In case you missed it, Ike Brannon, senior fellow at the Jack Kemp Foundation and former senior economist for the United States Treasury and U.S. Congress, explains the problem with misguided policies targeting pharmacy benefit companies in a new RealClearMarkets op-ed. He highlights one proposal – “delinking” – that targets performance-based incentives for pharmacy benefit companies and would be especially detrimental to prescription drug costs. Brannon writes:
“For instance, one such proposal would effectively prohibit any contract that rewards PBMs for the size of the price discount they obtain on a drug via negotiations, a provision referred to as delinking. The ostensible reason for it is to prevent PBMs–the demonized “middlemen” from making too much money–but it would completely destroy their incentives to reduce drug costs for their customers, since obtaining bigger discounts would not bring them higher revenue. The arrangement would effectively push Medicare and employers back towards a fee-for-service model and away from the value-based payment arrangements that CMS and private insurers have been trying to implement, while also increasing costs. PBMs are compensated based on how effectively they secure savings from drug companies and pharmacies, which is both why they are effective and why pharmaceutical companies resent them. One recent analysis noted that annual federal spending on Medicare Part D premiums would increase $3 billion to $10 billion as a result of such legislation.”
Brannon underscores how various government agencies have already concluded that misguided efforts targeting pharmacy benefit companies would increase prescription drug costs and government spending:
“However, government agencies have acknowledged that efforts to rein in PBMs would do nothing to save taxpayers or patients money: Studies published by both the Government Accountability Office and the HHS Office of the Inspector General found that the rebates PBMs negotiate are passed along to plan sponsors in Part D to lower the costs of premiums for beneficiaries and taxpayers alike. What’s more, the consulting firm Oliver Wyman found that rebates reduced aggregate drug costs in Medicare Part D by $35 billion.”
Joel Zinberg, MD, senior fellow at the Competitive Enterprise Institute and Director of the Public Health and American Well-Being Initiative at Paragon Health Institute explains in another op-ed how these policies will undermine competition. Dr. Zinberg writes:
“The legislation being debated would limit or eliminate rebates and discounts that pass through PBMs, and require PBMs to disclose pricing and other confidential contract terms. These provisions could decrease competition and result in higher costs, thereby sacrificing much of the value PBMs provide. The proposals will limit the ability of smaller PBMs to compete and could lead to anti-competitive collusion.”
“Nothing keeps the market from transitioning to a different, no rebates, no discounts system. New market entrants and smaller PBMs already compete by offering set fees for administration of pharmacy benefits. Plan sponsors will be able to determine if these alternative payment models offer better value without government instruction. The proposed legislation will foreclose sponsors from making this determination and could mandate a less efficient, more costly arrangement.”
Dr. Zinberg concludes by warning lawmakers about the negative impact that pending proposals could have on patients:
“Congress should reject these new proposals which are more likely to make the market worse than better. The market for prescription drugs should be allowed to continue to evolve and become more efficient through negotiations among the market actors.”
The growing list of experts sounding the alarm on proposals targeting pharmacy benefit companies doesn’t stop there. Rick Hodges, an executive in residence at Ohio University and the former director of the Ohio Department of Health, urged lawmakers to reject legislation targeting pharmacy benefit companies in a Townhall op-ed. He writes:
“Congress should turn their attention to the pressing matters on their agenda and not muck around with a system that’s working. And if they want to address the drug supply chain, a complicated market with many players, they should focus on the entities raking in the highest profits rather than the efficient and positive role PBMs play. As in the Hippocratic Oath, first, do no harm.”
These experts underscore that misguided legislation targeting pharmacy benefit companies does nothing to address the root cause of high prescription drug prices – Big Pharma’s anti-competitive tactics to keep prices high – and will actually increase prescription drug costs and spending for everyone.
Read what economists said in a recent op-ed explaining the misunderstood role of pharmacy benefit companies HERE.
See a recent op-ed from U.S. Senator Rand Paul (R-KY) discussing legislation advanced by the Senate HELP Committee HERE.
See a recent PCMA blog highlighting how former Members of Congress are warning Congress against advancing legislation targeting pharmacy benefit companies HERE.
See what more lawmakers have had to say about pharmacy benefits securing savings for employers and patients, and the root cause of high prescription drug prices – Big Pharma’s anti-competitive tactics – HERE.
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