Aaron Besterman

My testimony today at the Texas State capital I’m the co-founder of CostPlusDrugs.com. We started Cost Plus Drugs because the prescription drug market is too complicated, too opaque and too expensive. Our model is simple: we show what we pay for a drug, add a transparent markup and pharmacy fee, and show the customer the price. No games. No hidden spread. And a large percentage of our customers already have insurance. 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. Here are five things Texas can do about it. 1. Let patients shop for cheaper drugs If someone's insurance says a prescription costs $500, but they can buy the exact same drug for $100 cash, let them buy it for $100. Then credit that $100 toward their deductible and out-of-pocket maximum wherever Texas has authority to do so. Patients should be rewarded for saving themselves and their health plan money. They shouldn't be punished for it. That's how you create something healthcare desperately needs: Price competition. 2. Standardize PBM and TPA contracts Texas should require the state, cities, counties and school districts to use standardized model contracts and mandatory terms for PBMs and TPAs. I've reviewed these contracts. They routinely run hundreds of pages. I've seen contracting packages longer than a thousand pages. There is no human being—or group of human beings—on this planet who can stay awake and understand every provision in contracts that complicated. I don't care how much coffee they drink. I call it contractual terrorism. The vendor only has to sneak a couple of tricks through hundreds of pages. The employer has to find every one. It can't. I've developed a model PBM contract designed to eliminate the major tricks and hidden economics we've identified. Texas can have it for free. Use mine. Improve it. Open source it. I don't care. Just stop making every government entity negotiate these contracts from scratch. 3. Make the economics public If taxpayers are paying the bill, taxpayers should know the price. Pricing. Fees. Rebates. Guarantees. Pharmacy reimbursement. Affiliate compensation. Audit rights. Make them public. I'm not talking about patient information or legitimate security information. I'm talking about the money. You cannot have an efficient market without price discovery. Without price discovery, you get information asymmetry. And when one side knows dramatically more than the other, guess who wins? Not taxpayers. Not employers. Not patients. Open the contracts up and let competitors see what they have to beat. That giant sucking sound you hear will be money moving away from healthcare conglomerates that are too big to care and back toward taxpayers, employers and patients. In the immortal words of Charles Barkley: I guarantee it. 4. Kill the gag clauses PBM contracts are like Fight Club. The number one rule of Fight Club is that you can't talk about Fight Club. The number one rule of many PBM contracts seems to be that you can't talk about your PBM contract. That's insane. Let employers compare pricing, rebates, fees, guarantees and reimbursement terms. Markets work better when buyers know what other buyers are paying. 5. Make enforcement hurt If a healthcare company commits a serious violation, give them one mulligan. But after a second material federal or Texas enforcement action within a defined period, make them ineligible for new Texas government contracts for a period of time. Two strikes. You're out. Today, some of these companies can make billions, get caught, pay a fine and write it off more easily than I wrote off an NBA fine. That's not deterrence. That's a cost of doing business. And Texas should spend more on enforcement. If Texas spends $10 million auditing contracts and analyzing claims and prevents $100 million in unnecessary spending, that's not overhead. That's a 10x return on investmen