by Robert W. Levin
ORLANDO — The current role of pharmacy benefit managers as “controllers” in the center of the prescription drug market has been detrimental to both patients and physicians, according to Robert. W. Levin, MD, president of the Alliance for Transparent and Affordable Prescriptions, who likened manufacturer rebates to “kickbacks” and “organized crime.”
“The PBMs are in the center: they are the controllers, and they interact with the manufacturers and decide placement on formulary, deciding which drugs we can prescribe first, leading to step therapy and nonmedical switching, and all the other horrible utilization management things for our patients,” Levin, who practices at Bay Area Rheumatology, in Clearwater, Florida, told attendees at the 2019 Rheumatology Nurses Society Annual Conference. “The PBMs are the cause of it. They create formularies, and the manufacturers have to pay to get that formulary placement.”
“Formulary placement is not rational,” he added. “It is not rational based on what works for our patients, or what is efficacious or safe, or well-tolerated. None of that really counts. The only thing that counts is how much money — how big of a truck they can pull up, filled with cash — they can give to the PBMs. That is really what all of this is about.”
According to Levin, Express Scripts, CVS and United Health capture more than 75% to 85% of the PBM market share, with Express Scripts’ revenue totaling $101.85 billion in 2015. He added that recent consolidation and vertical integration has seen Express Scripts purchased by Cigna and CVS/Caremark bought by Aetna. United Healthcare owns Optum Rx, Levin noted.
“These three largest PBMs are in the top 25 of the Fortune 500, and they are larger than any pharmaceutical company,” Levin said. “When you think about how gargantuan they are, the top pharmaceutical companies are below the revenues and profits some of these PBM companies make.”
According to Levin, PBMs claim to drive down drug costs by negotiating discounts for health plans and patients, as well as by designing formularies and obtaining rebates. Other arguments in favor of PBMs are that they increase the use of mail-order and specialty pharmacies, offering more affordable channels for purchasing medications, and also that they encourage the use of generics and affordable brands, he added.
However, such arguments and claims are not rooted in reality, Levin said.
Not only are medication costs “skyrocketing,” with patients paying more at the pharmacy counter, but access has also grown more restricted, he argued. Rather than help decrease costs, Levin said PBMs use their position to instead negotiate contracts with manufacturers, health plans and pharmacies that maximize profits at the expense of patients and physicians. These sources of PBM revenue and profit included spread pricing, manufacturer rebates, their own mail-order pharmacies and administrative and service fees, he said.
Regarding rebates in particular, Levin said drug manufacturers pay these lump sums to PBMs in exchange for preferred placement on formularies. The rebate amount is a negotiated percentage off the list price, with the manufacturer promising to pay the PBM a percentage rebate of that price for every prescription filled for that drug, he added.
According to Levin, this motivates PBMs to base drug use on rebate profits rather than patient care or the need to reduce costs.
“The best way to describe these pharmacy benefit managers, and what they do, is they provide this really important thing, called ‘middle-man services,’” Levin told attendees. “They basically sit there in the middle and act as the toll booth. They really do nothing in terms of innovation, they do nothing in terms of lowering costs. They claim to lower costs, but the question is, ‘To whose benefit?’ That is really the crux of the matter.”
The rebate system, in addition to creating strong financial incentives when managing formularies, has had “profoundly negative” effects on patient access to affordable treatment, according to Levin. In addition to step therapy and nonmedical switching, it has led to increased list prices, forcing patients to pay an “inflated out-of-pocket amount.”
“PBMs are only contractually obligated to pass on rebates as specifically defined in the health plan contract, but health plans do not know the amount of rebates actually collected from manufacturers,” Levin said. “PBMs exploit this nontransparency to reclassify rebates in the manufacturer contract as ‘fees,’ or as ‘payment for services.’ This allows PBMs to keep a large part of the rebate has profit.”
“A lot of the problems with all of this could be alleviated if we got rid of this secrecy and create transparency,” he added. “If the amount of money paid by the manufacturer to the PBM was disclosed, we could have a better system. We could actually have our patients paying based on what the real price is, which was negotiated by the PBM, and actually take advantage of that for our patients. That would improve access tremendously.” – by Jason Laday
Levin RW. Confronting the barriers of access to care. Presented at: Rheumatology Nurses Society Annual Conference; Aug. 7-10, 2019; Orlando, Florida.
Disclosure: Levin reports speaking fees from AbbVie, Bristol-Myers Squibb, Exagen, Regeneron and Sanofi, as well as consulting fees from Crescendo.