PCMA Letter to the Council of Economic Advisers

The Pharmaceutical Care Management Association recently submitted a letter to the Council of Economic Advisers.

Click here for the letter

PCMA’s letter includes the following points:

1. The report offers no evidence to back its claim that the drug marketplace “suffers” from high concentration among PBMs. The Federal Trade Commission has thoroughly scrutinized this issue and concluded there is significant competition among PBMs, which benefits consumers. Furthermore, the Sood paper (on which CEA bases its assertions) states that the top three PBMs comprise 66% (not 85%, as CEA asserts) of the marketplace, which is typical among mature industries. While Sood makes no recommendation to reduce market concentration among PBMs, he does note that patent exclusivity on certain drugs “confers a complete monopoly” for brand manufacturers.

2. CEA’s assertion that PBMs exercise “undue market power against manufacturers” conflicts with HHS Secretary Azar’s comments that PBMs contribute to lower net costs for consumers and are part of the solution to higher costs. In fact, some of the highest priced drugs offer no discounts or rebates to PBMs. The launch of the $84,000 drug Sovaldi was a very public example of this. This is a major problem in Medicare Part B where there are high prices despite the presence of neither PBMs nor rebates…just government benchmark pricing.

3. It’s incorrect to imply PBMs are at odds with Part D plans or beneficiaries. First, most PBMs are owned by or affiliated with health insurers. Second, the health plans that don’t own PBMs choose to hire them (after a rigorous competitive process) because they reduce costs. No one is required to contract with a PBM. Likewise, Part D beneficiaries enjoy a 90% satisfaction rate and choose their own plan according to their particular needs and interests.

4. It’s untrue to assert that PBM discounts and rebates are a “secret” to the Centers for Medicare and Medicaid Services (CMS) in Part D. CMS is well aware of these, understands how they reduce costs for consumers, and approves each Part D plan before it is marketed to beneficiaries.

5. While Sood asserts that “more than $1 in every $5 in spending on prescription drugs goes towards profits of firms in the pharmaceutical distribution system,” these firms include manufacturers. Sood goes on to say that the “total net profit on a $100 expenditure is $23, of which $15 is captured by manufacturers and the remaining $8 by intermediaries,” and he also says this is consistent with the supply chains in other industries. Notably, he asserts that PBMs make only a 2.3% profit while drugmakers make what he calls “excessive returns” of 28% profit (or over 10 times the profit of PBMs).