BY PATTI PEEPLES and CATHERINE STEVENSON
While pharmaceutical companies are often the focus of conversations about high drug prices, more recently pharmacy benefit managers (PBMs) have come under increased drug price scrutiny. The American PBM business model, developed in the early 2000s, was designed to identify treatment-eligible patients, reduce health insurer administrative burden, and price negotiate with the pharmaceutical manufacturer. By managing these prescription drug programs on behalf of health plans, PBMs exert wide-reaching influence on drug formularies and rebate negotiations with manufacturers.
A PBM’s revenue comes from upfront and secretly negotiated discounts and rebates following sales for including the pharma company’s medications on their formulary (a powerful leverage for negotiating prices), as well as through charging health plans a higher amount than they reimburse pharmacies. The latter practice is called “pharmacy spread”.
The Pharmaceutical Care Management Association (PCMA), the national trade association representing America’s pharmacy benefit managers, claims that PBMs reduce prescription drug costs for consumers, employers and government programs. However, the National Academy for State Health Policy (an independent academy of state health policymakers) summarizes concerns around the PBM business model, highlighting anti-consumer practices including:
- Drug formularies that may benefit PBMs but not patients;
- Gag clauses that restrict pricing information pharmacists can share with consumers;
- Restrictions on drugs purchases to PBM-controlled pharmacies; and
- Lack of fiduciary transparency in operations.