(Washington, D.C.) — The Pharmaceutical Care Management Association (PCMA) today issued the following statement on a new research paper, “Ending Pay for PBM Performance: Consequences for Prescription Drug Prices, Utilization, and Government Spending,” authored by University of Chicago Professor of Economics Casey Mulligan and published today by the National Bureau of Economic Research (NBER). Dr. Mulligan previously served as Chief Economist of the White House Council of Economic Advisers.

Numerous bills in Congress narrowly focus on pharmacy benefit companies and, under the guise of “drug pricing legislation,” restrict the incentives for pharmacy benefit companies to lower prescription drug costs and, as a result, significantly risks increased drug costs. The NBER paper’s findings puts a billion-plus-dollar price tag on a significant policy that embodies the negative fiscal impact of anti-PBM legislation.

The new NBER working paper specifically examines the consequence of prohibiting linkages between pharmacy benefit companies’ compensation and prescription drug list prices 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.

“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 states in the paper.

Key Takeaways:  

1. 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.

2. Taxpayers Pay More for Medicare: Annual federal spending on Medicare Part D premiums would increase $3 billion to $10 billion.

3. 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.

4. Reduces PBM competition: Introducing a new obstacle between buyers and sellers (in this case between health plan sponsors and PBMs) is unlikely to increase competition or new entrants in the PBM market or improve patient welfare.

“The report by Dr. Mulligan is emblematic of proposals that undermine pharmacy benefit companies’ leverage to effectively push back against drug companies to lower drug prices and reduce costs for employers and patients,” said JC Scott, President and CEO. “Unfortunately, Congress is not examining the entire prescription drug supply chain in order to identify policy approaches that actually reduce drug costs. It’s our hope that economic research will allow lawmakers to refocus on policies that promote more competition in the prescription drug marketplace, including policies that eliminate some drug company practices that extend patent protections to keep drug prices high.”

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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.