Pharmacy Benefit Managers

Growing evidence shows that U.S. consumers often overpay for generics as pharmacy benefit managers game opaque and arcane pricing practices to pad profits.

If cost-sharing were based on net price it would provide meaningful financial relief to many Part D beneficiaries.

Drug rebates and list prices are positively correlated: On average, a $1 increase in rebates is associated with a $1.17 increase in list price.

166 recently enacted prescription drug pricing laws were analyzed to identify those that contained price transparency measures. Of these, 35 bills in 22 states include a transparency component, but only 7 were deemed to be informative.

In 2013, almost one-quarter of filled pharmacy prescriptions (23%) involved a patient copayment that exceeded the average reimbursement paid by the insurer by more than $2.00.

The share of stand-alone prescription drug plans using coinsurance for preferred brand name drugs surged in recent years, exposing more patients to list prices that are often artificially inflated.

A few pharmacy benefit managers dominate each of the payer markets, and the three biggest PBMs appear to be targeting different markets.

Part D plans became significantly more restrictive over time, rising from an average of 31.9 percent of compounds restricted in 2011 to 44.4 percent restricted in 2020.

Premiums of Part D beneficiaries enrolled in a plan that is vertically integrated with a PBM increased from 30% to 80% between 2010 and 2018.

Preferred pharmacy networks caused a moderate shift on average towards preferred pharmacies among unsubsidized beneficiaries, although stronger financial incentives correlated with more switching.

As policymakers consider reforms to the prescription drug supply chain, they should keep five principles in mind to ensure better outcomes for patients.

The lack of transparency and inability of plan sponsors to assess how much pharmacy benefit managers generate in savings and how much they retain for themselves is the root issue.

Drug costs can be driven down if market forces are allowed to target those profits, but first everyone needs to know what is being charged, and by whom to whom.

Eliminating insurance for generics might make patients nervous at first, but the payoff would be stable and affordable prices.

The shortages, which have been going on for years, have typically affected only low-cost generics rather than profitable brand-name drugs.