In case you missed it, Ike Brannon, health care economist and senior fellow at the Jack Kemp Foundation, published a new white paper, “Recently Proposed Federal and State Legislation To Constrain Pharmacy Benefit Managers Would Not Reduce Drug Costs,” in the Social Science Research Network (SSRN). Brannon writes:

“The role of pharmacy benefit managers, or PBMs, has become scrutinized in the last few years, with independent pharmacists, pharmaceutical companies, and–recently–politicians scapegoating them for many of the perceived ills that afflict the prescription drug market, including what many perceive to be excessively high prescription drug prices…

“PBMs represent an important counterweight to the government-granted market power of pharmaceutical companies that manufacture drugs covered under patent protections. One key driver of efforts to reduce the efficacy of PBMs comes from pharmaceutical companies and independent pharmacists, both of which perceive PBMs as reducing their revenue. 

“Constraining PBMs would neither reduce the amount of money health plans spend on prescription drugs nor improve health outcomes. In fact, some of the proposals being considered at the state level would directly increase costs and effectively reduce drug adherence, leading to predictable, costly, and negative health outcomes.” 

Specifically, Brannon highlights four provisions that are included in almost all of the recent legislation being considered in Congress that restrict pharmacy benefit companies.

Spread Pricing: Also referred to as a risk mitigation model, spread pricing provides employers and other health plan sponsors with cost predictability by giving them a price-certain for prescription drug benefit payments to pharmacies. Every employer has different goals and needs: some prefer predictability, some value cash flow, while others prioritize visibility into discounts negotiated on their behalf. For many small and mid-sized businesses, that means having the option to choose spread pricing and the predictability of fixed pricing for drugs dispensed by pharmacies is what works best for them and their employees. Proposals eliminating spread takes away one of the choices health plan sponsors have when designing their prescription drug benefit. Learn more about why employers use spread pricing HERE.

Delinking: So-called “delinking” proposals ban market-based compensation for pharmacy benefit companies for successfully being able to secure savings for patients. If enacted, “delinking” would increase health care premiums in the commercial health insurance and Medicare markets by nearly $40 billion annually and give Big Pharma a $32 billion financial windfall. See more on the costly effects of “delinking” HERE.

Rebate Pass-Through: Rebate pass-through requires pharmacy benefit companies to pass through 100 percent of the rebates they secure from drug companies. Many health plan sponsors already choose this model and have this option when designing their benefits. In fact, 99.6 percent of rebates are passed directly to Medicare Part D plans and 91 percent to other health plan sponsors, like employers and unions, who use those savings to help patients, including by lowering premiums, reducing cost-sharing at the pharmacy counter or providing more comprehensive benefit offerings. Further, rebates are uncorrelated to drug prices which are solely set by Big Pharma companies. Taking away the flexibility and choices health plan sponsors have will do nothing but increase costs for patients, families, and consumers. Learn more about rebates HERE.

Transparency: Transparency that helps patients and payers is necessary across the entire prescription drug chain. Pharmacy benefit companies already do their part to support and practice transparency, including by reporting to various federal agencies and to the health plan sponsors who voluntarily choose to hire them. However, the drug manufacturers, who alone set the drug prices, do not. Transparency proposals being considered do nothing to address the root cause of high drug prices – Big Pharma’s anti-competitive tactics – but require the 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. Find out more on transparency HERE.

Brannon concludes:

“While politicians want to pretend that there are sizable savings to be had from removing “the middleman,” there is no free lunch to be had here. Proposals to limit PBMs’ negotiating power on behalf of their clients would effectively give pharmaceutical companies more market power, and there is no logical reason for anyone to believe that would result in lower prices. Furthermore, no one who puts forth a proposal that adds a per-prescription fee at the pharmacy counter or limits the ability of PBMs to negotiate discounts or encourage direct delivery of drugs can pretend that these would somehow reduce costs.  

“Some pharmacists and drug companies have pushed the notion that PBMs do not provide services that benefit the market because they reduce the pharmacists’ profits by limiting drug costs. Giving them what they want will benefit their bottom line, but it will not help patients, and it would very likely raise costs.”

Read the full white paper HERE.

Learn more about the role and value of pharmacy benefit companies and how Big Pharma’s practices lead to high drug prices 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