Walgreens recently agreed to a $100 million settlement over claims it charged insured customers more than cash-paying members of its Prescription Savings Club (PSC). But lets be clear: this isn’t just a Walgreens problem. This isn't just a PBM or pharmacy problem. This is the same playbook used across the healthcare system, from hospitals to insurance companies. Walgreens inflated prices for the insured while offering cheaper options to cash customers. Sound familiar? Hospitals are doing the same, leaving employers and employees footing the bill for so-called “discounts” that are anything but.
The Walgreens Playbook: Inflated Costs for the Insured
Walgreens’ PSC offered cash-paying customers generic prescriptions at $5, $10, and $15 for 30-day supplies. Meanwhile, insured customers—who assumed their coverage would help them save—ended up paying much more. Plaintiffs in the lawsuit alleged that Walgreens misrepresented its PSC prices, failing to report them as the "usual and customary" (U&C) price to insurers. The result? Insured patients were charged inflated copays and deductibles while Walgreens raked in billions.
One plaintiff, Cynthia Russo, paid $220 for generic prescriptions over time, while a cash-paying PSC member would have paid only $90 for the same medications. That’s over a 240% markup! Walgreens turned the insured into its highest-paying customers, exploiting the very people who rely on insurance to protect against high costs.
Again, sound familiar? Let’s talk hospitals.
Hospitals Are Playing the Same Game
If you think Walgreens’ pricing scheme is shocking, wait until you hear what’s happening in hospital billing. A cardiac MRI with a cash price of $1,218 is billed to UnitedHealthcare at a “discounted” rate of $3,678—that’s a 200% markup. A defibrillator with a cash price of $21,088? United’s negotiated rate balloons to $78,395—a jaw-dropping 270% markup. And it’s not just United; this pattern holds across BUCA (Blue Cross, United, Cigna, Aetna) networks, where “negotiated discounts” are really just inflated prices in disguise. At University of Pennsylvania Hospital in Philadelphia, the privilege of using your Independence BCBS card to pay for an MRI will cost you.... about 400% more than if you were just paying cash.
On the surface, negotiated rates between insurers and hospitals sound like a win for patients and employers. The idea is simple: insurers leverage their size and bargaining power to secure discounts off the hospital’s sticker prices, known as the chargemaster rates. But here’s the catch: those sticker prices are wildly inflated to begin with. So even after the so-called "discount," what you’re left with is often still a far cry from a fair or reasonable price.
How can a hospital accept $1000 from one patient for services rendered while charging another patient for the exact same service at the exact same hospital $10,000 merely because source of funds for payment? How is this possible? Because the negotiation starts with the chargemaster rates—numbers hospitals set arbitrarily high to maximize revenue. The higher the starting point, the more the hospital benefits from any “discount.” Even if the insurer claims to knock 50% off the price, the final number might still be vastly higher than the hospital’s cash price or its actual cost to provide the service. And since most patients don’t know the cash price to begin with, they’re none the wiser.
For hospitals, this isn’t just a pricing strategy—it’s a windfall. They can report massive discounts to justify their high charges while collecting even more money from insurers and insured patients than they would from cash-paying customers. Meanwhile, insurers pass these inflated costs onto employers and employees through higher premiums, deductibles, and out-of-pocket expenses.
And here’s the kicker: insured patients often have no choice. Thanks to insurance plan restrictions and network agreements, they’re locked into using these inflated rates. Even if they wanted to pay cash, they might not be allowed to under their plan’s terms.
The Bigger Picture: Systemic Exploitation
This Walgreens case isn’t just about one pharmacy chain. It’s a reflection of the deeper problem in healthcare: pricing opacity and profiteering. Whether it’s Walgreens charging insured patients more for generics or hospitals demanding 400% more from an insurer than from a cash-paying patient, the system is rigged to ensure the insured always pay the most. And we’ve allowed it to become “business as usual.”
Walgreens’ Defense: Sound Familiar?
In the wake of its settlement, Walgreens issued the usual corporate spin: “We admit no liability and believe these claims never had any merit. This resolution allows us to focus on our turnaround strategy.” Translation: We’re not sorry, and we’ll keep doing what’s best for our shareholders.
If that sounds familiar, it’s because healthcare giants say the same thing every time they’re caught gaming the system. Whether it’s a pharmacy inflating prices or a hospital negotiating exorbitant rates, their focus isn’t on patients.
Why This Matters
Think about it: If a $5 prescription can cost $45 under an insurance plan, or a $1,200 cardiac MRI ends up costing $3,600, what’s the point of insurance? Employers and employees are paying premiums for coverage that inflates prices instead of protecting them from high costs. It’s a shell game, and the house (insurers, hospitals, and pharmacies) always wins.
The Walgreens case might be settled, but it raises a question we can’t ignore: Why are we still tolerating a system that charges people more for doing the “right” thing and using insurance at "in network" facilities? It’s time to demand transparency—not just from pharmacies like Walgreens, but from hospitals, insurers, and the entire healthcare system.
What Needs to Change
This settlement is a reminder of what’s possible when we hold corporations accountable. But we need broader reform:
Price Transparency: Just like Walgreens was forced to confront its PSC pricing, hospitals and insurers must disclose their real prices—cash rates, insured rates, and negotiated rates.
Legislative Action: Stronger laws are needed to prevent price inflation and ensure the lowest available rates are reported to insurers.
Consumer Awareness: Patients need to know that sometimes cash is cheaper than insurance and why that’s a red flag for the whole system.
The Walgreens case isn’t just a one-off scandal; it’s a blueprint for understanding how healthcare costs spiral out of control. If we don’t demand accountability now, we’ll keep paying the price—literally. Let’s stop pretending this is normal. It’s time to rewrite the rules.
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