New report finds a potential result of disclosure requirements could increase federal government costs by $134 billion over 10 years
Congress continues to consider proposals that could require pharmacy benefit companies to publicly disclose contracted manufacturer rebate amounts – information that is currently considered confidential.
Milliman recently released a white paper, “Possible Outcomes of Potential Disclosure Requirements in Medicare Part D,” which provides insight into the potential impacts of this legislation. The report quotes the Federal Trade Commission (FTC), noting that PBM disclosure requirements could change the dynamics of the current market:
“The Federal Trade Commission (FTC) has suggested that public disclosure of competitively sensitive information ‘can blunt a firm’s incentive to offer customers better deals by undercutting the extent to which such a move would win business away from rivals’ and ‘can enhance a firm’s incentive to raise prices by assuaging the fear that such a move would lose customers to rivals.’”
Other sources have suggested that the public disclosure of rebate values could lead to tacit collusion, a practice that occurs when businesses – in this case big drug companies – coordinate their activities without explicitly reaching an agreement. In fact, the FTC previously warned that if drug companies learn the amounts of rebates negotiated by pharmacy benefit companies, then “tacit collusion among manufacturers is more feasible.”
As one potential result of public disclosure requirements of manufacturer rebates in Medicare Part D, Milliman modeled a 15% reduction in manufacturer rebate amounts. A 15% reduction in manufacturer rebates could lead to $134 billion in increased costs for the federal government over 10 years, assuming no resulting behavioral changes.
Pharmacy benefit companies support transparency that empowers patients, providers, plan sponsors, and policymakers with resources to inform decision-making that can lead to lower prescription drug costs. PBMs already provide information to clients on all contract terms, including how PBMs are paid for their services and negotiated rebate amounts. They also share information with government regulators, such as CMS for Medicare Part D, on price concessions, costs, and service fees.
However, PBMs cannot support public disclosure of proprietary, competitively sensitive information, and data that allows drug companies or drugstores to tacitly collude with the competition to increase drug costs for Americans.
When drug manufacturers must compete against each other for formulary placement without knowing how much deeper they have to discount to best their competition, pharmacy benefit companies can drive costs down. Policies forcing pharmacy benefit companies to disclose information about competitors’ discounts may lead to higher costs.
Read the full Milliman white paper HERE.
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Learn more about how pharmacy benefit companies practice transparency HERE.
Read PCMA’s recent blog highlighting a Bank of America survey of employers that confirm pharmacy benefit companies are transparent 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. Learn more at www.pcmanet.org
