Congressional leaders like Sens. Chuck Grassley, Kevin Cramer, and others are advancing critically important work to address prescription drug pricing. However, we would like to take the opportunity to clarify some misconceptions. Pharmacy benefit managers are an integral part of the solution to high prices, working on behalf of hundreds of millions of consumers to make treatments more accessible and affordable, and supporting policies to lower costs and improve patient care.
Pharmacy benefit managers are proud to stand between those who pay for healthcare — patients, employers, and taxpayers — and drug manufacturers. To get the best value for prescription drugs, they negotiate directly with manufacturers for discounts off the list price. The savings from these negotiations are passed through to health plans and used to the benefit of patients through lower premiums or reduced costs at the pharmacy counter.
Pharmacy benefit managers agree that greater transparency among all players in the supply chain will help payers and consumers understand the value they’re receiving. For example, real-time benefit tools provided by pharmacy benefit managers inform doctors and patients, at the point-of-prescribing, where a medication is placed on a formulary and its out-of-pocket cost. Supplying transparent information on the most affordable and clinically effective drugs for each patient enhances patient care and improves quality.
Another part of pharmacy benefit managers’ role is the work done with pharmacies to lower costs and improve care. Through value-based care incentives, pharmacy benefit managers work with pharmacies to encourage use of generic drugs and keep patients on their medications. In Medicare, pharmacies are rewarded for meeting generic-use and medication-adherence measures through what is known as direct and indirect remuneration, or pharmacy DIR.
Pharmacy DIR lowers Medicare drug premiums and helps Medicare plans meet government quality standards, both of which benefit patients. To improve DIR transparency and predictability for pharmacies, pharmacy benefit managers support using standardized quality measures developed by independent groups in which pharmacies and pharmacy benefit managers participate.
Pharmacy benefit managers also pay pharmacy claims on behalf of health plan sponsors. For employer plan sponsors, pharmacy benefit managers typically offer a choice between the employer reimbursing the pharmacy benefit manager exactly what he paid the pharmacy or a more predictable, standardized amount. The latter method, sometimes called spread pricing, is widely misunderstood.
Spread pricing is a risk management option used by employers to mitigate the likelihood that some enrollees will use more expensive pharmacies. Many employers prefer payment certainty, and therefore structure contracts so that pharmacy benefit managers take the risk when pharmacies charge widely different prices for a given drug.
In an unpredictable drug pricing environment, pharmacy benefit managers give health plan sponsors the option of certainty, thereby reducing the risk of unexpected spending increases. This is entirely the choice of the plan sponsor.
All of these tools and functions performed by pharmacy benefit managers can be misunderstood but are critically important to lowering costs and improving care.
Indeed, new government research from the Government Accountability Office and the Health and Human Services, Office of Inspector General confirms that rebates negotiated by pharmacy benefit managers in Medicare Part D are passed along to Medicare prescription drug plans and used to lower costs for Medicare beneficiaries. The inspector general’s report also verifies that manufacturer price increases are independent of these negotiated discounts. These independent government reports demonstrate that pharmacy benefit managers are providing value.
Ultimately, only drug manufacturers can set list prices. Pharmacy benefit managers understand that there is still a prescription drug affordability problem for consumers, and we will continue to work with all policymakers to advance policies that lower drug costs and improve outcomes for patients.
J.C. Scott is president and CEO of the Pharmaceutical Care Management Association.
