Will PBMs be held to account for their role in drug price hikes?
PBMs have rightfully come under increasing scrutiny, and their practices have attracted the notice of the Senate Finance Committee.
On April 3rd, pharmacy benefit managers (PBMs), the invisible middlemen of the health care industry, will be front and center for the world to see. No longer able to lurk behind the scenes, top executives from five PBMs—UnitedHealth Group’s Optum, Cigna Corp, Humana Inc, CVS Health Corp, CVS Caremark, and Prime Therapeutics LLC—have been invited to testify before Congress as part of a series of drug pricing hearings examining the healthcare marketplace and soaring drug costs.
PBMs were initially set up to help control drug utilization and cost. It was thought that having middlemen specifically devoted to increasing efficiency and lowering cost that they could improve the system for everyone involved.
Unfortunately, they’ve just become incredibly adept at negotiating discounts and rebates from manufacturers that they then keep for themselves as profits rather than passing savings onto patients. As a result, patients are paying cost shares that do not reflect the actual lower cost of the drug, and out-of-pocket costs and co-pays have been driven far above what they otherwise would be – putting critical treatments out of reach for many patients.
Part of the issue stems from a lack of transparency. There are no legal requirements for them to pass any of their negotiated savings onto payers or patients, and the opacity of their contracts makes it difficult to determine how much of it actually gets passed on, though it appears the majority of it goes to the bottom-line of the PBMs themselves.
This lack of transparency further factors in to perceptions around spread pricing. The spread is the difference between what the PBM charges the health plan for a drug and what it reimburses the pharmacy for it. The opaque nature of these transactions means that pharmacies don’t know what health plans pay PBMs for drugs, and health plans don’t know how much PBMs reimburse pharmacies for dispensing it. In Ohio, for example, the auditor of state released findings that PBMs took fees of 31 percent on generic drugs, generating $208 million in a single one-year period. This spread was over four times as much as previously reported. According to the auditor, Dave Yost, “The more we learn, the more troubling this becomes.”
PBMs have rightfully come under increasing scrutiny, and their practices have attracted the notice of the Senate Finance Committee. On Wednesday, April 3, the committee will hold its third hearing on drug-pricing this year, and five of the leading PBMs will be called to testify. According to committee chairmen Chuck Grassley, R-Iowa and Ron Wyden, D-Ore, “Middlemen in the healthcare industry owe patients and taxpayers an explanation of their role. There’s far too much bureaucracy and too little transparency getting in the way of affordable, quality health care.”
In the drug industry, no one player is completely at fault. Problems are rampant throughout the supply chain, meaning that, among others, drug manufacturers play a significant role in soaring drug costs as well. However, the exploitative, deceptive practices that PBMs use are undoubtedly a major factor in the severe inflation of prescription medications, limiting access to those who need it the most: patients.
I applaud the Senate Finance Committee for asking PBMs to explain their role to the American people and bring more transparency to the opaque drug distribution system. Hopefully this hearing will help bolster the argument for reforms and lead to further improvements of patients’ access to more affordable treatments.
Angus Worthing, M.D., is vice president of the Alliance for Transparent and Affordable Prescriptions (ATAP), a coalition of patient and provider organizations working to lower prescription costs and make treatment more accessible.
Read more: