As Congress returns to Washington, Ike Brannon, senior fellow at the Jack Kemp Foundation, explains how state and federal efforts to undermine the role of pharmacy benefit managers (PBMs) would do nothing to reduce drug costs in a new op-ed published in RealClearMarkets. Brannon writes:
“For the last few years, both Congress and the White House have attempted to limit the activities of pharmacy benefit managers (PBMs), ostensibly to limit the cost of prescription drugs. There was a fervent, but unsuccessful, push for such government mandates around the most recent government funding deadline in Washington. There have also been nearly twenty Congressional hearings focused on the industry in the last year, and there are a dozen different pieces of legislation currently being considered by a half dozen different committees…
“However, PBMs are not the bogeyman they have been made out to be, and attempts to ascribe high drug prices to them do nothing but help the real culprits keep hiding behind the curtain. Independent pharmacists and pharmaceutical manufacturers want to hamstring PBMs precisely because PBMs’ efforts effectively reduce costs to the benefit of consumers, taxpayers, health plan sponsors, and much of the rest of the healthcare system – savings that limit the profits of pharmacists and manufacturers.”
Brannon goes on to explain how the misguided polices being considered would weaken the ability of pharmacy benefit companies to negotiate with Big Pharma, leading to higher prescription drug costs, and higher profits for big drug companies:
“Most of the regulatory actions currently being proposed would ultimately limit the ability of PBMs to reduce drug benefit costs and improve patient health. While it is clear how these would increase costs for businesses to benefit pharmaceutical companies and pharmacies, it is far from obvious how any of these would benefit patients…
“At the federal level, a primary target for PBM criticism is the fact that PBMs negotiate rebates rather than discounts, as the Robinson-Patman Act effectively prohibits the latter. Rather than amend the law to allow up-front, volume-based discounts, misguided anti-PBM proposals would instead mandate that all rebates be passed onto the health plan sponsor. Such a provision is largely, as most rebates do end up beginning passed through. Proposed legislation would also prohibit PBMs from having their revenue tied to the size of the rebate obtained, which would impact the incentives of PBMs to negotiate discounts altogether.
“The last provision inadvertently reveals the unfortunate reality of most efforts to weaken PBMs, which is that these have nothing to do with protecting consumers or managing costs and everything to do with protecting the profits of the other actors in the market for pharmaceutical drugs.”
Brannon concludes by cautioning policymakers to understand the negative implications of these proposals for consumers, patients, and families:
“The demonization of PBMs is merely a harmful political sleight-of-hand to direct anger for high drug prices away from pharmaceutical companies and onto an entity that negotiates against drug companies, and others in the supply chain, to reduce costs.
“Policymakers would be wise to recognize the perils of unnecessary regulations aimed at PBMs, and the negative implications of regulations for consumers and the health care market.”
Read the full op-ed HERE.
See Ike Brannon’s recent 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) 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
