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Study Highlights PBMs’ Role in Drug Prices

An analysis by 3 Axis Advisors has found that there is a large variability in pharmacy reimbursement of prescription drugs depending on PBM contracts with insurers. This creates a system with huge inconsistences on the prices of both generics and branded products.

Managed Healthcare Executive


Pharmacy benefit manager (PBM) contracts with insurers play a significant role in the prices of prescription drugs at the pharmacy level, leading to prices that are highly inconsistent, according to a new analysis from the data analytics company 3 Axis Advisors. The 88-page report was sponsored by American Pharmacy Cooperative, which represents independent pharmacies.


The Pharmaceutical Care Management Association (PCMA), which represents PBMs, has long said that drug manufacturers alone set prices of prescription drugs. “Drug companies have total autonomy over the list prices of their products,” a spokesperson for PCMA told Managed Healthcare Executive. “The primary mission for pharmacy benefit companies is to reduce prescription drug costs for patients and health plan sponsors, like employers and unions. Any assertion that PBMs are in any way increasing costs is simply wrong.”


The analysis from 3 Axis, however, has found that PBMs control how much pharmacies are reimbursed. This can vary significantly depending on the PBM contracts with insurers and employers, creating a system with large inconsistencies in the prices that consumers pay for both generics and branded products. Pharmacies, through their trade associations, have been persistent critics of the PBM industry.


“Ultimately, the findings in this study underscore the complexity, inconsistency, and malleable nature of drug pricing in the United States, where public policy goals for reform are scattered but loosely centered on a quest for affordability and value,” 3 Axis researchers wrote. “With this in mind, this report demonstrates that the current system is full of inequity and misaligned incentives that would seem to run counter to these goals.”


For this analysis, 3 Axis assessed 32.6 million retail pharmacy claims in 2020 from independent, small chain, and midsized chain pharmacies. The analysis focused on the negotiated prices between the PBMs and the pharmacies, which are based on the average wholesale price (AWP) benchmark, which 3 Axis describes as being similar to a manufacturer's suggested retail price sticker price.


Some of the biggest variability in prices is for generic drugs, for which the PBMs set a maximum allowable cost (MAC) that determines their retail price. The MAC methodology sets an upper limit for products where are there are multiple manufacturers. It is meant to encourage pharmacies to purchase lowest cost products. But critics say the MAC benchmark doesn’t reflect actual market conditions. the MAC is considered proprietary, and there is little transparency about how PBMs arrive at them.


In their study, the 3 Axis analysts were unable to identify a single price for a given product on a single day at one pharmacy. For example, analysts described one case in which a single pharmacy on a single day was reimbursed five different prices by the same PBM for duloxetine, a serotonin-norepinephrine reuptake inhibitor used to treat patients with depression. The pharmacy was reimbursed between $9.30 and $96 per prescription for duloxetine that came from the same manufacturer.


Additionally, 3 Axis looked at the price of duloxetine across the pharmacies in its review and found that the same PBM reimbursed pharmacies 49 different prices across 232 claims filled by 172 pharmacies.


In an example of variability among branded products, 3 Axis reviewed the price of Eliquis (apixaban), which is used to treat patients with atrial fibrillation and decrease the risk of blood clots. In 2020, Medicare spent $9.9 billion for Eliquis. In the 3 Axis analysis, there were more than 107,000 claims for Eliquis in 2020 among the pharmacies it studied. Prices for Eliquis varied by almost $100, with Medicare patients often paying some of the highest prices.


Additionally, analysts at 3 Axis were unable to determine what would happen at the pharmacy level if drug manufacturers lowered their list prices because they were not able to tie manufacturers' wholesale acquisition cost (WAC) to pharmacy reimbursement. WAC is the price manufacturers charge drug wholesalers and doesn’t include discounts or rebates. The definition of WAC is defined by law.


The WAC price, 3 Axis notes, is a more reliable benchmark for branded drugs where discounts are between the PBM and the manufacturer. For generic drugs, the discounts occur within the manufacturer-wholesaler-pharmacy relationship.


“Beyond simply securing better contract language leading to lower drug costs, the incentives of the system encourage, rather than discourage, artificially inflated list prices. As a result, our system is inherently inequitable,” 3 Axis said.


Reporter: Denise Myshko

To view the full 3Axis Advisors Report, click here

1 comment

1 Comment


Health care reform! Health care does not fit into a normal economic model where competition lowers prices. It sure does not in pharmaceuticals. The price drops of insulin are an anomaly that were forced by the Feds. We have been looking for different results using the same flawed model for 30 yrs. That is the definition of insanity. Too damn bad that congress cannot do the heavy lifting required to make needed changes. Long on lip service derelict on needed action.

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