The Indiana Gazette
Pharmacy benefit managers were created to control prescription drug prices. Since they arrived on the scene in 1987, however, prescription drug benefit costs have risen by 1,129 percent and patients’ actual out-of-pocket costs have increased by almost 200 percent.
Here in Pennsylvania, a 2018 report from Auditor General Eugene DePasquale found that as prescription drug costs in the commonwealth went from $1.41 billion in 2013 to $2.86 billion in 2017 (an increase of more than 100 percent!), the average price of a prescription at a community pharmacy actually went down slightly and prescription volume was flat.
Where did all that money go? To pharmacy benefit managers; the multibillion-dollar quasi-monopolies that set the prices patients pay for prescription drugs and create pharmacy networks, often pushing people to pharmacies that they own.
In fact, the top three PBMs control as much as 89 percent of the U.S. marketplace.
Despite their claims to the contrary, PBMs actually benefit from higher prices due to perverse incentives. Drug manufacturers offer discounts in the form of rebates, which are meant to be savings to be passed along to patients.
Importantly, rebates are usually provided for the most expensive drugs; so, the higher the price of the drug, the higher the rebate.
The rebate process lacks transparency, so there is no way to determine how much PBMs increase their profits by pocketing some if not all of these rebates, which should be intended for patients. As Auditor General DePasquale found, “the rebate process is not working to lower costs for patients,” leaving the sickest people, who rely most on drugs, paying more than ever to keep premiums level.
In other words, elderly patients are subsidizing everybody else.
PBMs leverage the power of their formularies to bully not only patients but all players in the health care space.
They can essentially choose winners and losers, giving them enormous leverage over each party and leaving little room for small-business pharmacies to operate and serve their local communities.
A recent National Community Pharmacists Association survey of independent community pharmacists revealed that almost 60 percent may close their doors in the next two years, with nearly two-thirds saying that the biggest problem are the back-door fees the PBMs claw back from pharmacies weeks or months after transactions.
PBM abuses hurt more than just patients and small-business pharmacies; they cost taxpayers enormous sums of money.
Fortunately, there is a way for Pennsylvania to ensure their PBMs are controlling drug costs: increasing PBM transparency. Increased transparency has worked in other states.
For example, West Virginia has saved $54 million a year by removing opaque PBM practices from its Medicaid program. Ohio moved to more transparency PBM contracts after determining the move would save $16 million a year.
There’s plenty wrong with our health care system. We’re not blaming PBMs for all of the problems, but their fingerprints are all over one of the biggest issues, which is runaway prescription drug prices.
We applaud the local and federal policymakers who are focusing on lowering drug prices, reining in PBMs, and enacting real solutions for independent pharmacies, their patients and taxpayers.
Stephanie Smith Cooney, Pharm.D., is president of Gatti Pharmacy in downtown Indiana.