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CAPD Statement on the Latest Set of Pharma-Funded Attacks

An opinion piece in The Washington Post this week repeated a laundry list of pharma-funded attacks on pharmacy benefit managers (PBMs), under the guise of promoting a proposed rule currently pending with the Office of Management and Budget. The basic premise about what’s driving high drug prices and consumer costs is deeply flawed.

The role of PBMs in the supply chain and the goal of PBMs for the patients, employers, and government programs they serve is to drive down the sky-high drug prices set by pharmaceutical companies. Research has shown that PBMs save every American an average of $941 per year. For every $100 spent on prescription drugs, costs would be $45 higher without PBM negotiations.

One way PBMs generate savings is by negotiating discounts from drug companies in the form of rebates. These rebates are used by health plans to reduce out-of-pocket costs for consumers at the pharmacy counter and to keep health care premiums stable. Many plans, for instance, already offer their clients the option of applying 100 percent of the negotiated rebates at point of sale, lowering costs for beneficiaries. If rebates were to go away, consumers in these plans could see the costs of their prescription drugs actually increase. In Medicare, where effectively 100 percent of rebates are passed through to the Medicare program, seniors who rely on Medicare Part D could see premium increases of 52 percent without a serious restructuring of the way in which prices are set and negotiated.

What’s more, drug companies would need to voluntarily cut their prices by 45 percent in order to account for the loss of rebates as a negotiating tool. There is no evidence to date that this will happen. In fact, after accounting for rebates, the cost of brand name drugs still rose by 62 percent between 2011 and 2015, according to the HHS Inspector General.

Rebates are an important tool used by PBMs to manage rising drug costs and reduce out-of-pocket spending, but not the only one. In 2016, PBMs saved Medicaid – which covers 1 in 5 Americans – $6 billion dollars, by increasing the utilization of clinically appropriate, lower-cost generics; building preferred pharmacy networks, and using data analytics to cut down on waste, fraud and abuse.

PBMs already provide their clients with savings; now they offer more ways for those savings to reach the consumer DIRECTLY be it through $0 copays on generic drugs or point-of sale rebates. For example, CVS Caremark offers members an online tool that allows them to compare costs, resulting in an average savings of $130 per fill when a lower-cost alternative is presented. Their retail pharmacists use an Rx Savings Finder to help members save an average of $420 per year at the pharmacy counter.

The truth is: neither PBMs nor drug rebates are the cause of high drug prices. Gutting negotiations will only serve to further drive up prices for those who can least afford it.