Prescription drug pricing reform must hold back pharmacy benefit managers

This month, President Biden signed an executive order directing federal health departments to create plans within 90 days to reduce the prescription drug costs that plague so many Americans. Any robust program to provide meaningful financial relief to patients at the prescription counter must address the root cause of soaring drug prices – Pharmacy Benefit Managers (PBMs).

A new report from one of us (Rep. Buddy Carter) reveals the outsized role PBMs play in making drugs unaffordable and inaccessible. Federal health departments can achieve the bipartisan goal of lowering drug prices by seizing this opportunity to curb predatory PBM practices.

PBMs are intermediaries between pharmaceutical manufacturers, pharmacies and health insurers. They artificially raise prices, emboldened by a lack of transparency in the drug price chain, without delivering any value to consumers. The three largest PBMs, which account for nearly 80% of prescriptions nationwide, are owned by health insurers, creating a huge conflict of interest.

PBMs dramatically inflate drug prices by demanding huge discounts from manufacturers in exchange for placement on insurers’ covered drug lists, known as formularies. Since 2006, when PBMs took a more active role in the market, drug prices have increased by 313%. Annual rebates now exceed $200 billion, approaching half of the nation’s prescription drug market.

In 2020, total gross spend on brand name drugs reached $517 billion. Manufacturers only earned 31% of this spend, while intermediaries earned 69%. An analysis concludes that $339 out of the $425 cost of a box of insulin pens are rebate dollars. PBMs and their paid discount system explain why this 100-year-old drug remains unaffordable for so many people.

By excluding low-reimbursement drugs from formularies, PBMs also systematically prevent patients from accessing the drugs they need. The three largest PBMs block more than 1,150 treatments from forms, including a low-cost insulin alternative called insulin glargine. Patients prescribed these drugs often have to endure long waits, what’s called step therapy (where insurers force patients to try and fail with formulary drugs first), and much higher expenses. .

“Several of my medications are no longer on my formulary or have become more expensive, so I can no longer take them,” says Yuri Cárdenas, a patient from California. “To get this letter in the mail saying my medical specialist wants me to take this medication and my insurance company says ‘no’ is extremely frustrating,” says Jessica Wofford, a patient with Crohn’s disease. Angela Deeds, a patient from Virginia, waited 273 days to get her gastroparesis medication. These are just a handful of countless PBM victims nationwide.

PBMs also increase costs through their aggressive pricing with independent pharmacies. For example, PBMs routinely engage in spread pricing, paying pharmacies significantly less than they charge payers and pocketing the difference. A PBM paid an independent pharmacy in Iowa only $5.73 for a bottle of antipsychotic pills which he billed the payer $198.22.

Pharmacy owners have little choice but to agree to such contracts. If they refuse, PBMs may not include them as a network pharmacy, which will likely put them out of business. PBMs are already vertically integrating the drug market, driving up prices, by directing patients to affiliated pharmacies through their insurance networks. As a result, 2,300 independent pharmacies nationwide closed between December 2017 and December 2020.

The momentum for strong prescription drug pricing reform that tackles PBMs is building. A June decision by the Federal Trade Commission to investigate PBM practices may serve as a precursor to long overdue antitrust action to end their inflationary practices. If there was ever a time when Americans needed this pro-consumer agency and antitrust action, this is it.

Mr. Carter also introduced legislation in the U.S. House of Representatives to ban PBM spread pricing tactics in Medicaid programs. The Congressional Budget Office determined that such a ban would save federal taxpayers at least $1 billion over 10 years. Bipartisan US Senate legislation is also aimed at curbing these inflationary middlemen. And states like Florida have taken action to stand up to PBMs and stand up for patients.

Federal health departments can build on this momentum by responding to Mr. Biden’s executive order with strong recommendations to end the PBM pricing games and direct the savings to patients through much lower prices at the prescription counter. .

  • Buddy Carter represents Georgia’s 1st District in the United States House of Representatives. Terry Wilcox is the Executive Director of Patients Rising.
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