LOUISVILLE — As a pharmacist, I know firsthand the impact today’s big pharmacy benefit managers (PBMs) have on the companies and individuals they claim to serve — and unfortunately, it’s not a good one. Thankfully, change may be on the horizon through congressional action.
This op-ed commentary is by Greg Baker, CEO of AffirmedRx
While big PBMs promote health plan cost savings to employers, the facts tell a different story. Fortunately for Kentucky, two lawmakers— Reps. James Comer and Brett Guthrie – are at the forefront of bringing reality to light by holding congressional hearings to encourage reforms that will improve health outcomes and bring much needed transparency, accountability, integrity and trust to pharmacy benefit management.
Many business owners ask, with so much regulation in healthcare, how did we get here? And the answer has a lot to do with the fact that just a handful of large PBMs control 80% of the U.S. market. This market domination is problematic because with no legal mechanisms in place to ensure accountability, PBMs can hide behind harmful, profit-motivated pricing practices while employers and patients pay the price.
For years, PBMs have operated in the shadows, urging employers to trust them while effectively evading oversight attempts by state regulators. Recently, executives from two major PBMs openly declared their ability to navigate around any reforms enacted, maintaining their profit trajectory – almost exclusively at the expense of the customer. However, a new wave of companies, spearheaded by entrepreneurs like Mark Cuban, is entering the market bringing much-needed transparency to this previously opaque industry.
Traditional PBMs tout their size and scale as factors that secure better deals for clients. While these big PBMs may indeed procure drugs in larger quantities and secure favorable acquisition costs, they often fail to pass these benefits on to their clients. Worse, they won’t even share the data with their customers to help them make an informed decision.
For example, let’s consider the drug Imatinib, a standard first-line therapy for cancer patients. According to their own data, the CVS pricing for a 30-day supply is $17,710.21. The price for the same medicine through Mark Cuban’s company, CostPlus, is $72.20. While CVS claims it uses its purchasing power to help save companies money, their clients are actually paying far more to boost the PBM’s bottom line.
PBMs also get to dictate where prescriptions can be filled. In the Imatinib scenario, they tell clients that because this is an oncology product it can only be filled at their own specialty pharmacy. In essence, the PBM – as a for-profit company – gets to decide what it pays itself and blocks its customers from going elsewhere. It’s not hard to see why this type of monopoly is a bad deal for consumers and the employers who provide their health plans. Meanwhile, traditional PBMs continue to rake in record-high profits.
Additionally, there has been much discussion about rebates and the relationship between the pharmaceutical manufacturers and PBMs. I am not here to defend or hold manufacturers harmless when we are talking about why we have a drug affordability issue in our country. They are by no means innocent, but the PBMs bear a significantly larger responsibility to the problem.
Let’s look at insulin, a hot topic in the drug pricing debate. Drug manufacturers know if they lose access to the formulary controlled by one of these PBMs, their medications will no longer be available to tens of millions of patients. So, the big PBMs use this to their advantage and extract more rebates because if one manufacturer doesn’t pay the higher amount, they can find another who will. The massive market consolidation is why rebates are going up faster than list prices. This also artificially raises the price for customers at the pharmacy counter.
This example illustrates just one way in which PBMs hurt American society. Unfortunately, there are still many more ways they impact our healthcare spending as a nation. For example, formularies are built preferring high-cost drugs over lower cost options and generics. This, of course, yields more revenue for the PBM but results in higher costs for patients at the pharmacy counter when they are on a high deductible or coinsurance plan. Also, “preferred” networks are used to drive patients to more profitable pharmacy locations for the PBM instead of their trusted local pharmacy. This practice limits patient access which can be particularly harmful in lower income and rural areas.
It is past time PBMs are held accountable for their impact on healthcare costs, and it’s encouraging to see Congressmen Brett Guthrie and James Comer leading the way in enacting positive change and pushing forward critically needed legislation. Their important work will finally bring accountability and reform to this broken system and put the focus back on patients, where it belongs.
Greg Baker is a trained pharmacist and CEO of AffirmedRx. In his 30+ year career, he has been a leader in direct pharmacy services with a focus on optimizing patient outcomes. AffirmedRx’s mission is to improve health care outcomes by bringing integrity, clarity and trust to pharmacy benefit management.
