July 19, 2021 at 5:00 am ET
An economic threat that consumers have not had to worry about for quite some time – inflation – may become a reality. From groceries to gas prices, and pretty soon, back-to-school shopping – consumers are dealing with sticker shock in many parts of the marketplace, including drugs.
When we take a closer look, it is clear that entities in a position to help drive savings – pharmacy benefit managers – are not fulfilling the mission they were created for.
The original PBM concept was a good one. These companies would contract with employers and insurance companies and then use their leverage, created by the large number of members they were covering, to negotiate lower prices for prescription medicines.
But the evidence shows that the three multi-billion-dollar PBM companies control nearly 80 percent of the marketplace, and they appear to be using their size and market power to increase their own profits rather than deliver more affordable medicines to consumers. In fact, in some cases, they are even restricting medications available to patients in order to compel them to use drugs that provide the PBMs with greater profits.
For consumers who need medications to survive – a Type 1 diabetic, for example – this is simply unacceptable. A report by the Senate Finance Committee found that PBMs have been negotiating rebates of up to 70 percent on some insulin products. That should result in enormous savings for people with diabetes. But it’s not.
Out-of-pocket consumer costs for insulin have been spiraling upwards – and patients can’t afford these increased prices. According to one study, insulin costs have nearly doubled in recent years to more than $5,700 per patient.
This cannot continue. Consumers must not have to choose between buying groceries and purchasing medicines just so PBMs can continue to squeeze profits from patients.
The tactics that PBMs use are multifaceted. There is “spread pricing,” in which they charge their employer clients significantly more for drugs than they pay the pharmacies that dispense them. There are “rebate walls,” in which they demand high manufacturer rebates in exchange for positioning on formularies. These companies also own large mail-order pharmacy businesses. In the case of one PBM, the nation’s largest retail pharmacy chain, they are driving independent community pharmacies out of business by paying them less than it costs to acquire and distribute medicines to their customers.
While federal policymakers are beginning to address this, states are taking matters into their own hands. The Ohio attorney general is taking action. West Virginia passed a law (HB 2263) that requires PBMs to share discounts and rebates provided by drug manufacturers with patients. Minnesota (SF2178/HF2327) and Colorado (HB 1237) are moving bills to establish a new PBM reverse auction process to ensure transparent competition and ultimately lower out-of-pocket costs.
This is promising news. Federal regulations that would direct PBMs to pass along negotiated savings to consumers at the pharmacy counter would be another positive step. These regulations have already been written, and now we need swift implementation.
We can no longer accept the status quo. PBMs must stop demanding huge discounts on drugs and then failing to return those discounts to consumers.
Sally Greenberg is the executive director of the National Consumers League
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