Pharmacy Benefit Managers (PBMs) are Overcharging, Burdening Patients and Driving Up Healthcare Costs
The role of Pharmacy Benefit Managers (PBMs) in the US healthcare system has come under increasing scrutiny, with recent reports revealing their potential to inflate drug costs for patients, employers, and government programs like Medicare. While PBMs are designed to negotiate lower drug prices and manage prescription benefits, they are often accused of prioritizing profit over patient well-being, resulting in inflated costs that disproportionately impact vulnerable populations.
Key Takeaways:
- PBMs are overcharging: Evidence suggests that PBMs are charging exorbitant fees, exceeding the actual cost of medications by significant margins. For example, Caremark, the PBM for SilverScript Choice, the most popular Medicare drug plan, is charging nearly $2,000 per month for a generic blood cancer drug, imatinib, which is available for less than $50 online.
- Patients are footing the bill: This overcharging directly impacts patients, leading to higher out-of-pocket expenses. In the case of imatinib, Medicare beneficiaries are paying $664 a month, more than ten times the drug’s actual cost.
- PBMs prioritize profit: PBMs are incentivized to maximize their own profits, often at the expense of lower drug costs and reduced patient expenses. This creates a conflict of interest, as PBMs benefit from higher drug prices, not lower ones.
- Clients are realizing the PBM’s true cost: Several organizations have recognized the hidden costs associated with PBMs and are seeking alternatives. Blue Shield of California, for example, discontinued its contract with Caremark, citing "the fundamental issue of the incentive structure".
The Rising Cost of PBMs: A Deeper Dive:
The role of PBMs in the healthcare system is complex and often opaque. While they can provide benefits such as negotiating lower prices and managing prescription benefits, their financial incentives, often shrouded in secrecy, raise significant concerns.
PBMs Profit From Higher Prices:
PBMs make money through a variety of mechanisms, including:
- Rebates from pharmaceutical companies: PBMs negotiate rebates from drug manufacturers in exchange for preferentially listing their drugs on formularies. These rebates, often hidden from patients and employers, can significantly influence the drugs a PBM will promote.
- Pharmacy dispensing fees: PBMs charge pharmacies for dispensing drugs. These fees are not always transparent and can be a significant source of profit for PBMs.
- Administrative fees: PBMs charge employers and insurers administrative fees for managing prescription drug benefits.
These complex financial arrangements create a system where PBMs are financially motivated to drive up drug prices, not reduce them. While PBMs claim their actions are justified by achieving lower costs for their clients, the reality is often more complex.
Examples of PBM Overcharging:
Numerous reports and investigations highlight specific instances of PBM overcharging, underscoring the financial burden they impose on patients and the healthcare system.
- Imatinib pricing: The case of the generic blood cancer drug, imatinib, exemplifies the disparity between PBM pricing and the actual cost of medication. The nearly $2,000 price tag charged by Caremark is significantly higher than the online price, highlighting the potential for inflated costs for Medicare beneficiaries.
- Abiraterone acetate pricing: Similarly, Express Scripts has been charging Hyatt nearly $1,500 per month for the prostate cancer drug, abiraterone acetate, despite its availability online for under $200. This example demonstrates how PBMs are profiting from the price difference, potentially at the expense of employers and their employees.
Impact on Patients and Healthcare Costs:
The implications of PBM overcharging are far-reaching, affecting patients, employers, and the overall healthcare system:
- Higher out-of-pocket costs: Patients are forced to bear the brunt of inflated drug costs, often leading to financial hardship and compromised health outcomes. High co-pays and deductibles become an obstacle to accessing crucial medications.
- Increased costs for employers: Employers also experience the financial burden of PBM overcharging, as their premiums rise to cover these inflated costs. This can impact the affordability of healthcare plans for employees and limit access to high-quality care.
- Strained government programs: Government programs, such as Medicare, are also susceptible to PBM overcharging, generating higher costs for taxpayers and potentially jeopardizing program sustainability.
Fighting Back Against PBM Practices:
The growing awareness of PBM pricing practices has led to calls for reform and greater transparency. Several initiatives aim to address the issue:
- Transparency in drug pricing: Efforts are underway to increase transparency in drug pricing, including the prescription drug price negotiation provision included in the recent Inflation Reduction Act. This provision empowers Medicare to negotiate prices for certain high-cost drugs, potentially setting a precedent for broader pricing reforms.
- Alternatives to traditional PBMs: Some organizations are exploring alternative models for managing prescription drug benefits, such as direct contracting with pharmacies or creating their own independent PBM models.
- Consumer advocacy: Consumer advocacy groups are raising awareness about the impact of PBM overcharging and advocating for policy changes to protect patients and control costs.
The Path Forward: A Call for Action:
Addressing the problem of PBM overcharging requires a multi-pronged approach:
- Policy and legislative changes: Stronger regulations and stronger enforcement are needed to curtail PBM practices that inflate drug costs. This may include requiring greater transparency in pricing, limiting rebates, and establishing independent oversight bodies.
- Consumer awareness: Patients need to be informed about the role of PBMs and how their pricing practices can impact their health and finances. Empowering patients with knowledge allows them to make informed choices and advocate for fairer drug pricing.
- Industry innovation: The healthcare industry should explore alternative models for drug benefit management, potentially focusing on models that align incentives with patient well-being and prioritize cost-effective solutions.
The challenge lies in striking a balance between maximizing profits for pharmaceutical companies and ensuring patient access to affordable medications. Creating a transparent and equitable healthcare system requires addressing the inherent conflict of interest that drives PBM practices and advocating for policies that empower patients and control healthcare costs.
