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I would like to address the arguments in Jessica Watkins’ Aug. 20, 2024, opinion piece “Rep. Moore, choose the right drug pricing approach.”
Like all great falsehoods, Watkins’ argument contains a kernel of truth. Brand-name drug manufacturers are primarily focused on quarterly profits, and “patent thickets” illustrate this. But Watkins’ position that pharmacy benefit managers (PBMs) are a bulwark between American citizens and prescription cost increases is at best misinformed and, at worst, disingenuous.
PBMs indeed negotiate rebates on brand name drugs, ostensibly in the interest of passing along these rebates to payers to lower cost, yet they will not disclose the amounts of these rebates. How, then, are payers (the recipients of citizens’ premium and tax dollars) to check the math and verify that they have saved money on these drugs? Further, each of the “big three” PBMs have, in recent years, set up subsidiary Group Purchasing Organizations (GPOs) to “better manage” name brand drug rebates. Two of the three are located offshore. If a PBM’s intent is to transparently demonstrate that its rebate practices save the consumer money, then why would it locate a GPO in Switzerland? In a world of technology allowing instant connections across the globe, the argument that their GPO was located simply because of proximity to manufacturers falls short.
PBM formularies (lists of covered drug products) were once dictated by the least expensive alternatives. In the last decade, PBMs have shifted this model to requiring name brand drugs for which significantly less expensive alternatives are available. This is solely because the rebate on the brand name drug is profitable for the PBM, and it directly increases costs to the consumer.
For example: One popular brand name inhaler for the treatment of chronic lung disease wholesales for about $250. A generic alternative has been available since 2019 and wholesales for about $75 (70 percent less). The major PBMs almost entirely reject claims for the generic product, which means that regardless of copay, the patient’s benefit is paying the retail price of the brand product. For patients with high deductible plans or Medicare Part D plans (which use a running sum of the patient’s total annual spend to determine when that patient is responsible for higher copays), this translates to a direct increase in out of pocket spend for the drug.
Is the rebate that the PBM collected 100 percent passed through to the patient’s healthcare fund? Or is 10 percent passed through? The PBMs are reticent regarding the disclosure of this information. We are to trust, but not verify.
This rebate scheme not only increases patients’ out of pocket costs, but also inflates the cost of the associated generics. The three largest PBMs control 80 percent or more of the drug market here. When all three reject claims for generic drugs in favor of collecting rebates on the brand formulation, only about 20 percent of the market is left for generic manufacturers, which discourages them from entering the market for that drug. Where there would have been a dozen generic manufacturers of a generic before this PBM practice began, now there are three or four. This reduces free-market competition and inflates the price of the generics.
PBMs and their public relations departments dispute this argument, but will not refute it with verifiable numbers. The largest PBMs have become the de facto stewards of prescription drug therapy in the U.S. All good stewards are transparent.
PBMs will not be good stewards of our taxes and premium dollars unless they are forced to be transparent.
Josh Hardin, Pharm.D., is a resident of Vestavia Hills and the co-owner of 12 community pharmacies in Alabama.
