Advocacy Group Claims PBMs Increase Healthcare System Costs

Sacramento, CA - The PBM Accountability Project, reports it is a coalition made up of stakeholders across healthcare, labor, business, pharmacy and consumer/patient advocacy. It is working to advance solutions to help redirect prescription drug savings from PBMs back to patients, employers, health plans and taxpayers.

It just released a new report that it claims sheds light on how pharmacy benefit managers (PBMs) are finding new and hidden ways to profit off of the role that they play in managing prescription drug benefits for consumers, businesses, unions, government and other payers.

The report, "Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers," claims that between 2017 and 2019, PBM gross profit increased by 12%, from $25 billion to $28 billion, but the sources of these profits changed substantially over the same period.

The report also says that, while total PBM gross profit increased over the study period, the sources of PBM gross profit shifted due to changes in contracting practices, competitive pressures and public scrutiny.

- - PBM gross profit from retained administrative fees paid by manufacturers for services provided by PBMs increased 51%, from $3.8 billion to $5.7 billion.
- - Gross profit from PBM-owned mail order and specialty pharmacies increased by more than 13% from $8.9 billion in 2017 to $10.1 billion in 2019.
- - Gross profit from "other sources," including spread pricing, pharmacy fees and clawbacks, fees collected from payers, and other non-administrative fees collected from manufacturers grew by nearly 26%, from $8.5 billion in 2017 to $10.7 billion in 2019. Although these "other sources" constitute nearly 40% of all PBM gross profit, analysis of the publicly available financial data sheds little light on how much gross profit is derived from the specific components.

The report discusses the market dynamics and misaligned incentives that have resulted in system-wide inefficiencies and allowed PBMs to drive up costs for patients, employers and the overall health care system:

- - PBMs benefit directly from prescription medicine list price growth, leading to misaligned incentives in the system. Several sources of PBM revenue for medicines are linked directly to the list price of the medicine. When the list price of a medicine goes up, the PBM often collects more revenue. These misaligned incentives can drive up costs for plans and patients.
- - Excess complexity and information asymmetry in the market prevent payers and patients from properly evaluating PBM decisions or drug costs. Pricing complexity and lack of transparency allows PBMs to buy products or services from one stakeholder in the system and sell the same products or services to other stakeholders at higher prices, without the payer understanding the true cost or inflationary nature of the services purchased.
- - Lack of meaningful PBM industry standards, limited transparency and lack of regulatory oversight enable PBM revenue growth. Many PBM contracting mechanisms and revenue sources lack agreed-upon definitions, providing PBMs with the broad discretion to design the terms of a complex contract in their favor.

It concludes by saying these findings highlight the need for consideration of new approaches to realigning PBM incentive structures as part of prescription drug policy discussions, including delinking PBM compensation from the list price of medicines, requiring rebates and discounts to be shared with plans and patients at the pharmacy counter, ensuring patient choice of pharmacies, limiting spread pricing within Medicaid, and establishing disclosure requirements for employers and commercial health plans.

Source: WorkCompAcademy.com

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