Two PBM strategies cost patients billions annually

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Dan Leonard

The generic medicine manufacturing industry and chain drug stores represent the starting and end point of the pharmaceutical value chain delivering the vast majority of prescription medicines to American patients every day. In the case of the generic industry, we produce the medicines for 92% of the prescriptions that your pharmacists fill each year, however we account for only 16% of the total spend on prescription drugs. Those savings extend to the pharmacy counter as well: our medicines are available for an average out-of-pocket cost of $6.61, compared to an average of $55.82 for brand name drugs.

With those statistics in mind, it is difficult to reconcile the realities American patients face when they think about filling their prescriptions. For too many patients, especially in today’s inflationary environment, the choice is a trade-off between necessities. Should I go to the gas station or the pharmacy? That reality is even more difficult to untangle when you consider the fact that generic drugs are in the midst of a six-year deflationary trend in prices. If the price offered by our manufacturers is falling but patients are paying more, it is critical that policy makers look to understand why.

The Association for Accessible Medicines (AAM), the organization that I lead and that represents the generic and biosimilar industries, recently filed extensive comments in response to an inquiry from the Federal Trade Commission about the role that pharmacy benefit managers play in the prescription drug value chain. We spent a considerable amount of time and resources diving deep into what is really going on, and the findings are concerning.

There are two primary tactics that PBMs use that end up costing patients billions of dollars more than necessary. First, too many PBMs are placing generics on formulary tiers with high co-pays that do not reflect the low cost of the generic. Second, PBMs block patient access to new generic and biosimilar medicines.

The data tells an alarming story for patients. Even as the price of generic drugs has fallen, PBMs have increasingly moved those medicines to formulary tiers with higher out-of-pocket costs to patients. This year is the third consecutive year in which PBMs have placed more generics (57%) on nongeneric tiers than on generic tiers. This dynamic has real-world consequences for patients: Due to the changes in generic tier placement, patient spending for generic drugs in Medicare Part D more than doubled between 2011 ($8.5 billion) and 2019 ($20 billion) even though manufacturers were offering those medicines at increasingly lower prices.

Just as troubling, PBMs block patient access to potential savings from new generic and biosimilar medicines. Take, for example, the case of a recently approved biosimilar insulin, Semglee. The biosimilar is available through two pricing options: a 5% price discount compared to the brand and an “unbranded” option available at a 65% discount. But many PBMs have chosen not to cover the lower-priced option, opting instead for the higher price or, incredibly, the highest-priced option of all: the original brand-name version. The rebates that flow from higher-priced medicines make them more attractive to the PBMs than cheaper alternatives that would result in lower patient costs but also lower revenue to the PBM.

This distortion in specialty meds is even more worrisome when we consider that one of the best-selling and most-expensive medications of all time, Humira, will be open to biosimilar competition next year. Since specialty meds drive more than half of prescription spending but account for a mere 2% of prescriptions by volume, it is imperative that biosimilar competition function as efficiently as intended.

Even with the friction and roadblocks that biosimilars have had to navigate to date, we still have seen these medicines provide meaningful savings for patients. For instance, the introduction of biosimilars in oncology has reduced the growth in oncology spending by nearly 50%. We need to build on that record of success and remove the barriers that impede greater patient access and savings.

Our manufacturers are doing their part by producing safe, effective and affordable medicines, and pharmacists are doing their part in delivering those medicines safely to the patients who need them. It’s time that something is done about the middlemen whose economic incentives are too often in direct opposition to the patients who we serve. We, in the generics and biosimilars industry, will continue to draw attention to the harm these perverse incentives impose on patients and ask the regulators and policy makers to right the wrongs.

Dan Leonard is president and chief executive officer of the Association for Accessible Medicines.

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