Are you worried about the high cost of some prescription drugs?
A government report released this summer states that thousands of cancer patients depend on medicines to survive.
The problem is that pharmacy benefit managers, or PBMs, sometimes mark up these drugs as high as 4,000%, according to a Federal Trade Commission report.
Are you familiar with pharmacy benefit managers?
PBMs are little known but have tremendous power in setting drug prices.
PBMs are the intermediaries between drug manufacturers, insurers and consumers.
PBMs make their money through a complex web of price negotiations. They are the middlemen.
In their defense, PBM leaders say it’s the drug manufacturers, not them, who are the cause of high-priced medicines.
JC Scott, head of the Pharmaceutical Case Management Association, sharply refuted the FTC report. In a statement sent to The Watchdog, he criticized the report as “based on anecdotes and comments from anonymous sources and self-interested parties.” The truth, he said, is that PBMs reduce drug prices and increase access to medicines.
Exempt from kickback rule
The three major PBMs are: CVS Caremark, Cigna’s Express Scripts and UnitedHealth’s OptumRx. Each is connected or owned by health insurers.
Due to a 1990s law passed by Congress, PBMs were excluded from what, in other industries, are called kickbacks. In other words, PBMs can take a little off the top of each pill and make millions of dollars.
The Federal Trade Commission has launched a major investigation into their mostly unchecked power to set prices. An FTC lawsuit against the three big PBMs is a possibility.
In addition, Minnesota Attorney General Keith Ellison leads a bipartisan coalition of 32 attorneys general from across the country (including Texas) to ask the U.S. Supreme Court to rule on states’ authority to regulate pharmacy benefit managers.
Here, The Watchdog will show how PBMs work and whether they need to be put on a leash to lower prices. What do supporters say? Why does this matter to you?
What are PBMs?
Often, PBMs can lower prices. But not always. For more expensive drugs for which they can get higher rebates, consumer prices go up.
PBMs make money from administrative and service fees. They also collect rebates. The big three control about 80% of the drug market.
Critics say they profit by inflating drug prices, obtaining discounts they take on behalf of insurers and collecting the difference between what insurers pay and pharmacies receive.
Because they “now exercise significant power over Americans,” according to the FTC, PBMs are often the reason people can’t afford the drugs they need. Sometimes, they skip doses when they shouldn’t.
Community pharmacies not affiliated with the big companies are often hurt, too. The FTC says this complex system leads to the closing of some independents, especially in rural areas.
In stark language, the FTC reports that overcharging for drugs “represents billions of dollars in drug spending and reveals the incentives PBMs can have to preference their own affiliated pharmacies regardless what is best for the patients.”
What supporters say
In statements after the FTC report was released, industry association leader Scott warned that some possible solutions will increase, rather than decrease drug prices. PBMs are making improvements to the system, he said, and don’t seek the government’s help.
He complained that FTC regulators have predetermined conclusions and only seek to find “cherry-picked case studies” to make their points.
He shifted the blame to drug manufacturers for the bulk of the problems. His harshest criticism, though, was directed at the FTC for what he called the regulators’ “pre-determined conclusions that they want to advance irrespective of the facts or the data.”
FTC’s next step?
Critics of the system say efforts to lower drug prices have not gone far enough.
The FTC appears to be working on a potential lawsuit to strengthen oversight in the mostly unchecked power of PBMs.
FTC Chair Lina M. Khan said in the report that “the FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable health care.”
Congress is also looking at reforms that would bring transparency to the process and lower drug prices.
For many, this truly is a life and death matter.
Watchdog tip: Interested in getting involved? Send your comments to FTC.gov and also the U.S. senators who lead this fight — Ron Wyden, Mike Crapo and Bernie Sanders.
In the know
Here are a few ways to lower your drug prices:
Talk to the pharmacist. Ask about pharmacy discount cards such as GoodRx and OptumRx, which is supported by the AARP.
Check for generics.
Use manufacturers’ discounts.
Understand what your insurance plan offers.
Consider opening a health savings account
Source: Consumer Reports.
