MESSAGE
| DATE | 2017-04-26 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout of NYLXS] You Can Blame Pharmacy Benefit Managers for
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You Can Blame Pharmacy Benefit Managers for Higher Drug Prices
By Steve Pociask
March 28, 2017
Pharmacy benefit managers (PBMs) administer prescription drug plans on
behalf of insurers and employers. In the process, they negotiate
reimbursement terms with pharmacies and drug prices with drug
manufacturers. While plan sponsors face the direct financial costs of
the prescription plans being offered to its members or employees, PBMs
act as middlemen in the process. This creates an environment for
conflicts of interest that drives PBMs to work for their own
self-interests and not the sponsors that hired them – all while pushing
up higher drug prices for consumers.
PBMs cut deals with pharmacies, promising them access to the plan’s
beneficiaries in return for reducing fees and reimbursement for what the
pharmacies would normally earn for filing a prescription. This tactic,
called spread pricing, adds extra profits for the PBMs in addition to
what plan sponsors pay PBMs for plan management. The Prescription Drug
Price Transparency Act (H.R. 1316) introduced earlier this month by
Congressman Doug Collins (R-Ga.) attempts to deal with these opaque
transactions.
In addition, PBMs establish a formulary by negotiating drug prices with
manufacturers. These negotiations often promise increased volumes, but
restrict competitive drugs from the formulary in return for deeper
manufacturer discounts and rebates. The specific terms agreed upon are
not known to the pharmacies that fill the prescriptions or plan
sponsors. Instead of using competition to drive lower consumer prices,
PBMs use exclusivity to line their pockets.
In recent years, manufacturing rebates paid to PBMs and the PBMs list
prices of prescription have increased rapidly. Because of cost sharing
requirements, higher list prices mean that consumers pay more, while
PBMs keep the manufacturer rebates rather than passing savings on to
consumers in the form of lower prices.
Effectively, these tactics represent a tacit form of price gouging
employed by some PBMs.
The incentive for PBMs to profit is in direct conflict with their role
in minimizing sponsor costs, ultimately leading to higher consumer prices.
There are many cases where generic drug prices are lower than plan
deductibles. Because some plan beneficiaries do not know this and
pharmacists are not permitted to disclose this information under their
agreements with PBMs, consumers are paying more than they should under
their plans. The practice is called clawbacks, and it’s just one of
several ways that some PBMs are increasing drug costs for everyone.
The point of all of this is that PBMs do not really represent their
sponsors, nor do they necessarily save you money from the pharmacist or
the manufacturer. Most PBMs are virtually unregulated in an industry
layered with regulatory oversight, and only look out for themselves.
The largest PBM experienced an increase in net income of 70 percent in
just two years, while the Bureau of Economic Analysis shows that
after-tax corporate profits by other U.S. businesses remained virtually
unchanged. According to one estimate, PBMs fail to pass $120 billion
back to consumers, and retain another $30 billion in additional
out-of-pocket costs.
With allegations of market failures caused by asymmetric information,
conflicts of interest, collusive pricing, price gouging, and
establishing formularies that maximize profits, among many other
dishonest tactics, it can only be concluded that PBMs are driving up
prescription drug prices for consumers.
What can be done?
First, PBMs should be required to provide the formulary, information on
deductions and other out-of-pocket costs, and any administrative burdens
to consumers and employers before they sign up for a plan. Second,
patients paying coinsurance and deductibles should pay the negotiated
price and not the full price for drugs. Third, pharmacies should be
allowed and encouraged to disclose when lower cost medications are
available outside of patients’ drug plans. Fourth, when a cheaper
generic drug is available to patients that pay cash instead of using
insurance benefits, pharmacists should be allowed to tell patients.
Fifth and finally, manufacturing rebates should be provided upfront to
consumers in the form of discounts at the cash register. PBMs could be
made subject to audits to make sure that this pass-thru of saving occurs.
The bottom line is this: Consumers and sponsors deserve pricing
transparency to make better market decisions and to encourage
competition. Unless legislative action is taken, anti-competitive risks
will continue to grow and the result will mean much higher prices for
consumers in the future.
Steve Pociask is president of the American Consumer Institute Center for
Citizen Research, a 501c3 educational and research nonprofit institute
that recently released a new Consumer Bulletin focusing on PBMs and
pricing issue. For further information, visit www.theamericanconsumer.org.
--
So many immigrant groups have swept through our town
that Brooklyn, like Atlantis, reaches mythological
proportions in the mind of the world - RI Safir 1998
http://www.mrbrklyn.com
DRM is THEFT - We are the STAKEHOLDERS - RI Safir 2002
http://www.nylxs.com - Leadership Development in Free Software
http://www2.mrbrklyn.com/resources - Unpublished Archive
http://www.coinhangout.com - coins!
http://www.brooklyn-living.com
Being so tracked is for FARM ANIMALS and and extermination camps,
but incompatible with living as a free human being. -RI Safir 2013
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