A bipartisan bill introduced in the Senate Tuesday would take aim at the opaque pharmacy benefit manager (PBM) system to improve transparency in a scheme that has an impact on how much independent pharmacies and consumers pay for medicine.
The Pharmacy Benefit Manager Transparency Act of 2022, was introduced by Sens. Maria Cantwell (D-WA) and Chuck Grassley (R-IA).
“The legislation would make it illegal for PBMs to engage in ‘spread pricing’ in which they charge health plans and payers more for a prescription drug than what they reimburse to the pharmacy, and then pocket the difference,” according to a fact sheet. “This practice can result in pharmacies being reimbursed less than their acquisition cost for a drug. And consumers may face higher health insurance plan premiums to cover these middleman costs.”
“PBMs are companies that manage prescription drug benefits on behalf of private health insurers, Medicare Part D drug plans, large employers, and other payers,” according to the FTC. “The largest PBMs are vertically integrated with health insurance companies and specialty pharmacies, giving them financial incentives to steer patients to use their affiliated services.”
Put very simply, if a drug manufacturer prices a drug at $1,000, a PBM often is able to negotiate that price down by 50% in exchange for putting those drugs on their formulary.
“The messed up insurance system in the US has put many people in what they call a high deductible health plan,” Dan Durham, Senior Health Policy Advisor and Executive Vice President for Health Policy at Biotechnology Innovation Organization (BIO) told Bio.News. “Over 50% of the insured have a deductible over $1,500. So, if you haven’t reached your deductible yet, you go to the pharmacy counter. They’re going to charge you $1,000–the full list price for that drug.”
BIO applauded the introduction of the bill—telling the co-sponsors in a letter that it “will further bolster the FTC’s authority to address … the role PBMs play in the market for medicines and whose interests they serve.”
Hundreds of medicines excluded
Meanwhile, a study released this month indicates how another practice of PBMs impacts the availability of drugs.
“In addition to their concentrated negotiating power, PBMs have a variety of tools they can leverage to achieve deep discounts and rebates on medicines,” according to a study by Xcenda. PBMs can exclude medicines from their formularies, providing incentive for drugmakers to give the PBMs a discount.
“Formulary exclusions can limit patient and provider choice and may prevent a patient from accessing a particular medicine unless they pay completely out of pocket or undertake a burdensome appeals or exceptions process pricing and availability of drugs,” the study said.
According to the study, the three largest PBMs’ formulary exclusion lists increased from 850 unique drugs in 2020 to 1,156 unique drugs in 2022, “often excluding medicines for conditions where it is particularly important for patients and physicians to have multiple treatment options, such as oncology and autoimmune disorders.”