Regulators will hone in on pharmacy benefit managers as ‘unaccountable middlemen’ in 2017, expert predicts

DATE: January 30, 2017

Published by Healthcare Finance

The role of pharmacy benefit managers 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, Alan Rosenbloom, the president and CEO of the Senior Care Pharmacy Coalition predicted in comments released Thursday.

Rosenbloom said that in 2015 and 2016, “PBMs’ facade 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,” conclusions he based on both a new report from the Centers for Medicare and Medicaid Services, as well as recent reporting in Axios. That prediction underscores PBMs’ growing vulnerability as one of the causes of escalating Medicare costs for prescription medications, he said.

The CMS report, released Jan. 19, found that drug companies and pharmacies are paying increasingly larger rebates to PBMs and insurers, but that they’re keeping the money rather than translating it into lower costs for government healthcare programs and consumers.

CMS data shows that since 2010, the growth in rebates or concessions paid by drug companies or pharmacies to PBMs or managed care plans 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 basis. CMS observed total DIR growth of about 22 percent per year, and PMPM DIR growth of 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.

Meanwhile, the new Axios report, entitled “The next drug pricing target: pharmacy benefit managers,” declared “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.”

In the specific context of PBMs and the nation’s long term care pharmacy sector, Rosenbloom said that under Medicare Part D — the largest payer for prescription medications in LTC facilities — the PBMs that administer prescription drug plans are often owned by them or a shared parent company, and use a Maximum Allowable Cost pricing formula to establish reimbursement rates for a majority of generic drugs LTC pharmacies dispense to elderly Medicare beneficiaries.

SCPC contends that data between PBMs and LTC pharmacies find increasing reimbursement inequities for LTC pharmacies driven by these Maximum Allowable Cost pricing methods. The data shows MAC prices paid for the same generic drugs on the same day by different payers can vary considerably, which the Senior Care Pharmacy Coalition said 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.

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