NOTICE: Why should you know what a Pharmacy Benefits Manager does and how your pharmacy counter costs are impacted by these “middlemen” – Orange Leader
By Debbie Garza, R.Ph.
President and CEO, Texas Pharmacy Association
It’s somewhat gratifying that Congress and the White House are at least trying to address the issue of drug costs. It’s just not fair when rising out-of-pocket costs at the drugstore force some Texans to choose between buying food and buying life-saving drugs like insulin. In their deliberations, however, politicians miss a key aspect of this problem – the role played by pharmacy benefit managers (PBMs). Any serious attempt to reduce out-of-pocket costs for patients must begin by tackling the actions of these relatively obscure, but powerful business intermediaries.
Most people probably don’t know about PBMs or their position in the drug supply chain, but these mysterious middlemen are raising the cost of prescription drugs to increase their own profits. They play a dominant role in determining whether patients can access or afford certain prescriptions, but they operate with little government oversight.
PBMs were originally created to process claims and manage drug formularies, but their role has grown steadily. Now, they claim to be negotiating savings and discounts with drug makers allegedly on behalf of patients. In reality, PBMs have consolidated their power, using their outsized market share to negotiate even bigger discounts from drugmakers. Here’s the problem: None of these negotiated savings are reaching consumers.
The Senate Finance Committee found that “PBMs have used their size and aggressive negotiating tactics, such as the threat to exclude drugs from formulas, to obtain more generous discounts, rebates and fees.” While drug companies offer discounts of up to 70%, those savings rarely, if ever, benefit patients. In fact, the PBM discount game often results in higher out-of-pocket costs for patients. A recent university in Southern California to study found that every additional $ 1 in rebates was associated with an increase of $ 1.17 at the pharmacy counter. It is not difficult to understand how it works. The higher the list price of a drug, the larger the discount to the PBM. Thus, intermediaries direct consumers to more expensive drugs.
PBMs can also control where patients get their medications by requiring or enticing the patient to use the PBM’s “preferred pharmacy network”. Looking again at the top three PBMs: one operates the largest drugstore chain in the country and all three have their own mail order pharmacy. PBMs have completely eliminated independent pharmacies, making it even less of a service to patients, especially in underserved or rural areas. The Rural Policy Research Institute reported that between 2003 and 2018, around one in six independent rural pharmacy had to close its doors permanently. The Institute of Drug Channels also found that fewer than 20,000 independent pharmacies in rural and urban areas were still afloat in 2020, with that number declining for five consecutive years.
In addition, the three largest PBMs are owned or owned by health insurance companies, and control over 76% of the US prescription drug market. Insurers work with their own PBMs to decide which drugs will generate the biggest profits, then try to refer patients to their affiliated pharmacies. Do you see the problem?
Being a PBM pays off, but they don’t seem to add much constructive value to the healthcare system. PBMs do not research or develop new therapies. They don’t diagnose or treat patients. Yet PBMs have a virtual monopoly on the drug supply chain and ultimately make it more difficult for patients to access or purchase their drugs.
If President Biden and our leaders in Congress are sincere about using government to foster competition and transparency to help reduce out-of-pocket costs for patients, tackling PBMs would be the place to start.