Pharmacy benefit managers coming under scrutiny in Congress
Their roles are largely behind the scenes as PBMs negotiate drug prices between insurance companies and drug makers; they process prescription claims, operate mail-order pharmacies, and even have sway over how much we pay for our medicine.
For this role, they are paid a percentage of cost of each medicine. Their pay varies by drug and the exact dollar amount they collect is mostly unknown.
Some in Congress are taking a closer look at this little-known industry to determine if they play a role in higher drug prices. PBMs have been accused of inflating drug prices and keeping a larger profit, taking rebates from manufacturers and not passing them on to consumers, and telling insurance companies the cost of a medicine is higher than it actually is.
Bills have been introduced both in the House and the Senate by members accusing the PBMs of helping to keep drug prices high.
This is a position rejected by one of the largest PBMs in the country, Express Scripts.
Jennifer Luddy, Express Scripts' director of communications, said the company's mission is to make medication accessible for patients.
"We exist solely to make medicine affordable and accessible for the 85 million Americans we serve," Luddy said in an email to Patient Daily. "We have been effective in protecting employers from the effects of drug price inflation, and we are successful because we put patients first."
She said that employer spending on prescription medications rose only 3.8 percent in 2016.
"Because we helped employers manage their spending, they were able to hold the line patient copays and deductibles," Luddy said. "Patient out-of-pocket cost share decreased in 2016."
Among those in Congress highly vocal in their criticism of PBMs is Rep. Buddy Carter (R-GA). Carter told Patient Daily that PBMs are “definitely a bad thing" when evaluating how health care and drugs are delivered.
“They are part of the reason for escalating drug prices and bring no value to the health care system,” Carter said.
The Georgia congressman supports a bill introduced by Rep. Doug Collins, a Republican colleague from his own state.
Carter rejects the argument that by using their muscle with the pharmaceutical companies, the PBMs are able to keep prices down.
"If that is the argument, then how is that working, because drug prices are going up," Carter said.
He said that three companies — Express Scripts, CVS Health and United Health — control 80 percent of the market. Carter is the owner of an independent pharmacy, Carter's Pharmacy, whose National Community Pharmacists Association (NCPA) trade group has been the among the most critical of PBMs.
Community pharmacists claim the reimbursement offered by PBMs is often far below what the businesses pay for the prescriptions. Carter said there needs to be transparency and more competition.
Carter supports HR 1316, the Prescription Drug Price Transparency Act. It is aimed at protecting taxpayers and the community pharmacists who serve them by requiring greater transparency from pharmacy PBMs, according to Collins, its main sponsor. A similar bill, Creating Transparency to Have Drug Rebates Unlocked (C-Thru) Act, has been introduced in the Senate.
Employers and some federal programs, including Medicare Part D, use PBMs to manage the cost and type of drugs flowing between the various stakeholders.
Crucially for small pharmacists, they also use Maximum Allowable Cost lists to set reimbursement rates for prescription drugs.
But they have historically refused to explain their process for setting pharmacy reimbursement rates, Collins and Carter said. PBMs’ lack of transparency makes it impossible to determine whether these savings are being passed to federal programs or are increasing the PBMs’ bottom line, they said.
“PBMs engage in predatory practices designed to boost their own profit margins at the expense of insurers, contracting pharmacies, patients, and — in their relationships with federal programs — taxpayers," Collins said. "The lack of transparency in their operations has allowed them to control the market unjustly, with the result that these companies withhold savings that they have promised to pass on."
In a 2015 study, the NCPA asked its members for examples detailing the costs they incurred to acquire drugs versus the reimbursement they received when they filled the prescriptions.
"Independent community pharmacies should not be consistently underpaid for the products and services they offer," NCPA CEO Douglas Hoey said at the time.
"Unfortunately, the 'buy high-sell low' dynamic has regrettably become commonplace for these small business health providers, who absorb financial losses for many generic drugs because PBM corporations do not disclose reimbursement benchmarks to either pharmacies or the plan sponsors who hire them, and fail to react adequately to acquisition costs that can soar by as much as 1,000 percent, virtually overnight," Hoey said.
Organizations in this story
Express Scripts 1 Express Way St Louis, MO 63121
U.S. Representative Buddy Carter (GA-1) 1510 Newcastle Street Brunswick, GA 31520
U.S. Representative Doug Collins (GA-9) 210 Washington Street Northwest Gainesville, GA 30501
National Community Pharmacists Association 100 Daingerfield Rd Alexandria, VA 22314