Americans are paying too much for prescription drugs. Every day, patients complain about the cost of medication, and pharmacies are closing due to the all-time low of prescription reimbursements. We typically blame drug companies, insurers, and our dysfunctional federal government. However, the New York Times seems to be calling out the middlemen, Pharmacy Benefit Managers (PBM). The three largest in our nation, CVS Health, Cigna, and UnitedHealth Group, are causing skyrocketing prices for employers, patients, and the government. Typically, PBMs are meant to reduce drug costs. However, through a New York Times investigation, it is found that PBMs have been steering patients and pharmacies toward more expensive medications, charging markups, and collecting the leftover money for themselves through hidden fees. 1
What makes the role of PBM so crucial in this matter is how they are involved in determining the fates of plan sponsors, patients, and pharmacies. A study done by The Washington State Pharmacy Association (WSPA) and Washington Health Alliance (WHA) released the results of a study showcasing evidence of PBMs driving up drug pricing. Through nearly 6 million prescription claims from independent or small-chain pharmacies, along with over 3 million claims from commercial and private plan sponsors, just within Washington alone, it was shown that the average plan sponsor cost was $165,000 higher than any reimbursement provided to pharmacies. 2 It was also seen that there was a 30% increase in plan sponsor costs while reimbursement decreased nearly 3% within the past three years, showcasing the evident disparity between the prices being charged and the amounts being reimbursed. Through the study, it is seen that PBMs are incentivized to charge employers more than necessary to participate in plans, pay pharmacies less than the cost of dispensing medication, pocket the difference, and steer plans and patients to PBM-affiliated mail-order pharmacies to increase PBM profits. 2
Why are PBMs pushing for mail-order pharmacies? It’s because many of the mail-order pharmacies are owned by PBMs, and they’re able to mark up the price of medication. Initially, it was seen that employers began turning to mail-order pharmacies to save money on prescriptions because pharmacies were promising to sell medicines at lower prices. However, drugs that are ordered through mail-order pharmacies are starting to cost more, ultimately increasing the spending of employers.
Most generic prescriptions are marked up to three times more than the average prescription at a retail pharmacy, which answers the question of why PBMs are pushing for mail-order pharmacies. They’re able to make more revenue at half the hassle.
Within the past three years, there hasn’t been much action on that of enforcing more regulation for PBMs. However, just recently, the Senate Finance Committee Chair Ron Wyden has called on the Centers for Medicare and Medicaid Services (CMS) to step up in handling the oversight and regulation of Medicare Part D program requirements. This hopefully initiates more action in protecting pharmacies from unfair practices and contracts due to PBMs. 4
In the letter Wyden wrote addressing the nature of PBMs and its effects on pharmacies, he issued that actions such as enforcing, through auditing, pharmacy price concessions provisions included in the Medicare program should be applied to negotiated prices at the point of sale under Part D or reviewing formal or informal complaints about the PBM contracting practices under Part D received within the last 18 months, and more. However, some are taking more legal action as they face more detrimental consequences due to the power-hungry PBMs. Recently, the Arkansas Attorney General sued PBMs for their role in the opioid crisis, saying that PBMs are to blame for the opioid epidemic. Opioids were placed on lower tiers in formularies and controlled the availability of pain medication that was available to patients. 5 Ultimately, Attorney General Tim Griffin sees it as a way for PBMs to maximize profits at the expense of their patients, something they could have easily controlled.
- The New York Times (2024, June 21). Prescription drug costs: PBMs under scrutiny. The New York Times. Retrieved from https://www.nytimes.com/2024/06/21/business/prescription-drug-costs-pbm.html
- Morningstar (2024, June 25). New study reveals discrepancies in drug pricing by pharmacy benefit managers, costing employers and hurting pharmacies in Washington State. Morningstar. Retrieved from https://www.morningstar.com/news/business-wire/20240625677922/new-study-reveals-discrepancies-in-drug-pricing-by-pharmacy-benefit-managers-costing-employers-and-hurting-pharmacies-in-washington-state
- The Wall Street Journal (2024). Higher drug costs for mail-order prescriptions. The Wall Street Journal. Retrieved from https://www.wsj.com/health/pharma/higher-drug-costs-mail-order-prescription-bf37886f
- Senate Finance Committee (2024). Wyden calls for action to stop PBM middlemen from flagrantly flouting Medicare rules that protect pharmacies. Senate Finance Committee. Retrieved from https://www.finance.senate.gov/chairmans-news/wyden-calls-for-action-to-stop-pbm-middlemen-from-flagrantly-flouting-medicare-rules-that-protect-pharmacies
- KATV (2024). Arkansas Attorney General sues pharmacy benefit managers for role in opioid crisis. KATV. Retrieved from https://katv.com/news/local/arkansas-attorney-general-sues-pharmacy-benefit-managers-for-role-in-opioid-crisis-tim-griffin-pbm-optum-express-scripts-federal-law-lawsuit-court-case-ag-retail-formularies
