PBMs must stop taking advantage of seniors and taxpayers

DATE: September 25, 2018

Published by McKnight’s

As much as we can appreciate the ingenuity of entrepreneurs in a free market, programs like Medicare were never intended to pad the pockets of businesses at the expense of consumers and taxpayers.

Yet, out-of-control prescription drug pricing is most certainly hurting American seniors and the LTC pharmacies committed to ensuring access to medications and consulting services for Medicare beneficiaries under the Medicare Part D program. And when it comes to excessive drug expenditures under Part D, our valued free market principles have become more of an anti-competitive oligopoly – enriching corporate conglomerates whose subsidiaries dominate inter-related markets including private insurers, Pharmacy Benefit Managers (PBMs) and large pharmacy chains, contributing substantially to soaring prescription drug prices.

In fact, only three such conglomerates dominate the PBM market and chain pharmacies in the retail, mail order, specialty and LTC pharmacy markets, while increasingly controlling predominant Part D Plans (PDPs).

For example, the three PBMs affiliated with these conglomerates process about 90 percent of all prescriptions for LTC pharmacies – which serve more than 750,000 Medicare seniors nationwide in the skilled nursing facility, assisted living facility and long term acute care hospital settings. This market concentration — as well as vertical and horizontal integration across many elements of the nation’s health care delivery system and drug distribution chain – is stifling competition and driving up health care costs for seniors and taxpayers alike.

The Trump Administration, in its “American Patients First” blueprint has said enough is enough. “Millions of Americans face soaring drug prices and higher out-of-pocket costs, while manufacturers and middlemen such as pharmacy benefit managers (PBMs) and distributors benefit from rising list prices and their resulting higher rebates and administrative fees,” according to the May report. “An unprecedented re-examination of the whole system and opportunities for reform is long overdue.”

That reform can’t come soon enough.

Although PBMs are fighting back, claiming they are the primary causal drivers of lower prescription drug spending, health policy researchers have found the data, in many instances, fails to support PBM’s rhetoric. A new report by health economics and policy firm Dobson|DaVanzo & Associates found that generic conversion, increased consumer utilization of generic medications, and more manufacturer competition are the “key primary drivers that have helped to curb prescription drug spending” in recent years. Generic conversion, of course, would have occurred whether PBMs existed or not.

For LTC pharmacies — which operate much differently from retail pharmacies — it’s especially crucial that policymakers adopt comprehensive solutions that account for the differences and nuances unique to LTC pharmacies and the patients they serve. With more complex, chronically ill patients, and pharmacists with more clinical responsibilities than just dispensing medications — it’s time for policies that are fair, transparent and in the best interest of seniors, the Medicare program, and the nation at large.

An excellent first step would be for the Department of Health and Human Services (HHS) to eliminate all point-of-sale (POS) and post-POS fees, charges and adjustments (collectively, DIR fees) that PDPs/PBMs demand LTC pharmacies pay to play in their Part D networks. HHS rightly has focused on manufacturer rebates to the extent they drive higher drug prices.  DIR fees deserve similar scrutiny.  DIR fees serve no programmatic or market purpose and government actions that threaten the super-profits that PDPs and PBMs earn increases the risk of higher and more abusive DIR fees. Eliminating DIR fees altogether would allow Medicare to focus on quality-based payment approaches that truly incent better outcomes for consumers rather than higher profits for conglomerates.

Among other reforms, HHS should also impose an explicit fiduciary duty on PBMs to act on behalf of consumers. That’s because, as middlemen that contract only with insurers, but not with Medicare or beneficiaries, PBMs have been able to play both sides of the market and act in ways detrimental to consumers, pharmacies and both private and governmental payers. PBMs must be directly accountable to consumers, payers and pharmacies to address pricing, access and quality concerns.

No, corporate conglomerates in the insurance, PBM and chain pharmacy markets are not wholly culpable in the drug pricing blame game, but in the current environment, they hardly are part of the solution. Medicare exists to help care for older Americans and those with special health needs – and to do so responsibly for taxpayers and future generations. It’s time for policymakers to adopt systemic reforms that are common-sense, long overdue, and put a stop to runaway prescription drug spending that benefits market-dominant conglomerates at the expense of patients.

Alan Rosenbloom is President & CEO of the Senior Care Pharmacy Coalition. 

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