The enactment of PBM reforms last month was a victory for the big drugmaker’s diversion campaign. But now that PBM reform – and the distractions – is done it’s important to reaffirm the immense value PBMs provide patients, employers, and the entire health care system in order to prevent further unintended consequences for employers and patients.

An analysis by George S. Ford, Ph.D., chief economist and co-founder of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, examined the role of PBMs in the health care system and analyzed the effects of proposed policies that would undermine PBMs’ cost-saving role. Dr. Ford’s research confirms that PBMs are essential to making prescription drugs more affordable for patients and helping employers manage health care costs.

“The economic analysis presented in this policy bulletin demonstrates that PBMs serve a crucial function in the prescription drug market by effectively negotiating lower prices with pharmaceutical manufacturers, particularly for drugs with limited therapeutic competition.”

Read Dr. Ford’s white paper HERE.

Findings from the analysis include:

PBMs drive down costs:

• PBMs cut drug costs for employers, public programs, and patients by 17 to 47 percent.
• From 2007–2018, list prices for brand drugs rose 159 percent but net prices rose only 60 percent due to PBMs negotiating for substantial rebates.
• Introduction of therapeutic alternatives led to reduced spending on prescription drugs by 18.5 percent.

PBM marketplace is competitive:

• There are many PBMs in the market, suggesting substantial competition and low barriers to new entrants. And no PBM has more than a 31% market share.
• If employers or insurers are dissatisfied with their PBM, they are free to switch PBMs or not use one at all.
• PBMs have low profit and operating margins compared to large drug manufacturers, on the order of about 5% for PBMs compared to 25% for drug companies.