's copay or coinsurance under an employer plan topped $15, the cash price beat the insurance price nearly 80% of the time.
At the higher tiers, the gap turns into a canyon. For generic prescriptions where the insurance plan asked the patient to pay more than $100 out of pocket, the median cost through the plan was $140. The median cash price at Cost Plus was $25. That is an 85% drop, or a median savings of $119 on a single fill, across common medications in cardiology, psychiatry, neurology, urology, and oncology.
How does an insured worker end up paying $140 for a generic pill that sells for $25 in cash?
Three pharmacy benefit managers, CVS Caremark, Cigna's Express Scripts, and UnitedHealth's OptumRx, handle roughly 80% of prescription claims in the United States. Their contracts with employers can run hundreds of pages, packed with rebate definitions, spread pricing, and gag clauses that keep employers from comparing terms. Cuban calls those agreements "contractual terrorism."
At the same time, employer plans have shifted more drug spending onto workers through higher deductibles and coinsurance tiers. Even electronic "real-time benefit check" tools inside doctors' prescribing software caught savings only 39% of the time on those $100-plus generic fills, missing more than half the cases where cash was cheaper.
There is one catch every patient should know before pulling out a debit card. As pharmacist Jennifer Graff told The American Journal of Managed Care, cash purchases outside the plan usually do not count toward your annual deductible or out-of-pocket maximum. Cuban told Texas lawmakers the law should change so patients aren't penalized for saving themselves and their health plan money. Until it does, you have to run the math on whether you are likely to hit your deductible that year.
In our direct primary care clinics at AtlasMD, we skipped the middleman years ago. We dispense generic medications in the office at wholesale prices, often for pennies a pill, and tell patients the exact cash price before the label is printed. If a mail-order pharmacy or a local cash discount beats us, we send the prescription there.
When a $25 bottle of pills costs $140 through the benefit card, the card isn't a discount. It's a tollbooth.
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