Why Your Pharmacist Was Not Allowed to Tell You About a Cheaper Option, Until 2018

What a Gag Clause Actually Said

PBM contracts with pharmacies are confidential, pharmacies are typically not permitted to disclose the specific terms of their PBM agreements. But the general structure of gag clause provisions was documented through litigation, state investigations, and congressional testimony before the 2018 legislation was passed.

The essential provision worked like this: pharmacies agreed, as a condition of participation in a PBM’s network, not to proactively inform patients that a lower cost option was available if the patient was paying their insurance copay. In some contracts the prohibition extended to situations where a patient specifically asked whether a cheaper option existed.

The practical consequence was that a pharmacist who saw a $45 copay for a medication that cost $9 in cash could not say, ”Did you know this is cheaper without your insurance?” They could process the transaction, collect the $45, and watch the patient leave having paid five times what they needed to.

And this happened millions of times.

Where the Extra Money Went

Understanding the financial mechanics of why gag clauses existed requires understanding the clawback mechanism we described in our earlier posts.

When a patient’s copay exceeds the actual cost of a medication, the pharmacy is typically required by the PBM contract to collect the full copay from the patient, even though the pharmacy’s reimbursement from the PBM is lower than the copay collected. The difference, the spread between what the patient paid and what the pharmacy was reimbursed, is returned to the PBM.

This means the PBM had a direct financial interest in patients paying their copay rather than the cash price. Every time a patient paid a $45 copay for an $11 medication, the spread between the copay and the pharmacy’s reimbursement generated income for the PBM.

The gag clause protected that income stream by ensuring pharmacists could not disrupt it by informing patients of the cheaper option.

What Independent Pharmacists Did

Here is the part of this story that I am proud to tell.

Independent pharmacists across the country were vocal opponents of gag clauses from the beginning. Independent pharmacy associations, particularly the National Community Pharmacists Association, advocated publicly and in Congress for gag clause prohibition for years before the 2018 legislation passed.

Independent pharmacists who were not part of large chain networks had more flexibility in how they interpreted and applied their PBM contract terms. Many independent pharmacists found ways to make information available to patients within the limits of what they were contractually permitted to do, pointing to price comparison tools, helping patients understand their options, advocating for the transparency that the PBM contract terms were trying to prevent.

Chain pharmacy employees, working under corporate compliance policies designed to ensure adherence to PBM contract terms, had less flexibility. The institutional pressure to comply with gag clause provisions was significant.

I want to be careful not to blame individual pharmacists at chain pharmacies who were put in an impossible position, contractual compliance versus patient advocacy, by a system they did not design and had limited power to change. The blame belongs with the PBMs that wrote those contract terms and the system that allowed them to do so.

What Changed After 2018

The 2018 legislation made several things legally clear:

Pharmacists cannot be prohibited by PBM contract from telling a patient when a lower cost option is available. Pharmacists are specifically permitted to tell patients about lower cost alternatives, including cash prices and discount card prices, regardless of what their PBM contract says. PBMs cannot penalize pharmacies for providing this information to patients.

The legislation was a genuine and meaningful win for patients. Since 2018 pharmacists nationwide have been legally free to have the conversation that the gag clause prevented, and millions of patients have paid less for their medications as a result.

What Has Not Changed

The gag clause is gone. The underlying system that made it profitable is largely still in place.

PBMs still use spread pricing. Clawbacks still occur in some contexts. The formulary manipulation that places high rebate brand drugs on preferred tiers while generic equivalents cost more continues. The vertical integration of insurance, PBM, and pharmacy under single corporate parents continues.

The 2018 legislation was an important reform. It was not a comprehensive solution to the systemic problems it revealed.

What This Means for You Right Now

Because of the 2018 legislation your pharmacist is now legally free to tell you when a cheaper option exists. But they can only tell you what you give them the opportunity to discuss.

The most effective thing you can do at a pharmacy counter is ask, every single time, whether the price you are being quoted is the lowest available option. A pharmacist who is committed to your financial wellbeing will answer that question honestly. You now have the legal protection to ask it and the legal assurance that the pharmacist cannot be penalized for answering it.

At Fairview that conversation has always been part of how we practice. The gag clause era was something we found professionally intolerable. The post 2018 environment, where we can openly tell every patient about every pricing option available to them, is closer to what pharmacy practice is supposed to look like.

This article is for general information only and is not a substitute for personalized medical advice. Before starting or changing any medication, including over the counter products and supplements, talk with your pharmacist or physician about your specific situation.