Appearing recently before the Senate Finance Committee, executives for pharmacy benefit managers had the opportunity to set the record straight on their value, including their role as the only check against drug manufacturers’ pricing powers.
During the hearing, ranking member Sen. Ron Wyden (D-Ore.) said, “If PBMs had clear, hard evidence proving that they’re getting patients a better deal on prescription drugs, they’d be leafleting the countryside and shouting it from the rooftops.” The fact is, PBMs advocate on behalf of more than 266 million consumers with health insurance to keep prescription drugs accessible and affordable — and we want policymakers and the public to know about it.
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There is overwhelming evidence showing that PBM negotiations generate significant savings for government programs, health plans and consumers. From 2016 to 2025, PBMs will save $654 billion on prescription drug costs. Every day, PBMs are saving consumers and health plan sponsors an average of $123 per brand-name prescription.
Prescription drug spending increases have slowed. Due to the cost-containment efforts of PBMs, net prescription drug spending, taking into account rebates and discounts, grew 2.3 percent in 2016 and just 0.4 percent in 2017. In Medicare Part D, PBM negotiations with drugmakers have contributed to Part D monthly premiums remaining affordable, averaging about $33 in 2019 and down about 6 percent from the previous year.
The net trends plainly demonstrate the value of PBMs. Unfortunately, there is still insufficient competition among prescription drugs in specific therapeutic areas, leading to higher prices for some drugs and higher out-of-pocket costs for some patients.
While the administration’s proposed rule on rebates seeks to address this out-of-pocket challenge, it doesn’t solve the root cause of the problem: high list prices that only the drug manufacturers have the power to set. If finalized as proposed, the rule would result in increased costs for both taxpayers and Medicare beneficiaries.
The hearing was also an opportunity for PBMs to make clear our recognition that patient cost-sharing must be addressed. It’s time to consider how to best use PBM-negotiated prescription drug savings in government programs — to keep premiums low for all beneficiaries or to reduce out of-pocket-costs at the pharmacy counter for some patients.
Policymakers, and especially the administration, must take care not to disrupt the easy access to prescription drugs and the seamless administration Medicare Part D beneficiaries have come to expect when getting their medications. Without the negotiating power and technical expertise PBMs bring to the health care system, beneficiaries could find themselves standing at the pharmacy counter as the pharmacist struggles to determine their cost-sharing and how much the pharmacy itself is owed.
As the PBM witnesses explained, PBMs are the only part of the health care system with the expertise to provide Medicare beneficiaries with real-time access to affordable prescription drug benefits.
On the same day as the Senate Finance Committee hearing with PBMs, Wyden issued a statement saying that drug companies refused to support legislation that would require lower list prices in lieu of rebates. It’s not news to us that drug manufacturers will not voluntarily reduce their list prices. The admission in response to Wyden, however, is confirmation that, to keep drug costs as low as possible, PBMs’ role as negotiators must be preserved and enhanced.
At the hearing, PBM executives clarified their support for transparency, saying they supported transparency to empower physicians to consider patient cost-sharing at the point of prescribing; to help consumers know exactly what they’re going to pay, in real time; and to inform health plan sponsors, per their contracts, how much their PBM is negotiating in price concessions.
We know PBMs are, and should be, transparent to their clients and to government agencies. But our job is to reduce prescription drug costs, and posting price concessions — the wrong kind of transparency — would undermine competition and reduce PBMs’ negotiating leverage.
Publicly revealing price concessions to manufacturer competitors would create a price floor in their negotiations with PBMs, resulting in fewer discounts and higher drug prices for consumers and health plan sponsors. That’s why we are working with Congress to support action on the right kind of transparency measures.
Despite the progress that PBMs have made to keep drug prices in check overall, prescription drug costs are still too high for many people. PBMs are ready to help deliver real solutions that make sure the savings we negotiate make their way to those who need them most.
JC Scott is president and CEO of the Pharmaceutical Care Management Association.
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