Wendy future of retail top

PBMs’ outsize influence hurts the health care system

Print Friendly, PDF & Email

The health of everyone in America who needs a prescription drug is increasingly dependent on

John O'Brien

John O’Brien

a complex system in which pharmacy benefit managers exert an incredible amount of control. This system jeopardizes access to needed medicines and lacks meaningful competition, good reasons why the Federal Trade Commission is giving additional scrutiny.

PBMs, as they are known, negotiate with drug manufacturers on behalf of insurance plans, and the result of these negotiations often determines not just the price insurance plans pay, but also the out-of-pocket charges insurance plans make patients pay and reimbursement to pharmacies.

The power PBMs have has grown in recent years, in large part through consolidations and what is known as vertical integration, or the combination of an insurer, a PBM, a specialty pharmacy and other related businesses. About 80% of prescription drug claims are processed by just three companies — CVS Health, Express Scripts and OptumRx. Adding in the next three largest PBMs — Humana, MedImpact and Prime Therapeutic — brings that total to 97%.

These companies influence not just prices but patient access, medicine dispensing and even where people get care. Their actions and practices potentially jeopardize whether people even pick up or continue getting the prescriptions their doctors say they need. This has serious potential consequences, as nonadherence to medications accounts for 10% of hospitalizations and 125,000 deaths each year.

Furthermore, the market dominance the PBMs exert, and the opaque nature of their relationships have created an environment where financial incentives seem to matter much more than patient interest.

The FTC scrutiny, coming on the heels of a bipartisan legislative proposal in Congress, is part of a nationwide conversation about how drug prices are set within our health care system. The PBMs contend that their part in the process allows for differential and competitive pricing of drugs.

Yet what the PBMs say about drug prices often bypasses the fact that they are able to leverage their functions as gatekeepers to maximize revenue through bigger and bigger rebates. The gap between the list price and the net price — the revenue pharmaceutical companies actually get — is driven largely by the PBMs themselves. And that money in that gap, which some call the “gross-to-net bubble,” does not contain any extra savings for patients at the pharmacy counter.

Those patients are also not seeing the savings through their insurance plans, as insurers continue to increase deductibles and co-insurance, resulting in higher patient costs that create financial barriers that make getting and staying on needed medications more difficult.

The PBMs and their vendors also often employ tactics to limit the ability of patients who receive financial assistance from manufacturers or third parties from counting that help on co-pays towards their deductibles or other out-of-pocket limits. These practices expose patients to greater out-of-pocket costs, yet these policies are generally not disclosed to patients with any clarity and detail.

PBMs are also making life harder on the health care providers closest to patients who need medication: the pharmacists. The PBMs impose “pay to play” fees on pharmacies for participating in networks, along with performance fees and other charges. In Medicare, these fees, sometimes called direct and indirect remuneration, or DIR, grew more than 107,400% between 2010 and 2020, but the fees are not passed on to patients, and they do not help reduce cost-sharing obligations.

The increased vertical integration, the oft-hidden interplay between various lines of business, the anticompetitive activities … virtually none of it appears to benefit actual patients. At a time when everyone is paying attention to how much needed goods costs, what the PBMs do and who actually benefits from their actions deserves much closer examination.

John O’Brien is president and chief executive officer of the National Pharmaceutical Council.


ECRM_06-01-22


Comments are closed.

PP_1170x120_10-25-21