How beneficial are prescription drug programs?

A litany of opaque dealings by pharmacy benefit managers was emphasized in last week's article ("Small drugstores, high drug prices," Jan. 24 Weekly News).

To recap, PBMs are middlemen who negotiate with insurance companies as well as drug manufacturers to manage prescription sales and reimbursements from insurance companies to drug stores. PBMs develop formularies (drug lists) to negotiate contracts with manufacturers on what drugs they recommend – taking a sizeable kick-back for themselves – and tell drug stores what prices they can charge – while steering patients to their own in-store or mail-order pharmacies.

The Association of Mature American Citizens, a conservative advocacy group, reports "the operations of these middlemen take place out of sight. Rules for the disclosure of contractual and other arrangements are practically nonexistent."

The system is now so complex – and not the least bit transparent – that the slow crowding out of family-owned drugstores nationwide has seemed to be random and independent. But the billions of dollars amassed by PBMs has triggered investigations by the Federal Trade Commission and inspired strong bipartisan support for PBM reform in Congress and in several states.

National Public Radio reported on July 7, 2023: "Other sectors of health care are alarmed by the power of the PBMs and are appealing to the Biden administration and Congress to rein them in. Drugmakers are especially up in arms ... but employers, pharmacies, doctors and even patients chafe at PBM practices like "spread pricing... Non-PBM-affiliated pharmacists... say the PBMs squeeze their businesses by forcing them to sign opaque contracts that include claw backs of money long after sales take place. PBMs often steer patients using expensive drugs to their (own) affiliated pharmacies cutting revenue to independents. Doctors say PBMs act as gatekeepers for the insurers they represent, blocking or slowing coverage of necessary drugs ... the vertical integration of the PBMs enables unfair competition – an issue the Federal Trade Commission is studying."

In May 2023 the journalist Joshua Cohen, of Forbes magazine, reported that the Senate Health, Education, Labor and Pensions Committee advanced several new bills related to pharmacy benefit manager reforms. "The Pharmacy Benefit Manager Reform Act (S.1339), led by Chairman Sanders (I-VT) and Ranking Member Cassidy (R-LA), bans spread pricing and certain claw backs by PBMs and requires that rebates be passed through to plan sponsors."

However, this bill – and others – while promoting increased transparency – "requires pass-through of PBM rebates to employers and other plan sponsors, but not to patients."

Cohen, emphasizes that while bipartisan, the legislation does not delink PBM compensation from the formulary prices. Formularies are approved drug lists created by PBMs. PBM earnings are based om the formulary prices of drugs – the higher the price, the more money PBMs will make. They therefore place higher priced drugs on their formularies.

Eventually, patients wind up paying more out-of-pocket as patient's co-insurance is based on list (formulary,) not net prices.

Since manufacturers rely on product sales to generate profits and finance research and development, delinkage would disrupt this channel allowing the product to be sold at prices closer to production costs insuring better access to those who pay – the consumer.

Delinking eliminates vertical integration, lowers drug prices and improves access – for patients - while saving money for taxpayers, patients and employers.

Therefore, delinkage is essential to PBM reform. But, according to Cohen, the Senate "balked at including it in the legislation package."

Unfortunately, reports Cohen, "there's been some watering down of PBM reform initiatives." The bills no longer delink PBM compensation from the formulary prices of drugs."

U.S. Sen. Maria Cantwell, D-Washington, sponsored Senate Bill S.4293, the Pharmacy Benefit Manager Transparency Act of 2022

It would prohibit PBMs from billing insurance companies a different amount than they reimbursed the pharmacy to end pocketing the difference; prohibiting claw backs or increasing fees or lowering reimbursements to pharmacies – which may have saved the La Conner Drug Store – and PBMs must report directly to the Federal Trade Commission information about payments received from health-care plans and fees charged to pharmacies. It would give teeth to state attorneys and the FTC to enforce the provisions of the bill.

If the FTC "finds evidence of anti-competitive practices, enforcement of punitive action would be bolstered by having laws on the books," Forbes Magazine advicates.

The American public can only hope that two important pieces of legislation – cost savings to the public and delinkage of rebates and formulary list prices be incorporated in the final bills. With over 100 bills introduced in Congress in the last couple years, that seems unlikely.

Several states have introduced over 100 bi-partisan bills on PBM reform, as well.

The National Library of Medicine found pharmacy closures lead to health risks, particularly for older people. Anxiety already experienced by Swinomish and La Conner residents is evident in readers' letters to the Weekly News and social media posts.

This is Booth's second Weekly News article looking at Pharmacy Benefit Manager programs.