A lawsuit currently being pursued by Ohio Attorney General David Yost against OptumRx, a pharmacy benefit manager (PBM), alleges that the company bilked Ohio state coffers of more than $1.3 million on generic medications. If true, taxpayers and patients should be outraged.
But this is far from the only reason to distrust PBMs. PBMs are the corporate middlemen that drive the costs of drugs up for patients in pursuit of their own profits. Seniors, in particular, who rely on these medications in greater numbers, pay a heavy price.
But here’s the real outrage: those very middlemen keeping drug prices high are aided and abetted by the very organization that purports to represent seniors—the AARP.
AARP bills itself as a nonprofit organization “dedicated to empowering Americans 50 and older.” But behind closed doors, it argues something else entirely. In response to a recent lawsuit alleging AARP has been overcharging seniors for Medigap insurance coverage, AARP argued that it was under no obligation to “act with the interests of [its senior members] in mind.”
So, if AARP isn’t acting in the interests of its members, who does it answer to? One need only examine the organization’s financials to discover the truth—AARP is beholden to UnitedHealth Group, the parent company of the very PBM that Ohio’s Attorney General is investigating. Practically an open secret in Washington, D.C., AARP provides UHG with the exclusive right to brand medical insurance policies with the nonprofit’s name and logo—effectively their stamp of “senior” approval. In return, UHG pays AARP royalties of 4.95 percent of its sales of these products off the top—kickbacks worth billions.
Over the last decade, this exclusivity deal has provided AARP with tax-free income to the tune of $4.5 billion. In 2017 alone, the nonprofit received $627 million from UnitedHealth, more than double what it took in membership fees from seniors. A recent report from Chris Jacobs at Juniper Research shows how AARP has made a habit of putting profits over patients. Given AARP’s financial incentives, it’s no wonder the organization acts as a marketing and advocacy arm of the UnitedHealth Group. According to Jacobs:
“Even a former AARP chief executive has admitted that the organization faces financial conflicts regarding its insurance ties. In 2012, Bill Novelli, AARP’s CEO from 2001 through 2009, said that ‘it’s fair to say that AARP does have a financial interest in Medigap insurance because it’s a significant revenue raiser for them. If Medigap were somehow reduced, then AARP would have a financial reduction.’ That financial conflict played out in 2011, when AARP secretly lobbied against changes to Medigap insurance—without disclosing its financial conflicts to Congress. … In total, these changes would have lowered Medigap premiums so dramatically that most seniors would have saved significant sums, even after paying the new co-payments out-of-pocket.”
This fundamental conflict between AARP’s own financial interests and the interests of its senior members has been manifested in AARP’s public policy positions and advocacy; it regularly pursues policy objectives that benefit PBMs and the insurance industry rather than patients and seniors. The most blatant example of this is the AARP’s opposition to the recently-proposed rebate reform rule, which would cut out the healthcare middlemen to put immediate cost-savings directly into seniors’ pockets at the pharmacy counter rather than funneling that money to the coffers of PBMs.
While such a reform would be profoundly impactful for seniors struggling with their medical bills, it would hurt the bottom line of the organization’s PBM and big insurance overlords—and it is very clear which party AARP prioritizes.
Regardless of the outcome of Ohio’s lawsuit, the fact that the AARP does the bidding of such PBMs over the interests of seniors is a scandal orders of magnitude larger.
