There are few organizations in Washington D.C. that are considered truly objective; the Congressional Budget Office (CBO) qualifies as one of them. And when they talk, we listen.
A recent CBO report on prescription drug price and utilization trends both emphasized the value of pharmacy benefit managers (PBMs) and confirmed our long-held position that drug manufacturer pricing tactics are the root cause of high drug costs. Here are a few of our favorite highlights from the report.
In Medicare Part D between 2009 and 2018, the average price per drug decreased from $57 to $50. The CBO attributes the decrease in the average drug price to an increase in beneficiary use of lower-cost options, as incentivized by PBMs and Part D plans. One big component of this throughout the health care system, but especially in Part D, has been widespread use of generic drugs. According to the CBO, 90% of all prescriptions in Part D were filled with generics, by 2018, a generic usage rate unthinkable only 10 years earlier when it was just 72%.
PBMs have always advocated for more competition in the pharmaceutical marketplace and the CBO report lays out why competition is so important. Competition in the marketplace can lead to lower drug spending, and, as the CBO noted, PBMs leverage that competition “to negotiate for lower net prices.”
The converse is also true. “In cases in which therapeutic alternatives are limited, the manufacturer tends to have greater leverage, particularly for drugs that offer larger benefits to patients than other treatment options,” the report says. So, said another way: when net drug prices remain high, it’s probably due to a lack of competition providing no incentive for drug manufacturers to provide price concessions to PBMs and health plans.
The report also confirms a widely held axiom that’s worth repeating; pharmaceutical companies alone set and raise drug prices. According to the CBO, the increase in the average price of a brand drug in Part D was thanks to two basic tactics manufacturers use to keep drug costs high: “Two key drivers of those [average brand price] increases were higher launch prices for new drugs and growth in the prices of individual drugs already on the market.” Just to summarize, the CBO is saying that drug manufacturers set the launch prices of their products and then raise those prices over time. And they do that without a rebate in sight.
For me, the CBO report discusses many of the points my research has shown for years, namely that manufacturers are responsible for high and rising list prices and that PBMs use competition as leverage to lower net drug prices. And just as importantly, CBO does not discuss rebates, discounts, or fees as leading to higher drug list prices. This underscores the important role PBMs play in the drug payment and supply chain, negotiating lower costs on behalf of health plan clients and providing affordable prescription drug access for consumers.
