Virtually anyone in America who takes a prescription medication has that medication processed and paid for through a for-profit business called a Pharmacy Benefit Management (PBM) company. These companies provide a very valuable service in the transaction between your local pharmacy and the health insurers or other payers like state or federal health programs.
I am just old enough as a practicing pharmacist to remember a time before these transaction PBMs were around, and billing for prescriptions was a nightmare for everyone concerned. What existed before was a “non-system,” and because of it, many people who needed medications did not get them regularly. PBMs started up in earnest around the late 1970s and have grown to be an integral part of ensuring our access to medications, and that is for the good. But abuses have crept into this system that endanger patients.
By the mid-to-late 1980s, it was recognized that PBMs represented significant “purchasing power” in the health care market, and PBMs took on a new role of negotiating favorable medication price contracts for the clients they served; they became more effective in price negotiations and product rebate programs. Based on these negotiations, drug manufacturers would provide the PBMs contracted, volume-based purchasing concessions and also rebates with the intention of driving down health plan and ultimately patient costs for their medications.
As a pharmacist, I remember reading about the benefits of PBM negotiated prices, and along with my colleagues, viewed these as positive developments to help reduce costs for patients. But wait, hold the line. Somewhere along the way PBMs began to use their dramatic growth and substantial market influence for their own financial benefit rather than to help reduce consumers’ out of pocket costs.
As a result of the growth and power of PBMs, more attention is being paid by policymakers about the role they play in helping or discouraging patients from acquiring their medications. A Government Accounting Office (GAO) study was conducted to better understand the role of PBMs in the Medicare Part D program, the rebates they obtain, and how they earn revenue for these services. The study found that PBMs were able to offset Part D spending by health insurance companies 20 percent in 2016; however, it is critical to note in digging in to analyze the implications of this report that the nature of the health insurance market and the PBM market has over time created many interlaced relationships between PBMs and insurance companies; therefore, cost savings between these two entities becomes sort of a shell-game of where’s the savings. Unfortunately, all too often the savings does not go to the patient.
Additionally, the GAO review was not able to make any statement about the negative impact that the lack of cost savings at the patient level has on adherence to medications. Yet, it is widely understood that as co-pays at the pharmacy increase, adherence to prescription medications decreases. Thus, reducing co-pays may be one of the most important things to be done to encourage patients to take prescribed medications over the long run.
As more attention is given to the role that PBMs play in the prescription drug market and their complex inter-dealings with insurance companies evolves one thing is exceedingly clear, the great influence and power these companies wield must ultimately be used to benefit patients. As such, it is up to our lawmakers and regulators to ensure that any rebates and price reductions and other concessions from free market negotiated purchasing agreements are passed along to the consumer in the form of reduced out-of-pocket costs and lower co-pays.
Dr. Salvatore Giorgianni, PharmD is the Sr. Science Advisor, Men’s Health Network.