We have not written about pharmacy benefit managers (PBMs) in a while and, given some recent (startling) headlines—and the fact that Washington is rather quiet during this Presidents’ Day recess—we thought it was time for a refresher.
Let’s take the old, but important, news first. What is a PBM, and how do they impact drug prices?
As we explain here, PBMs are administrative middlemen hired by insurers and health systems to negotiate rebates on drug prices from manufacturers. In theory, they are supposed to pass these savings onto patients. In reality, however, PBMs pocket large chunks of the rebates as profits. We don’t know how much because, as we note here, their practices are opaque. But the sum is likely in the tens of millions.
The three top PBMs by market share are Caremark (owned by CVS Health), Express Scripts, and OptumRx. (Becker’s Hospital Review also provides a helpful overview of insurers’ PBM partners here.)
Now let’s look at the most recent PBM news.
A report issued by the Florida Pharmacy Association and American Pharmacy Cooperative Inc. last month confirms PBMs often operate at the expense of patients. Specifically, the report provides “concrete evidence” that PBMs steer patients to their affiliated pharmacies “by requiring that insurance plans cover certain medications only if the prescriptions are filled at those specific pharmacies.” (Emphasis in that sentence is our own.) The Florida Pharmacy Association said, for consumers, these “anti-competitive actions” result in fewer choices and “higher medication costs.”
If that report was not enough, the same week the Chicago Tribune reported “pharmacists at major chains like CVS”—which, along with Caremark, the PBM, is owned by CVS Health—say the chains are putting patients at risk. The Tribune reported that, in letters to state regulatory boards and in interviews with journalists, pharmacists “described understaffed and chaotic workplaces where … it had become difficult to perform their jobs safely.” One 17-year-old, for example, was “about to take another asthma pill when she realized CVS had mistakenly given her blood pressure medication intended for someone else.”
A pharmacist in Texas said, “I am a danger to the public working for CVS.” Another in Pennsylvania warned, “The amount of busywork we must do while verifying prescriptions is absolutely dangerous … Mistakes are going to be made and the patients are going to be the ones suffering.”
According to the Tribune, the American Psychiatric Association “is particularly concerned” about CVS because the company “routinely ignores doctors’ explicit instructions to dispense limited amounts of medication to mental health patients.”
Pharmacists say the entire system, which includes PBMs, deserves blame for the unsafe environment. As the Tribune reported, “Much of the blame for understaffing has been directed at pressure from companies that manage drug plans for health insurers and Medicare. Acting as middlemen between drug manufacturers, insurers and pharmacies, the companies — known as pharmacy benefit managers, or PBMs — negotiate prices and channel to pharmacies the more than $300 billion spent on outpatient prescription drugs in the United States annually.”
The founder of the firm 3 Axis Advisors, which has evaluated PBM practices in several states and compiled data for the Florida Pharmacy Association report discussed above, said what it found in the Sunshine State should be “an alarm bell for state and federal officials across the country” because it “reveals there’s much more to prescription drug costs than meets the eye.”
We agree, and can only hope lawmakers will bring more light to this issue after their recess ends.
Want more information on PBMs? Check out our previous posts here and here.