Pharmacy benefit managers (PBMs) are the shadowy middlemen who decide what drugs you can buy, where you can buy them, and at what cost—without disclosing how much they charge to your employer, to your doctor, or your pharmacist. And as HEALTH CARE un-covered has reported, the biggest PBMs are now owned by Big Insurance.
PBMs are a poorly understood component of America’s permanent and escalating health care snafu, but they are a growing presence in our lives. Their business practices have created administrative and financial barriers to the prescription drugs patients need, even as PBMs’ Big Insurance owners rake in record profits.
Pharmacy benefit managers (PBMs) are the shadowy middlemen who decide what drugs you can buy, where you can buy them, and at what cost—without disclosing how much they charge to your employer, to your doctor, or your pharmacist. And as HEALTH CARE un-covered has reported, the biggest PBMs are now owned by Big Insurance.
PBMs are a poorly understood component of America’s permanent and escalating health care snafu, but they are a growing presence in our lives. Their business practices have created administrative and financial barriers to the prescription drugs patients need, even as PBMs’ Big Insurance owners rake in record profits.
In recent months, an independent pharmacy, Osterhaus Pharmacy, in Iowa, sued the major PBMs over DIR fees. In its lawsuit against UnitedHealth, it stated, “This vertical consolidation has served OptumRx well. It now controls not just the pricing of drugs, not just the selection of the drugs covered by Part D Plans, and not just the selection of pharmacy services providers in each Part D network; OptumRx also controls access to almost a quarter of the Medicare beneficiaries enrolled in PBM‐affiliated Plans.”
Matthew Seiler, the general counsel of the National Community Pharmacists Association, explained to HEALTH CARE un-covered that “The DIR fees created this huge black box. Nobody really knew except for the PBM and their parent company what happened to that money. Who benefits from that? Clearly, none of us insured people have seen insurance rates go down. It’s not like medication prices have gone down because of PBM behavior—insulin is skyrocketing, for example. The PBMs are collecting a ton of money.”
With the new rule, DIR fees have been transferred to the point of sale—the Biden administration declined to ban DIR fees altogether—and there is now more transparency about price. The result? “PBMs are now dropping reimbursement rates considerably,” Seiler said. “What they’re trying to do now is drive independent pharmacies out of the market, steering patients to their own pharmacies so that the black box can return.”
The drop in reimbursement rates and consequent financial distress wrought on the remaining independent pharmacies underscores why it’s so critical for Congress to rein in PBMs before independent pharmacies are no longer an option for patients. The Senate Finance Committee in July 2023 passed legislation that would bar spread pricing for PBMs in Medicaid. Under spread pricing, PBMs provide lower reimbursements to pharmacies than the amount charged to Medicaid. (This was a practice that was found in a 2018 audit to cost Ohio’s Medicaid program more than $220 million in the prior year.) The legislation also included provisions that subject PBMs to additional drug pricing transparency.
But instead of including this legislation in omnibus must-pass federal funding bills, it was recently dropped in the latest round after $50 million of PBM lobbying, as The Lever reported. Pharmacists said that the inaction would lead to more closures.
Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho) tried to get the legislation included in a new funding bill that must be passed this week to avoid a partial government shutdown this coming weekend. Last Thursday, they held a press conference to call for immediate passage of their reforms.
“The time for PBM reform was yesterday,” Wyden said. “It’s past time to crack down on the shady practices of these pharma middlemen that result in higher drug prices for consumers and threaten pharmacies across Oregon and nationwide. I’ll be working around the clock to get this done as soon as possible.”
However, bipartisan efforts in both the House and Senate to include PBM reform provisions in the funding bill failed yesterday when Congressional leaders couldn’t agree on the scope of the reforms. The next push will come later this year, likely during the lame duck session of Congress after the November 5 elections.
Chapman, the independent pharmacist, said the actions of PBMs demonstrate that they need to be reformed. “We need to bring back transparency and fair play and get rid of these money-hungry incentives that are truly compromising our health care system.”
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