Congress to PBMs: Reality Bites
If you think bipartisanship is hard, it’s even harder when it comes to healthcare. But there’s one thing nearly everyone agrees on – Pharmacy Benefit Managers (PBMs) need reform. Yet many of the usual suspects continue to oppose common-sense PBM reforms. Let’s look at the record.
Sins of omission are seldom fun. What PBM lobbyists forget to mention is that PBMs take billions of dollars of pharmaceutical rebates – and keep them. In the process of padding their bottom lines, they keep what patients pay at the pharmacy (the infamous “co-pay”) high. In fact, PBMs are so profitable that three huge companies control 91% of the market—and all three are among the top 15 highest grossing companies in the country, and there’s a lot of nest feathering going on. PBM tactics have systematically driven local, independent pharmacies out of business so PBMs can move patients to pharmacies they own or control.
A few weeks ago, CVS announced a “change” to their reimbursement model guaranteeing they get paid the acquisition cost plus mark-up. This means, basically, that CVS gets paid twice – while not lowering co-pays to patients by one penny. CVS is just moving money from one pocket to the other – while digging their hands even deeper into the pockets of patients.
The PBM industry has used their enormous profits to gobble up a bunch of other entities in the healthcare system – insurers, physician practices, pharmacies, data firms, consulting firms, and more. This harms competition and allows PBMs to use their gateway to patient drug access as a toll road, steering business to related enterprises.
You want to talk about hidden costs? The PBM business model thrives on high pharmaceutical list prices. No matter how many times PBM lobbyists claim PBMs lower drug prices, the facts speak for themselves: PBMs consistently choose higher priced medicines over lower priced alternatives for their prescription drug lists because PBM revenue is structured as a percentage of a medicine’s list price. That perverse incentive can lead to higher out-of-pocket costs for patients at the pharmacy counter.
Things have gotten so warped that manufacturers now increasingly resort to selling the same drug at two different prices – one high list price, to appeal to PBMs, and another low list price, to provide an alternative for patients who may have high cost-sharing through their insurance or no insurance at all. If I offered to sell you the exact same product for $50 or $100, who in their right mind would choose the more expensive one? Cui bono? PBMs. That distortion alone should tell you all you need to know – and it doesn’t result in lower prices for patients when they pick up their prescriptions at the pharmacy.
Today, there are more than 30 bipartisan PBM reform bills pending in Congress. The array of proposed reforms ranges from transparency and reporting to ensuring fair reimbursement to pharmacies and delinking PBM compensation from list price.
These are sensible and sound policies that Congress is currently deliberating. The time to move and enact them is now. America is waiting.
Peter J. Pitts is President of the Center for Medicine in the Public Interest, a Visiting Professor at the University of Paris School of Medicine, and a former FDA Associate Commissioner.
