Big Pharma’s number one priority for the lame duck is urging Congress to pass a disastrous “delinking” policy for the Medicare Part D program. The policy dubbed “delinking” is nothing more than a money grab from seniors, putting $10 billion into the pockets of Big Pharma and hiking health care premiums for Medicare seniors by $13 billion.

In fact, Axios recently reported that the pharmaceutical industry is “going to be laser-focused on getting it over the finish line.” 

Big Pharma’s war on PBM-secured rebates does nothing to lower prescription drug costs. This harmful policy takes out pay for performance in the prescription drug supply chain, removing market-based forces that are an impactful counterbalance to Big Pharma’s otherwise limitless pricing power.

A research paper, “Ending Pay for PBM Performance: Consequences for Prescription Drug Prices, Utilization, and Government Spending,” from University of Chicago Professor of Economics Casey Mulligan, Ph.D, and published by the National Bureau of Economic Research (NBER), examined the consequences of “delinking” in Medicare Part D.

According to the report, such a policy would undermine incentives for pharmacy benefit companies to maximize competition in the market and secure savings for patients and health plan sponsors, resulting in higher drug prices and handing drug companies a profit-boosting windfall.

Read the research paper from Dr. Mulligan HERE. 

Mulligan’s analysis finds:

• 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.
• 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 approximately an additional $10 billion every year for drug companies, while costing patients and payers up to $18 billion.

“Incentives matter for PBMs just as they do for other market participants. A financial reward for greater rebates and discounts results in greater rebates and discounts. Conversely, eliminating pay for PBM performance would reduce PBM performance. Absent the financial incentives, plans would pay more to manufacturers and to pharmacies because plans would receive less manufacturer rebates and pharmacy discounts,” Dr. Mulligan explained in the paper.

Drug companies themselves have stated how rebates undermine drug company profits and force drug companies to provide bigger rebates, which PBMs then pass the overwhelming majority back to health plan sponsors.

Novo Nordisk reported weaker-than-expected net profits on their blockbuster GLP-1 weight-loss drug due to greater PBM-secured savings and competition in the marketplace. CNBC reported on this as a major takeaway for financial analyst Jim Cramer on Novo Nordisk’s earnings report:  

“Novo Nordisk posted disappointing earnings results before the bell. The company reported a weaker-than-expected net profit in the second quarter, and missed expectations for sales on its weight-loss drug Wegovy … However, Novo Nordisk’s sales miss was the result of higher-than-expected concessions to U.S. pharmacy benefit managers — not by softening demand for its drugs.” 

During Johnson & Johnson’s (J&J) Q2 earnings call, Joseph Wolk, Chief Financial Officer, highlighted that drug companies have been forced to provide greater rebates or price concessions, due to PBMs negotiating with drug companies on behalf of health plan sponsors. In other words, PBMs are doing their job:

“Discounts and rebates six years ago as compared to list price was only about 25% of that list price. Today, that number — and this is not just the J&J number, but an industry number, gravitates toward 60%.” 

And as PBMs secure significant savings on high-priced GLP-1 weight loss drugs, Gordon Brooks, Group Vice President, Controller & Corporate Strategy and Interim Chief Financial Officer of Eli Lilly, highlighted how more employers are choosing to cover them. This underscores the critical role PBMs are playing helping health plan sponsors navigate these high-priced products, balancing access and cost, and making decisions to cover them possible through negotiated savings. 

“We are rapidly building our formulary coverage for Zepbound in the U.S. and as of July 1 had approximately 86% access in the commercial segment. We estimate over 50% of employers have opted into anti-obesity medicine coverage and see that modestly growing as we work to expand coverage.” 

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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.