For years now, Pharmacy Benefit Managers or PBMs, as they are widely known, have been profiting handsomely from negotiating drug discounts with pharmaceutical corporations and keeping much of the savings. While these prescription drug middlemen succeed at bringing down prescription drug costs, patients are still paying high prices for their drugs. Five Congressional committees now seek to regulate these PBMs, reports MedPage Today, without helping to lower drug costs in a meaningful way. The system is broken.
You might think that bulk purchasing of pharmaceuticals would lead to steep discounts for patients. Instead. when the discounts are negotiated, they tend to go largely to PBMs and insurance companies. What’s even more problematic is that PBMs and insurers (some of which own PBMs) stock prescription drug formularies–the drugs an insurer covers–with drugs on which they earn significant revenue. Sometimes, formularies do not include generic or lower-cost alternative drugs because lower-cost drugs would cut into PBM and insurer profits.
The PBM bills in Congress right now would not lower drug prices appreciably, if at all. They simply require PBMs to disclose some details concerning what they end up paying for drugs and how much they are paid for their work. To what end?
Three PBMs control the vast majority of the market, which allows them to profit wildly. It’s hard to see how knowing more about what the PBMs pay for drugs or how much they earn from their work would benefit consumers. Perhaps large corporations could use the information to achieve slightly better drug prices.
Even the Congressional Budget Office (CBO) sees precious little financial benefit from these PBM disclosures. The CBO estimates only $900 million in savings early on, diminishing over time. The PBMs profit $18 billion a year now. What would the Congressional bills do specifically?
Bernie Sanders, who chairs the Senate Help Committee, has a PBM bill that would require more disclosure from PBMs. The bill calls for disclosure of copayment assistance by drug corporations, as well as which drugs the insurer covered, and how much insurers spend on prescription drugs. It also forbids PBMs from “spread pricing,” or requiring insurers to pay more for a drug than the PBM pays the pharmacy for the drug.
The bill does require PBMs to give the health “plan sponsor,” aka the insurance corporation, all rebates, fees, alternative discounts, and other remuneration received from a drug manufacturer. Who benefits here is not clear.
The Senate Finance Committee bill would require that insurers pay PBMs “a bona fide service fee,” rather than an amount tied to a drug’s price. PBMs would also need to disclose drug prices to Medicare Part D insurers and the HHS Secretary. Delinking PBM fees from the price of a drug would at least arguably disincentivize PBMs from putting expensive drugs for which they negotiate large savings on a formulary in place of generic drugs. The PBMs should have no more incentive to have higher-cost drugs on a formulary than lower-cost drugs.
The question remains as to why our government allows insurers and PBMs to decide which drugs are on their formularies. If the government is not going to mandate which drugs are covered, an independent agency should evaluate drugs based on their price, efficacy and safety and come up with the drugs all insurers must cover. At the very least, formularies should all include low-cost generic alternatives, when available.
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