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Greed of PBMs needs to be reined in at state and federal level

Pharmacy benefit managers need oversight and regulation

IN FEBRUARY, the attorneys general of several states, including Andrea Campbell in Massachusetts, appealed to federal lawmakers asking them to reform the way pharmacy benefit managers, or PBMs, operate. The request makes sense.

Pharmacy benefit managers were initially created to act as the middlemen between drug manufacturers and insurers.  Their job is to negotiate drug discounts from the manufacturer in return for listing those medications on an insurer’s formulary.  They dictate what the insurer should charge for the medication. 

Unfortunately, as the attorneys general note in their letter, a lack of oversight and regulation of PBMs has allowed them to act under the radar. They have made the drug distribution channel exceedingly opaque and have directly caused drug prices to rise. 

The three largest PBMs in the country — CVS Caremark, OptumRx, and Express Scripts — control 80 percent of the market and are reaping billions in profits on the backs of patients and employers who subsidize health plans. 

You’ve likely heard of, the company Mark Cuban set up that takes PBMs out of the equation and provides drugs at much more affordable prices.  One example is a drug called imatinib, which is used to treat a few different kinds of cancers and blood disorders.  A retail price for 400 milligram tablets at a PBM-preferred pharmacy will cost $9,657.30.  At Cuban’s online pharmacy, that same medication costs $34.70.  So the PBM and insurer are pocketing $9,622.60! 

Another example of cost manipulation is the fact that PBMs divide drugs into three buckets: brand name, generic, and specialty.  But there is little consistency between the three largest PBMs about which drugs fall in which category.

According to a study by 46Brooklyn, a non-profit that focuses on making drugs accessible to patients, the three categories are not as objective as they may seem. “PBMs have broad flexibility to categorize medicines in whichever buckets they so choose, with the only limits being how they elect to define those buckets in their contracts with payers,” the study said.

“But PBMs have a track record of manipulating those definitions, thus rendering many of their guaranteed discounts off of artificially inflated prices, at times not worth the paper they’re printed on.”

In other words, a person might be on a specialty drug if their plan works through the PBM OptumRx but another person whose plan uses CVS Caremark and needs that same drug might pay the cost associated with a generic price.

Compounding the problem, PBMs negotiate different discounts for different insurers.  An analysis by 3Axis Advisors found that, depending on what plan a people are on, they could pay wildly different prices for the same medication.  One example provided was a pharmacy that dispensed the same drug at the same dose five different times in a given day.  The amount for the medication ranged from just over $9 to $96 per prescription!

All of this is truly immoral.

It’s not just patients who are gouged by PBMs. Remember the example of imatinib above?  A study conducted by our organization found that the PBM charges the state Medicaid program, which relies on taxpayer funds, $5,412.47 for the drug even though it actually costs $380.47.  The PBM is making $5,032 per prescription.  This practice is called “spread pricing.”  Ohio and Arkansas have passed legislation banning it.

Importantly, PBMs are directly responsible for putting independent pharmacies out of business due to drastically under-reimbursing them for dispensing medications.  PBMs steer them to their own chain pharmacies.  In one example, our study found the PBM reimburses the preferred pharmacy more than $47 for a drug but reimburses the independent pharmacy only $1.90 for that same drug.  It’s unsustainable and several independent pharmacies in the state have closed. 

PBM reform must be tackled on both the state and federal levels.  There is legislation pending on Beacon Hill and Capitol Hill and it’s incumbent on our elected leaders to take action to protect their constituents from the excessive greed of pharmacy benefit managers. They, like the rest of the healthcare distribution system, need oversight and regulation.  Without that, we all pay the price.

Author: Todd Brown is the executive director of the Massachusetts Independent Pharmacists Association.

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