Undermining PBM Cost Saving Tools Gives Big Pharma Windfall Profits
Axios recently reported on Big Pharma’s number one Lame Duck priority: Proposals undermining pharmacy benefit managers (PBMs), specifically noting that the pharmaceutical industry is “going to be laser-focused on getting it over the finish line with a lot of other stakeholders.”
This should be a stark reminder to lawmakers that drug companies are pushing for legislation targeting PBMs because it boosts their own profits. Big Pharma is behind the push targeting PBMs because they serve as the one real check against big pharmaceutical companies’ otherwise limitless pricing power. If pharmacy benefit companies are weakened by restricting the tools used to lower drug costs, Big Pharma has more power to keep drug costs high.
Proposals such as “delinking”, which would ban market-based incentives for PBMs successfully securing rebates through negotiations with drug companies, would hand Big Pharma a $32 billion financial windfall, while increasing health care premiums more than $39 billion annually, according to research by University of Chicago Professor of Economics Casey Mulligan and founder and CEO of Matrix Global Advisors (MGA) Alex Brill.
Despite what drug companies are pushing, the truth surrounding rebates is that they are uncorrelated to high list prices set by drug companies and actually help drive down health care costs.
Anthony LoSasso, Professor and Chair, Department of Economics, DePaul University, emphasized the importance of rebates in a recent Congressional hearing: “Rebates are a good thing because they represent price decreases. And price competition is a good thing for consumers.” View what academics had to say about rebates HERE.
New research led by Dennis W. Carlton, Ph.D., David McDaniel Keller Professor of Economics Emeritus at the University of Chicago Booth School of Business, and a team of economists at Compass Lexecon concluded that the manufacturer rebates—passed through by PBMs or distributed by PBMs as discounts—along with fees, are not the driver of increased drug costs. Specifically, the data showed that PBMs are passing through the majority of manufacturer rebates and fees—recently, well over 95 percent of rebates and fees received from manufacturers are passed through, and in 2020 and 2021, this number has neared 100 percent.
Additionally, the report found there is no basis for the claim that the growth in drug companies’ list prices is higher for rebated drugs than for non-rebated drugs. Between 2018 and 2022, the average wholesale price (adjusted in real terms for inflation) on rebated branded drugs increased by two percent while it increased by three percent on non-rebated branded drugs during this time.
Learn more about Dr. Carlton’s new report HERE.
While Big Pharma is “laser-focused” on undermining the market-based role of PBMs to boost their bottom line, at the expense of employers and patients, PBMs are focused on solutions that would increase competition and make prescription drugs more affordable.
PBMs continue to support effective policies that crack down on Big Pharma’s patent abuse, including recent legislation that eliminates patent thickets that would save $1.8 billion, and policies to increase biosimilar competition within the marketplace to improve access to more affordable alternatives to brand name prescription drugs.
See PCMA’s policy platform to unlocking a more affordable and accessible health care future HERE.
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PCMA is the national association representing America’s pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients.
