Learn The Facts

  • What are Pharmacy Benefit Managers and how do they make drugs more expensive?

    Pharmacy benefit managers (PBMs) are administrative middlemen hired by insurers and health systems to negotiate rebates on drug prices from manufacturers. In theory, PBMs are supposed to pass these negotiated savings onto consumers and patients. But in reality, many PBMs pocket large chunks of these rebates as profits. Industry analysts can’t be sure how much PBMs take away from patients because they rely on a complex and secretive negotiating process. But there are some examples. According to a recent study, a PBM purchased a generic version of Novartis’ cancer drug Gleevec for $84 a pill and later sold the same pill to Indiana’s Medicaid program for $300. In another instance, a New Jersey Hospital system found out that their PBM was increasing costs on every prescription they filled by between $5 and $65. In one year, this cost the Hospital system over $1.3 million. PBMs promise that they provide savings for patients and insurers through negotiation, but in reality, their business model relies on a lack of transparency.
  • How has the biopharmaceutical industry helped patients?

    In the last half century, American life expectancy has increased by over ten years for both men and women. The President’s Council of Advisors in Science and Technology partly attributed this groundbreaking achievement to innovative medicines, treatments and cures developed by the industry. For instance:

    • Since 1995, the death rates for patients with HIV/AIDS has decreased by 85 percent,
    • Since 2001, heart disease death rates have declined by 30 percent,
    • Since 1991, cancer death rates have gone down by 22 percent,

    Biopharmaceutical companies have also developed medicines that have extended the lives of patients with terminal illnesses, limited the number of costly and time-consuming hospital visits, and provided much needed relief for painful and uncomfortable symptoms. Critics of the biopharmaceutical industry often fail to point out that these remarkable achievements.

  • Are prescription drugs solely responsible for driving health-care costs higher?

    No. Since 2008, the amount of money Americans spent on prescription drugs only increased by 1 percentage point annually, far lower than other health-care services. Once rebates and other discounts were accounted for, per-capita spending fell by 2.2 percent. In a reflection of that trend, premiums for Medicare prescription-drug plans are projected to fall for the second year in a row in 2019. In contrast, spending on hospitals and physicians have increased by 4.7 and 5.4 percent, respectively.
  • Why do I feel like I am spending more on prescription drugs?

    Spending on prescription drugs has actually declined in recent years, but there are a number of other factors driving out-of-pocket costs higher. For starters, insurance companies are shifting a higher share of health-care costs to their patients. Since 2006, deductibles have skyrocketed by 300 percent, and the amount patients pay for coinsurance has nearly doubled. Insurers and pharmacy benefit managers also keep the bulk of the savings offered by drug makers in the form of rebates or other discounts. And hospitals markup prescription drugs by almost 500 percent.

  • Why do some innovative new therapies have such high list prices?

    Bringing new treatments to market is enormously expensive and time-consuming. The average cost to develop a new prescription drug exceeds $2.8 billion, and the process takes more than a decade. Just 10 percent of the new treatments that make it to Phase 1 of the Food and Drug Administration’s exhaustive testing process are ever approved. And just two out of every 10 new treatments approved ever generates enough revenue to recoup the money spent to develop it. Additionally, many drug makers offer rebates and other big discounts to significantly lower patients’ out-of-pocket costs for these new medicines. That explains why more than nine out of every 10 publicly traded biopharmaceutical companies don’t earn a profit.

  • What’s wrong with importing drugs from other countries?

    Safety is the biggest concern. Other countries don’t observe the same strict safety and testing standards that we do in the U.S. Four former heads of the Food and Drug Administration warned that importing drugs from other countries would “harm patients and consumers and compromise the carefully constructed system that guards the safety of our nation’s medical products.” Current FDA Commissioner Scott Gottlieb raised similar concerns in a 2016 piece in Forbes. Gottlieb further noted that imported medicine “wouldn’t be much cheaper than drugs sold inside our closed American system.”

  • Why shouldn’t the government be allowed to negotiate directly with drug companies?

    There is already robust negotiation in Medicare. Pharmacy benefit managers (PBMs) representing as many as 120 million Americans negotiate rebates that regularly reduce the list price of medicine by as much as 30 percent, but PBMs don’t always pass those savings along to their patients, according to the Centers for Medicare and Medicaid Services. The Congressional Budget Office has said the secretary of Health and Human Services would not be able to negotiate deeper discounts than the private market, unless the government imposed restrictions on the medicine covered. And those restrictions would hurt seniors who depend on the popular Part D drug plans to buy their prescription medicine.

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