Letter to the editor: Rein in pharmacy benefit managers

Photo courtesy Wikimedia Commons

To the editor:

As Americans, we believe in the value of free markets to deliver consumer choice, quality and best price. This contrasts bureaucratic government price setting that discourages innovation and often leads to rationing. But we also recognize some regulation is necessary to ensure a fair playing field. What pharmacy benefit managers (PBMs) have done to the pharmaceutical marketplace is the farthest thing from fair.

PBMs have been around for years. Originally created to help insurers manage paperwork, they eventually took on the task of helping insurance plans negotiate prices with drug manufacturers. Their job was to get the lowest price for patients, many of whom are the elderly and the poor.

But over time, PBMs have become more and more powerful, telling your doctor what drugs can be prescribed to you under your plan and limiting your access to low-cost options. Increasingly, the drugs that are most available to you are also the most expensive. The result is higher co-pays and out-of-pocket costs for you.

So how did this go wrong? How is it that the people who are supposed to be negotiating lower drug prices for the patient are not doing so?

One key problem is the way PBMs make their money. They have rigged the system so their pay is linked to the price of drugs. The higher the cost of a drug, the more money they make. And of course, the higher the price of the drug, the more you pay because your co-pay is often calculated as a percentage of the price of the drug. This pay scheme for PBMs creates exactly the wrong incentive. If PBMs work effectively for patients and lower drug costs, their profit shrinks. No wonder PBMs like high drug prices.

This linkage between drug prices and PBM pay needs to be broken. Congress, on behalf of Medicare and Medicaid programs that subsidize a lot of drugs for seniors and low-income Americans, should demand that PBM pay be de-linked from drug prices. PBMs should be rewarded when they lower drug prices, not for keeping them high.

Effective free markets require vigorous competition.

Among PBMs there is little competition. Three large companies control 80% of the market. And each is part of a large conglomerate that own insurance companies and even pharmacies. Owning pharmacies means they can prohibit you from using your trusted local pharmacy and force you to use their chain or mail pharmacies from which they get a cut. In smaller and rural communities, this can often result in pharmacies closing and leaving patients with no convenient access to drugs nearby.

With all this complicated ownership, it’s not entirely clear who PBMs work for as they go about their business. But what is clear is that they are not always working in the best interest of patients.

Lack of transparency and oversight have allowed these problems to grow. But recently Congress has been holding hearings to expose PBM activity and highlight the need for reform.

One reform measure growing out of those hearings is H.R. 2880. This legislation would ban PBM compensation from being linked to high drug prices and incentivize the PBM industry to instead negotiate lower prices for consumers. It also requires a lot more transparency regarding how PBMs renegotiate prices and insists that more of the negotiated savings actually get into the pockets of the patients who need to buy the drugs.

Patients need the life-saving and life-sustaining drugs American research and ingenuity have blessed us with. But they want them at a fair price. Reform of PBM practices, such as those embodied in H.R. 2880, will enable the drug marketplace to work more effectively on behalf of patients. These reforms are long overdue. Join me in urging Congress to take swift action to reform PBMs and ensure we get the lower and fairer drug prices we deserve.

Kelley Koch, RN, BSN, MS, Chair, Dallas County Republicans


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