In case you missed it, the Brookings Institution released a new analysis, “A Brief Look At Current Debates About Pharmacy Benefit Managers,” which provides an overview of recent legislation targeting pharmacy benefit companies being considered by Congress and how the policies will not effectively lead to lower costs.
The Brookings Institution’s senior fellow of economic studies Matthew Fiedler, fellow and associate director of the Brookings Schaeffer Initiative on Health Policy Loren Adler and senior fellow and economic studies director of the Brookings Schaeffer Initiative on Health Policy Richard Frank write:
“An overarching message is that while there are problems in the market for PBM services, they likely have modest effects on the overall affordability of prescription drugs. Consistent with this, while some PBM reforms currently being considered are worthwhile, achieving large reductions in prescription drug costs will require approaches that look beyond PBMs per se.”
The analysis concludes that eliminating rebates and spread pricing could actually have the opposite of its intended effect by weakening pharmacy benefit companies’ negotiating power against Big Pharma. When speaking about the bills, the authors state, “It might even backfire by weakening PBMs’ incentives to aggressively negotiate prices.”
Pharmacy benefit companies already pass the majority of rebates directly to health plan sponsors. PBMs pass along 99.6 percent of rebates directly to Medicare Part D plans and 91 percent to commercial health plan sponsors, like employers and unions, who use those savings to lower costs or improve benefits for patients. Further, a separate analysis confirms that rebates actually have no correlation with drug list prices, which are set solely by Big Pharma. Fiedler, Adler and Frank note:
“In short, because this type of [rebate pass-through] policy would just bar a specific contract structure—without changing the parties’ underlying bargaining positions—it is doubtful it would meaningfully change how much money changes hands.”
Critically, the analysis finds that eliminating spread pricing will not benefit payers and consumers, but instead could increase payments to pharmacies, whose industry has been stable:
“If banning spread pricing did increase payments to pharmacies, perspectives would differ on whether that was good or bad. While payers and consumers would generally be worse off, pharmacies would generally be better off.”
Read the full Brookings analysis HERE.
A recent report from Alex Brill, founder and CEO of the Matrix Global Advisors (MGA), also analyzed the value of pharmacy benefit companies and the potential outcomes of restricting their ability to secure savings, as proposed in a number of policies being considered by Congress. He said:
“Well-targeted proposals would facilitate drug competition—for example, by ending drugmakers’ anticompetitive tactics like patent thickets and product hopping. But proposals aimed at PBMs—such as delinking or a ban on spread pricing—do nothing to address drug prices. In fact, they risk limiting the effectiveness of existing market-based mechanisms and increasing pharmaceutical spending.”
Read the full white paper from Alex Brill HERE.
The Brookings and MGA analyses underscore that the various policies targeting PBMs being considered by Congress actually do nothing to lower prescription drug costs for the American people and could result in higher costs. Lawmakers should instead focus on legislation that tackles the root cause of high prices – Big Pharma’s anti-competitive tactics designed to keep more affordable competing medications from entering the market.
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