New Report: PBMs Push Drug Costs

DATE: May 19, 2017

Published by Drug Topics

Are PBMs responsible for higher drug prices or is something else to blame?

A new review of studies on the economic impacts of pharmacy benefit managers (PBMs) found that they have an adverse impact on the overall costs and prices of drugs.

“Pharmacy benefit managers impact more than 260 million Americans when they purchase their prescription drugs, but most people have no idea what they are, or the big impact they play in their health care,” said Wayne Winegarden, PhD, Senior Fellow in Business and Economics at the Pacific Research Institute (PRI) and author of the PRI’s report, “The Economic Costs of Pharmacy Benefit Managers: A Review of the Literature.” PRI is a free-market public policy think tank in San Francisco.

Among the key findings of the PRI report:

• The large discrepancy between list prices and transaction prices cause higher patient co-pays than necessary.
• PBMs create pricing uncertainty by incentivizing higher list prices for medicines that enable large rebates and discounts.
• PBMs’ pricing policies may push Medicare Part D patients into the coverage gap (the donut hole) faster.
• PBMs impose large, and often unknown, fees that create substantial revenue uncertainty and volatility—which are particularly problematic for small, long-term care, and specialty pharmacies.

Through control of drug formularies, PBMs also “impose undue influence on the medicines patients can access,” according to the report from PRI. The report details how rebates from manufacturers help increase the profitability of PBMs.

“Manufacturers will offer rebates to PBMs based on how much the PBM increases the manufacturer’s market share for a given drug. The catch is that the PBMs are not required to share information about these rebates with plan sponsors, and in the vast majority of cases do not. Instead, they pocket some or all of the money saved,” the report stated. “This lack of pricing transparency has enabled the middlemen to significantly increase their share of the revenues relative to manufacturers and pharmacies.”

“The study further validates concerns articulated by NCPA and others about questionable pharmacy benefit manager business practices that add unnecessarily to prescription drug prices,” Kevin Schweers, a spokesman for the NCPA, told Drug Topics. “Holding PBMs more accountable begins with Congress passing pending legislation to end retroactive pharmacy DIR [direct and indirect reimbursement] fees, provide transparency in generic prescription reimbursements, and assure pharmacy choice for Medicare beneficiaries.”  While NCPA did not commission the report, it cites some of NCPA’s work, according to Schweers.

However, the Pharmaceutical Care Management Association (PCMA) criticized the PRI review. “This report looks like it was written by—and for—the drugmaker lobby, since it parrots much of their anti-payer agenda,” Charles Cote, spokesman for PCMA, told Drug Topics.

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