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Title: The Rising Influence of Pharmacy Benefit Managers: An Unveiling
Introduction:
The television airwaves have become inundated with perplexing prescription drug advertisements, leaving viewers in the dark regarding the sponsor’s identity and motive. However, recent developments have shed light on this mystery. In response to growing concerns, Congress has actively engaged with the issue by introducing nine bills. Collectively, these bills target pharmacy benefit managers (PBMs) who play a crucial role in the distribution of prescription drugs to patients. To dispel the fog of confusion, this primer will explore the unfolding situation.
Understanding Pharmacy Benefit Managers (PBMs):
PBMs, established during the 1960s, have played a vital role in assisting employers and insurers with their medication selection and procurement. Over the years, the industry has flourished, aligning with the exponential growth in prescription drug spending. PBMs act as intermediaries between drug manufacturers, pharmacies, insurers, employers, and patients. Their responsibilities encompass negotiating discounts with manufacturers, setting payment terms for pharmacies, and efficiently managing the drug supply chain.
The Enormity of the PBM Industry:
Within the United States, approximately 70 PBMs operate. In recent years, through mergers, three key players, namely CVS Caremark, Optum Rx, and Express Scripts, have secured control over 80% of the prescription drug market. These dominant players generate billions of dollars in revenue each year. Additionally, the influence of PBMs extends far beyond their role as middlemen. These conglomerates own major health insurers, such as Aetna, UnitedHealth, and Cigna, further expanding their reach within the healthcare sector. Unfortunately, the complex web of PBM-linked corporations and their obscured financial dealings make it challenging to trace how the money is ultimately distributed.
Unveiling the PBM Ads:
Various stakeholders in the healthcare sector are growing increasingly concerned about the power wielded by PBMs. They are, therefore, appealing to both the Biden administration and Congress for regulation. Drug manufacturers, employers, pharmacies, doctors, and patients alike have raised concerns about PBM practices, including “spread pricing,” which allows companies to pocket funds obtained through negotiations on behalf of health plans. Pharmacies, independent and large-scale alike, criticize PBMs for pressuring them into signing opaque contracts that include retroactive clawbacks of funds. Moreover, PBMs tend to steer patients towards their affiliated pharmacies, leaving independent pharmacies at a disadvantage. Physicians accuse PBMs of acting as gatekeepers for insurers, obstructing or delaying access to vital medications. Paradoxically, while the pharmaceutical industry has faced backlash for exorbitant drug prices, PBMs have claimed a significant portion of revenue in recent years. The median launch price for newly marketed brand-name drugs has experienced a staggering increase, while net revenues for drug companies have stagnated. This dynamic arises due to rebates paid by drug manufacturers to PBMs, which are often calculated based on the drug’s list price.
Sponsors of PBM Ads:
The Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group representing major drug companies, spearheads the anti-PBM campaign. The ads are also funded by the PBM Accountability Project, a transient lobbying organization partially supported by the pharmaceutical industry. Membership in this group includes unions and patient advocates who object to PBM and insurance industry policies. Alongside PhRMA, the Pharmaceutical Care Management Association (PCMA), the trade group for PBMs, has responded with their own ads, blaming drug companies for high prices and alleging that they impact pharmacy benefits negatively. The health insurance lobby, AHIP, has also joined the campaign.
Congressional Action:
Bipartisan members of Congress have expressed outrage over PBM misconduct, leading to the introduction of several bills to address the issue. The Senate Finance Committee, with its oversight of Medicare and Medicaid, has proposed a bill that aims to prohibit PBMs from collecting rebates and fees based on a drug’s list price. This legislation seeks to discourage PBMs from favoring expensive drugs. The committee also plans to introduce additional legislation that mandates PBMs to pass on discounts directly to senior citizens, grants patients the freedom to choose their preferred pharmacy, and increases transparency regarding the allocation of funds. Senator Bernie Sanders, as the leader of the Senate Health, Education, Labor, and Pensions Committee, has introduced a bill that bans spread pricing. Other bills in both the Senate and House intend to crack down on PBM practices that adversely impact independent and rural pharmacies. Furthermore, certain measures aim to enhance transparency and reduce patient waiting times for drug approvals. Notably, several states have adopted a practical approach to lowering PBM-related costs by utilizing high-tech auctions to secure the best possible deals for employee healthcare plans.
The Bottom Line:
Although PBMs have become convenient targets of outrage due to their secretive nature, omnipresence, and immense influence, they primarily act in the best interest of their customers, namely insurance plans and employers who seek to control prices. However, this goal often necessitates extracting burdensome concessions. Internist and health policy researcher Benjamin Rome attests to the crucial role PBMs play in restraining brand-name drug prices and preventing unchecked price increases by the drug industry. While this arrangement might not sit well with consumers desiring full insurance coverage of drug costs, such a scenario would significantly inflate healthcare expenditures, already accounting for nearly a fifth of the economy. All parties involved in the healthcare system, including hospitals, insurers, the drug industry, and PBMs, attempt to deflect blame onto one another while simultaneously benefiting from the existing system. The suave PBM representative in the advertisement may interfere with patients receiving their prescribed medications, but this occurs because the manufacturer of another drug offered a better deal to the PBM and consequently, the insurance company. On the other hand, the vertical integration of PBMs has sparked concerns about unfair competition. The Federal Trade Commission is currently investigating this issue, although no Congressional bill has specifically targeted it. Rome cautions against the unintended consequences that may arise from these bills, questioning whether the proposed structures will ultimately serve the best interests of patients.
Conclusion:
In conclusion, KFF Health News, a national newsroom dedicated to comprehensive health journalism, delves into the intricate landscape of healthcare issues. As an essential component of KFF, an independent organization specializing in health policy research, polling, and journalism, KFF Health News strives to keep readers well-informed. To learn more about KFF, please visit their website.
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