2017 Greets PBMs With New CMS Report Undermining “Rebate” Claims While Key GOP Senator Considers PBM Role in Higher Drug Prices

DATE: January 26, 2017

Senior Care Pharmacy Coalition (SCPC) Predicts Rough 2017 for Unaccountable Pharmacy Benefit Managers (PBMs) as Congress, Regulators, Media Ask More Questions, Demand More Answers

Washington, DC — The President and CEO of the Senior Care Pharmacy Coalition (SCPC) today predicted the increasingly apparent role of Pharmacy Benefit Managers (PBMs) as unaccountable middlemen in the national drug pricing chain will result in a higher level of scrutiny from Congress, regulators and the media in 2017.

“In 2015 and 2016, PBMs’ façade as benevolent, pro-consumer actors in the pharmaceutical marketplace began to crack — and this will continue in 2017 as Congress, the regulatory community and the media direct fresh scrutiny at this anti-competitive oligopoly,” said Alan G. Rosenbloom, President of SCPC. He said a new CMS report and recent reporting in Axios underscores PBMs’ growing vulnerability as causal factors in escalating Medicare costs for prescription medications.

A new 1/19 report from the Centers for Medicare & Medicaid Services (CMS) finds that drug companies and pharmacies are paying increasingly larger rebates to PBMs and insurers, but that these middlemen are keeping the money rather than translating it into lower costs for government health care programs and consumers.

CMS data show that since 2010, the growth in rebates or concessions paid by drug companies or pharmacies to PBMs or managed care plans (in addition to the lump sum payment plans received from Medicare) after the point of sale (called Direct and Indirect Remuneration or DIR) has far outpaced the growth in Part D drug costs — on both a total and per-member per-month (PMPM) basis. CMS observed total DIR growth of about 22 percent per year and PMPM DIR growth nearly 14 percent per year between 2010 and 2015. During the same period, total Part D gross drug costs only grew about 12 percent per year, and PMPM Part D gross drug costs only grew nearly 5 percent per year. The DIR that plans report to CMS increased from $31 billion in 2012 to $50 billion in 2015.

Rosenbloom also pointed to a new Axios story entitled, “The next drug pricing target: pharmacy benefit managers,” which reports “a push to shine more light on the intermediaries known as pharmacy benefit managers and how they fit into the national furor over drug prices.” Continues the Axios report: “A spokesperson for Republican Sen. Chuck Grassley, who hasn’t been shy about taking a critical eye toward the health care industry, said the senator is ‘looking at all factors that might contribute to higher drug prices, including the role of PBMs’.”

In the specific context of PBMs and the nation’s Long Term Care (LTC) Pharmacy sector, Rosenbloom pointed out that under Medicare Part D – the largest payer for prescription medications in LTC facilities – the PBMs that administer Prescription Drug Plans (PDPs), and which often are owned by the PDPs or a shared parent company, use a Maximum Allowable Cost (MAC) pricing formula to establish reimbursement rates for a majority of generic drugs LTC pharmacies dispense to elderly Medicare beneficiaries.

SCPC argues that data between PBMs and LTC pharmacies find increasing reimbursement inequities for LTC pharmacies driven by these MAC pricing methodologies. Significantly, the data show MAC prices paid for the same generic drugs on the same day by different payers can vary considerably, which SCPC contends raises questions about the relationship between price variation and actual market conditions. The data analysis, funded by SCPC, is one in a series of Avalere Health analyses assessing various facets of the marketplace in which the nation’s LTC pharmacies operate.

“Congress used the SCPC report in 2016 to question PBMs about their pricing practices, and we are just beginning to see mounting evidence of how PBMs and their anti-competitive pricing policies in the LTC pharmacy are costing Medicare more,” concluded Rosenbloom.

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The SCPC is the national association for independent LTC pharmacies. Our member pharmacies provide care and services to patients in LTC facilities in across the country occupying approximately 675,000 beds across the country.  Visit us at www.seniorcarepharmacies.org to learn more.