While debating important legislative proposals that can impact patients’ health and access to medications, the discussion should rely on solid facts and evidence.

Today, we’re highlighting new reputable third-party research and analyses by economists which underscore that legislation focused on pharmacy benefit companies will do nothing to lower the cost of prescription drugs for patients. In fact, legislative proposals currently being debated in Congress could raise drug costs.

Economic Research Paper: “Ending Pay for PBM Performance: Consequences for Prescription Drug Prices, Utilization, and Government Spending”

University of Chicago Professor of Economics Casey Mulligan authored new research that was published Monday by the National Bureau of Economic Research (NBER). The research analyzes the economic impact of “delinking” – a proposal to ban list price-based compensation for pharmacy benefit companies, ending pay for performance incentives in Medicare Part D.

Key Takeaways:

• Financial Windfall for Big Pharma: The “delinking” policy has the potential to significantly increase drug prices, reduce drug utilization, and redistribute billions of dollars annually from patients and taxpayers to pharmacy companies and drug manufacturers. The result would be up to an additional $10 billion of revenue every year for drug companies, while costing patients and payers up to $18 billion.
• Taxpayers Pay More for Medicare: Annual federal spending on Medicare Part D premiums would increase $3 billion to $10 billion.
• Higher Premiums for Seniors in Medicare Part D: Reducing the negotiated rebates and discounts PBMs pass to health plans to lower drug costs for patients and health plans could lead plans to raise premiums to finance drug benefits. Eliminating the pay for PBM performance incentives could also reduce insurance coverage and appropriate drug utilization as costs for patients rise.

Mulligan states:

“This policy would significantly change drug pricing and utilization and shift billions of dollars annually from patients and taxpayers to drug manufacturers and retail pharmacy companies.” 

Competitive Enterprise Institute (CEI)

CEI published a new study, A Free Market Solution for Drug Distribution, that describes and explains the role of pharmacy benefit companies in the U.S. healthcare system. Joel Zinberg, MD, senior fellow at CEI and Director of the Public Health and American Well-Being Initiative at Paragon Health Institute, writes:

“PBMs are a free market solution that enhances competition through group purchasing and negotiated discounts… This is particularly important in the world of prescription drugs where manufacturers can be sole source providers of new, patent protected, brand name drugs or sometimes older generic drugs that have only one maker and where the top three wholesalers make up more than 80 percent of the market and the top three pharmacies more than 50 percent.” 

Dr. Zinberg goes on to analyze pending legislative proposals that dramatically impact the tools PBMs have available to deliver savings to employers and patients:

“The legislation is likely to be counterproductive, resulting in reduced competition, higher costs, and an end to the natural evolution in the market of terms and arrangements which benefit the actors in the drug distribution system.” 

Matrix Global Advisors

Rounding out recent research on anti-PBM legislation by top economists is a report by health policy researcher Alex Brill of Matrix Global Advisors, Understanding the Role of PBMs in the US Drug Pricing Debate. The report examines how and why PBMs function and provide value, cautioning that targeting PBMs’ incentives and ability to negotiate lower prices with manufacturers could result in higher total drug spending. Brill encourages Congress to address Big Pharma’s anti-competitive practices to truly lower prescription drug prices:

“As Congress ostensibly works to lower drug prices, it has considered a range of policy proposals but seems fixated on PBMs. Ironically, it has at its fingertips the opportunity to pass meaningful policies that address drug prices. Brand drug manufacturers are known to use various tactics to block competition and maintain their monopoly power on lucrative drugs, including manipulating the regulatory system and using strategies known as patent thickets and product hopping… It is vital that lawmakers recognize and pursue effective strategies that promote competition and reject policies that could yield the opposite.”

The message from economic experts is clear: Pharmacy benefit companies provide incredible value and critical services to employers, plan sponsors, and patients – and the pharmacy benefits of Americans must be protected. There are opportunities for Congress to have a real impact on drug prices by focusing on Big Pharma’s egregious and anti-competitive practices and the price-setting power that drug companies alone hold.

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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