White Paper from George S. Ford, Ph.D., Highlights How PBMs Drive Down Costs; Cautions Against Misguided Policies Undermining PBMs

(Washington, D.C.) — The Pharmaceutical Care Management Association (PCMA) issued the following statement on new research from George S. Ford, Ph.D., chief economist and co-founder of the Phoenix Center for Advanced Legal & Economic Public Policy Studies. Dr. Ford examined the role of pharmacy benefit managers (PBMs) in the health care system and analyzed the effects of proposed policies that would undermine the cost-saving role of PBMs.

“Dr. Ford’s new research underscores that PBMs are essential to making prescription drugs more affordable for patients and helping health plan sponsors manage health care costs,” said JC Scott, president and CEO of PCMA. “The analysis also confirms that the PBM market is competitive and dynamic, offering a variety of pharmacy benefit options and new programs that consistently deliver the diversity and choice that employers, unions, and other plan sponsors need when deciding to contract with a PBM.”

Findings from the white paper include:

PBM marketplace is competitive:

• The PBM market offers plan sponsors a variety of options and models to choose from. PBMs leverage volume across plan sponsors and work with affiliates or others to provide high-quality, cost-effective prescription drug benefits.
• There are many PBMs in the market, suggesting substantial competition and low barriers to new entrants. And no PBM has more than a 31% market share.
• If employers or insurers are dissatisfied with their PBM, they are free to switch PBMs or not use one at all.
• PBMs have low profit and operating margins compared to large drug manufacturers, on the order of about 5% for PBMs compared to 25% for drug companies.
• Mail and specialty pharmacies increase competition in drug sales, which sets limits on drug prices.

PBMs drive down costs:

• PBMs cut drug costs by 17 to 47 percent.
• From 2007–2018, list prices for brand drugs rose 159 percent but net prices rose only 60 percent.
• Introduction of therapeutic alternatives led to reduced spending by 18.5 percent.

Policies undermining PBMs risk the very savings PBMs deliver:

• Delinking Rebates from List Prices: Evidence shows rebates do not cause higher list price growth and delinking them may reduce PBMs’ ability to negotiate better prices for expensive drugs.
• Banning Spread Pricing: Spread pricing is a voluntary measure, chosen by plan sponsors. It averages a 1.5 percent spread and has declined over time.
• Any Willing Pharmacy Laws: These weaken PBMs’ ability to drive discounts through network design and likely result in higher costs for consumers and plan sponsors.
• Rebate Transparency: Public disclosure of rebates could allow pharmaceutical manufacturers to observe competitor pricing, ultimately raising prices for patients.

Read Dr. Ford’s white paper 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 289 million patients.