Don’t Be Fooled by Big Pharma’s Blame Game
If you listen to the drug pricing debate, you’ve probably heard a good deal about “middlemen” in the system, allegedly operating in the shadows and driving up prices.
The line is a cheap tactic, a ruse used by Big Pharma to evade culpability for the crisis of rising prescription drug prices and point the finger at others, namely pharmacy benefit managers (PBMs).
On April 9, executives for five PBMs went to Capitol Hill and got the opportunity to tell their side of the story in testimony before the U.S. Senate Committee on Finance.
The testimony we heard underscores the critical role PBMs play in securing savings for patients, promoting safety in the system and providing an important check on the outsized pricing power of brand name drug makers.
The assault on PBMs by Big Pharma in the run-up to this hearing was intense. The reason is self-interest.
To understand Big Pharma’s motivations, it’s critical to take an objective look at what PBMs actually do and how they achieve savings.
PBMs’ primary objective is to bring down health care costs for payers and patients.
They achieve this in a several ways. First, they negotiate with drug manufacturers to secure savings, like rebates, that are passed on to patients as lower premiums and lower out-of-pocket costs. Second, they work with doctors to ensure that patients are getting medications that are right for them. Third, they work with patients to ensure they take their medication properly, so they get healthier faster and stay healthier longer.
The results, for patients, taxpayers and the health care industry, are substantial.
On an annual basis, PBMs cut prescription drug costs for all payers and patients in half.
The positive impact for patients is undeniable. Take Medicare Part D, just one segment of the American consumer population, as an example.
The savings achieved by PBMs amounts to more than $2,300 in average annual savings for enrollees and more than $34.9 billion in premium savings for enrollees over a four-year period.
Over the next decade, it is estimated PBMs will achieve $2 trillion in savings for American patients and another $654 billion for the health care system.
PBMs are consumers’ bargaining power. They are an essential link between drug makers and patients, and provide the only concrete check on drug makers’ ability to unilaterally set and increase prices.
A recent proposal targeting PBMs’ negotiating power provides Big Pharma even more incentive to push false narratives and misleading claims.
Earlier this year the U.S. Department of Health and Human Services issued a proposed rule, called the Rebate Rule, that accepts grave and guaranteed negative consequences in exchange for theoretical drug pricing benefits.
According to the government’s own analysts, if implemented, the rule would hike Medicare Part D premiums up by 25 percent and jack federal spending up by nearly $200 billion over the next decade.
And the kicker? While Medicare recipients and taxpayers take the effects of the rule on the chin, Big Pharma gets rewarded with a $137 billion giveaway in the form of increased national drug spending.
So, it should come as no surprise large pharmaceutical manufacturers would be pleased to see PBMs and the negotiating tool of rebates limited or gone – because it would give them more power, nearly total unilateral power, over prices in the system and boost their profits with a massive windfall.
There is a further, fundamental flaw in the rule: there is no guarantee it will lower drug prices and, in some circumstances, could raise them.
Many drugs receive no rebates at all, including 89 percent of Medicare Part D prescriptions. For new drugs, where the price tag can run into the hundreds of thousands a year, rebates are rarely offered because there is no direct competition in the space.
And for those drugs where there are significant rebates, there is no guarantee in the proposed rule drug makers will lower their prices by the full amount of the rebate.
When seven pharmaceutical executives appeared before the Senate Finance Committee in February, they were asked whether they would “commit to lowering [their] drug prices” should the Rebate Rule be finalized. The executives’ answers were laced with qualifiers from “that definitely would be my goal” to “we would try to.”
Since nothing in the rule compels drug makers to lower list prices by the full amount of the existing rebates, alter how they price prescription drugs or stop price-gouging – it is a predictable outcome they will continue raising prices.
Putting profits before people is simply what Big Pharma does – and very effectively. Brand name drug makers have hiked the prices of their products at 10 times the rate of inflation over the last five years. Pharmaceutical manufacturers enjoy sky-high profit margins and have a demonstrated track record of anti-competitive tactics and price gouging.
To tackle the crisis of rising prescription drugs, we need the right diagnosis.
The root cause of rising prescription drug prices are the anti-competitive, price gouging tactics of large pharmaceutical companies.
It is imperative members of the Senate Finance Committee, policymakers on both sides of the aisle and the American people see through Big Pharma’s blame game, so concrete, market-based solutions to tackle the crisis of prescription drug prices can advance and deliver relief for American patients.
Lauren Aronson is the executive director of the Campaign for Sustainable Rx Pricing, a broad-based coalition of physicians, nurses, hospitals, consumers, health plans, pharmacy benefit managers, pharmacists and businesses promoting bipartisan, market-based solutions to lower drug prices. Lauren can be reached at email@example.com and followed at @RxPricing.