PBMs are driving up drug prices through fees, PhRMA report claims
Rebates and fees received by PBMs account for 42% of every dollar spent on brand medicines in the commercial market, report says.
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Ahead of a hearing on pharmacy benefit managers before the House Committee on Oversight and Accountability on Tuesday, PhRMA released Nephron Research that contends PBMs are driving up profits and drug prices through fees.
PBMs demand double the amount of fees today than they did five years ago, according to the report released Monday.
PhRMA held a report briefing in which Robby Zirkelbach, executive vice president of Public Affairs and Strategic Initiatives for PhRMA, said PBMs are siphoning money out of the system.
Three PBMs control 80% of the market, he said. These are CVS Caremark, Optum Rx and Express Scripts, which is owned by Cigna. PBMs use their size and scale to negotiate and decide what patients pay out-of-pocket and which medicines they can get.
PhRMA recommends that PBM compensation no longer be tied to the price of medicines and that they should instead receive a flat fee. Also, PBMs should share savings directly with patients so they don't pay more than their insurer pays, PhRMA said.
The House Oversight Committee will hold a hearing entitled "The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part II: Not What the Doctor Ordered" on Tuesday, September 19 at 10 a.m.
WHY THIS MATTERS
Hospitals bear a heavy financial burden when the cost of drugs increases, the American Hospital Association has said. Between 2015 and 2017, total hospital and health system spending on drugs increased on average by 18.5% per admission, the AHA reported. Hospitals are not only major purchasers of drugs, but patients often end up in the hospital when they cannot afford to take their medications as prescribed.
Lowering drug costs has been a focus of the Biden administration, with drug manufacturers in the legislative crosshairs. The Inflation Reduction Act, which passed last year, allows Medicare for the first time to negotiate the price of 10 high-cost drugs. Last month, the Centers for Medicare and Medicaid Services released the names of drugs that would be subject to federal price negotiation.
PhRMA has sued the federal government over what it calls price fixing.
THE LARGER TREND
The battle over who's to blame for high drug prices has been ongoing for years.
PhRMA has said, and Zirkelbach reiterated on Monday, that net prices from manufacturers have flattened, while insurers, represented by AHIP, claim that drugmakers alone set the price of drugs.
PBMs have been called middlemen that negotiate prices with manufacturers, receiving rebates for preferred placement on a plan's formulary.
Pam Roberto, vice president, Policy and Research, PhRMA, said Monday that PBMs have changed from making money from rebates to making money from the fees they charge.
Nephron's research and new data on PBM compensation from biopharmaceutical manufacturers from 2018 to 2022 claim the share of PBM profits from fees charged to manufacturers, pharmacies, health insurers and employers increased by more than 300% over the last decade.
PBMs have expanded traditional administrative fees and have created new fees that virtually didn't exist five years ago, the report said.
"PBMs increasingly funnel these new fees through their opaque contracting entities, which they refer to as group purchasing organizations," the report said.
Rebates and fees received by PBMs account for 42% of every dollar spent on brand medicines in the commercial market, the report said.
ON THE RECORD
"The more the veil is lifted on how these middlemen operate, the clearer it is that policymakers must directly address PBM abuses in the system head on if they want to solve the access and affordability challenges patients are facing," the report said.
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
