Who benefits behind the scenes from high prescription drug prices?

DATE: October 16, 2023

By Alan Rosenbloom
Guest Column
McKnight’s Long Term Care News

If there’s one thing most Americans still agree on, it’s that the ever-increasing cost of healthcare is simply unsustainable. And while there is plenty of blame to go around, one must look at who benefits behind the scenes from inflated prices — particularly for prescription medications — to really understand the root of the problem.

Lately, much attention has been paid to a relatively unknown player in our healthcare system: pharmacy benefit managers, or PBMs. Operating with virtually zero transparency or oversight, PBMs exert significant control over when, where and how Americans access their medicines and how much they pay for them. These middlemen also unfairly dictate how pharmacies of all types and sizes serve their patients and what they are reimbursed for the care they provide. 

Thankfully, both Congress and many state legislatures are waking up to the PBM problem and working to do something about it. But PBMs are just one piece of the much larger drug pricing puzzle. And when you pull back the curtain, things start to make a lot more sense.

PBMs, Medicare Part D plans, commercial insurers and their affiliated pharmacies are vertically integrated and concentrated among just four dominant healthcare conglomerates that cover 57% of Part D enrollees and 87% of the prescriptions dispensed nationwide. This means a big portion of the profits from all those prescriptions flow back to just four massive companies — CVS Health, UnitedHealth, Cigna/Express Scripts and Humana. 

When drug prices drop, those companies lose the money their PBMs extract via drug manufacturer rebates. Make no mistake, neither they nor their shareholders have any interest in lowering drug prices for Americans. Putting profits before people means posting record-high revenues.

Unfortunately, the Biden Administration and Congress did not account for PBMs’ harmful practices and their adverse impact on patients, businesses and independent pharmacies when they enacted the Inflation Reduction Act (IRA). And without meaningful reform, these conglomerates and their affiliated PBMs will just continue to shift the cost burden to others while enjoying increased profits.

The problem is even more acute for the nearly two million vulnerable Americans in skilled nursing and assisted living facilities and the long-term care (LTC) pharmacies who serve them. These individuals, who are predominately covered by Medicare and Medicaid, typically suffer from more chronic conditions and require more medications than almost anyone else in our population.
 
Many states have recognized how vertical integration among PBMs, health insurers, affiliated pharmacies (retail, specialty, mail-order and LTC) and rebate aggregators is increasing costs for medications, delaying access to necessary treatments, shuttering unaffiliated pharmacies and giving higher–priced drugs more favorable health-plan coverage. Congress must do the same.

If this unsustainable system remains unchecked, patients will be priced out of the medicines they need, independent pharmacies, including those serving long-term care patients, will suffer devastating losses and taxpayers will continue being fleeced while profits of those big conglomerates continue to soar.
  
That’s why swift passage of comprehensive PBM reform must remain a priority for Congress. The Senior Care Pharmacy Coalition (SCPC), the leading national voice for the long-term care pharmacy community, is encouraged by the bipartisan efforts put forth so far, particularly efforts by the Senate Finance and House Energy and Commerce Committees. But the rubber will really meet the road this fall as final reform packages take shape in both chambers.

True reform must address multiple well-known issues impacting both patients and pharmacies. Most importantly, it must increase transparency into PBM business practices while promoting better access to care and lowering prescription drug costs for Americans. And it must ensure that community and LTC pharmacies are treated fairly and reimbursed properly for the services they provide. 

Delinking PBM compensation from the cost of medications, as several legislative proposals would do, is a major step forward as it would prevent PBMs from profiting from ever-increasing list prices and rebates. But reform must also address the widespread self-dealing that restricts access to expensive drugs to pharmacies affiliated with PBMs and that allows PBMs to pay affiliated pharmacies more than unaffiliated pharmacies for the same services. 

We encourage Congress to hold the line against the misleading rhetoric from PBMs and put an end to their abuses. Members have an opportunity to lower drug costs, reduce the financial burdens on patients and businesses and improve Americans’ access to care by promoting a fair and more competitive environment for all pharmacies. 

And given the state of our healthcare costs, it’s an opportunity Americans cannot afford them to miss.

Alan Rosenbloom is the President & CEO of the Senior Care Pharmacy Coalition. SCPC is the leading voice and chief advocacy organization for the long-term care pharmacy community. 
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.

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