The pharmaceutical industry has taken most of the heat in Congress and the public’s mind for high drug prices. But increasingly, scrutiny is shifting to a different part of the supply chain: pharmacy benefit managers.
Why it matters: PBMs may not resonate with the average person the way big drugmakers like Pfizer do, but they play an important role in determining how much people wind up paying for medicines.
- PBMs negotiate prices with drug companies, and also help insurers decide which drugs are covered for a patient.
- Backers note that PBMs, unlike drugmakers, have a goal of seeking lower prices.
- But frustration with PBMs has grown over complaints that they keep too much of the discounts they negotiate or steer patients to costlier drugs to benefit their own bottom lines.
What they’re saying: “We need that negotiating power” from PBMs to bargain for drug prices, since the government plays a smaller role than it does in many other countries, said Anna Kaltenboeck, principal at ATI Advisory and a former Senate Finance Committee staffer.
- But as more PBMs merge with big insurers, “it becomes a very difficult accounting exercise to figure out what money is going where, when and how,” she added.
- The three biggest PBMs — CVS Caremark, Express Scripts and OptumRx — manage about 80% of prescriptions and are integrated with the health insurers Aetna, Cigna and United Healthcare, respectively.
- The health system spent $603 billion on prescription drugs in 2021 before accounting for rebates, per the federal health department.
Driving the news: There’s bipartisan interest building in Congress to address PBM business practices before the end of the year.
- “I think these PBM reforms are in many cases tinkering around the margins, but a really important place to start, and I hope Congress continues to do even more on the PBM front,” said Sarah Kaminer Bourland, legislative director of Patients for Affordable Drugs Now.
- The legislation under consideration would not drastically lower drug prices in the United States. But backers say they could remedy some misaligned incentives for PBMs and make modest improvements for patient costs and access to medicines.
Between the lines: In particular, Bourland pointed to two areas as benefiting patients:
- A “delinking” provision in a Senate plan would move PBMs’ pay to a flat fee instead of being based on the price of a drug. The idea is to remove an incentive for PBMs to recommend higher-priced drugs, potentially lowering costs for patients who have to pay a certain percentage of the drug’s sticker price regardless of any negotiated discount.
- Legislation in the House would address PBMs steering patients to their own pharmacies by imposing transparency requirements on this practice, while the Senate bill would restrict the circumstances in which it can occur.
Yes, but: The Trump administration stepped on a hornet’s nest in 2019 when it sought to ban PBMs from pocketing discounts negotiated with drugmakers, and insisted they instead be passed on to patients at the pharmacy counter.
- While it would have prevented PBMs and insurers from using rebates as they see fit, the CBO projected Medicare Part D premiums would rise, partly because health plans would no longer be able to use rebates to lower premiums. Government costs would have risen $177 billion over 10 years because of higher Medicare and Medicaid spending.
- The current PBM legislation is narrower in scope and would not ban rebates or require passing them on to patients. That avoids headlines about rising premiums and taxpayer costs, but it also means less relief for sick patients with high out-of-pocket costs for their drugs.
The other side: PBMs argue that Congress should instead focus on drugmakers, who actually set the sticker prices of drugs.
- Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, the PBM trade group, warned in a statement that the legislation under consideration “clearly benefits Big Pharma by weakening pharmacy benefit companies’ ability to lower drug costs.”
- He said lawmakers should target drug companies’ abuse of the patent system as a way to “actually lower drug costs.”
- The drug industry trade group PhRMA says PBMs and insurers have increasingly shifted more health costs onto patients through high deductibles and copays, adding that PBMs restrict access to drugs.
The bottom line: PBMs have drawn heat from Democrats as well as Republicans, who are generally friendlier to drugmakers. However, one Democratic senator cautioned that lawmakers’ work on drug costs must go beyond PBMs.
- “I’ll be the first to concede that there is work to be done to improve the behavior of pharmacy benefit managers,” Sen. Sheldon Whitehouse (D-R.I.) said in the Senate Finance Committee last month.
- But he noted that Congress should not divert its attention from drug companies themselves and become a “tool of the pharmaceutical industry.”