Take Notice of PBMs, the Drug Industry's Overlooked Middlemen

August 22, 2017

 

The American health care system is famously complex and difficult to describe, but nearly everyone agrees that it needs major reform. One of the most pressing issues is the rising cost of prescription drug prices, which are harming consumers, patients, and businesses, and forcing even people with comprehensive insurance to pay more out-of-pocket costs. Pharmacy benefit managers (PBMs) play a major role and contribute to rising drug costs. In a new editorial, Mike Schweitz of the Coalition of State Rheumatology Organizations examines PBMs and urges they be held accountable.

 

As we previously noted, PBMs function as intermediaries between pharmacies, insurance companies, and drug manufacturers, and they deal with a wide range of subjects from negotiating prices and discounts with companies to deciding which drugs are on formularies to setting copayment amounts. Until recently PBMs have been overlooked by most Americans and policymakers; the Federal Trade Commission, for instance, has opposed any meaningful regulation of the industry. Fortunately PBMs are now getting more scrutiny; they affect drug prices, how many patients pay for prescriptions, and which drugs are available to patients.

 

One of the most important parts of the drug market is the rebate system, where PBMs negotiate and get payments from drug manufacturers. In return they give the medicines made by those companies preferred placement on their formularies (the lists of drugs they will cover). This section determines whether drugs will be covered; if they are not, patients usually cannot access them. Theoretically PBMs are supposed to send much of these rebates back to insurers, but in practice they keep almost all of the money for themselves, earning huge profits.

 

As a result our PBM system doesn't promote lower drug costs. Instead, it encourages PBMs to negotiate higher prices and base their formularies on rebates. The result? Patients across the country are harmed. They can't access the proper medications, they often have to find imperfect alternatives, and patients with high deductibles or coinsurance have to pay a lot more out-of-pocket costs.

 

This is not just, humane, or sustainable over the long term. In response to this, a number of health care providers including the Coalition of State Rheumatology Organizations and the American College of Rheumatology have formed a group called the Alliance for Transparent and Affordable Prescriptions. One of its chief goals is to educate the public and policymakers on PBMs and pass legislation holding them accountable. This group joins Patients for Affordable Drugs and other organizations in advocating for lower drug prices.

 

The more, the merrier. Big Pharma and PBMs are under increasing pressure and the facts are competely against them, but both lobbies are still powerful. We look forward to working with ATAP to ensure that the PBM market is transparent, well-regulated, and truly beneficial for consumers.

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