Sally C. Pipes
Sally C. Pipes
As the Republican-controlled House of Representatives opens in January, one lawmaker has a particularly big idea — and research to back it up — to save patients money on prescription drugs.
A year ago, Rep. James Comer (R-Kentucky) released a comprehensive report on the role of pharmacy benefit managers in the nation’s healthcare system. The result is not a comfortable read. This is largely due to a greedy intermediary taking advantage of existing legal loopholes and lax oversight to create an industry that made him a $28 billion profit in 2019 while providing real healthcare to patients. It is said that they have not.
Insurance companies use pharmacy benefits administrators to negotiate with pharmaceutical companies the terms of including drugs in insurance plan coverage. But in reality, his three largest PBMs, which account for nearly 80% of prescription claims, are co-owned by large insurance companies like Cigna and pharmacy giants like CVS Caremark.
The result is an interlocking daisy chain that extracts the maximum benefit from consumers and payers such as employers and federal and state governments, while at the same time diverting responsibility for rising drug costs from themselves to pharmaceutical companies. can.
To remain competitive with PBM, there is evidence that pharmaceutical companies are setting list prices high in hopes of significant future discounts. The move does not pass discounts directly to patients and allows PBM to extract increased revenue for the bottom line.
Insurers, on the other hand, claim coin insurance payments and credit the deductible for the patient’s out-of-pocket costs based on the list price of the drug, not the discounted price actually paid by the insurer. Insurance companies love this arrangement because it allows them to generate revenue without increasing premiums.
Insurance companies and their PBMs are also putting pressure on consumers to obtain medicines through their respective pharmacy groups. It can take the relatively harmless form of an endless barrage of emails from insurance companies urging beneficiaries to switch prescriptions internally. In more serious cases, PBM can discriminate against independent pharmacies by offering lower reimbursement rates and exclusion from insurance companies’ networks.
Overall, the practice has become so parasitic that over 50% of every dollar spent on brand name medicines now goes to middlemen.
If lawmakers and regulators on the Federal Trade Commission and elsewhere were doing their job, all of this would be illegal, and patients would be saving big. On the other hand, while pocketing campaign funds from PBM and allies, I am happy to look the other way.
Rep. Comer nailed it with his main reform push: meaningful transparency among PBMs. Consumers have the right to know who is paying for their prescription drugs.
Healthcare reform must enable patients to make informed choices about their care. The starting point is to increase the transparency of PBM practices. Next is the shocking requirement that drug discounts ostensibly for patients be passed on to patients rather than absorbed by intermediaries.
Sally C. Pipes (@sallypipes) is President and CEO of the Pacific Research Institute and a Thomas W. Smith Fellow in Health Care Policy. Her latest book is her False Premise, False Promise: The Disastroous Reality of Medicare for All (Encounter 2020). Follow her on her Twitter @sallypipes.
