Drug pricing reform has received renewed attention in recent months, but one entity always seems to escape unscathed in reform efforts: pharmacy benefit managers (PBMs). Even the most recent federal drug pricing legislation, the Inflation Reduction Act, ignores the role that PBMs play in drug pricing. It went as far as to delay a rule that would have had an immediate reduction in Medicare beneficiary cost sharing. In their original form, PBMs adjudicated pharmacy claims but over the years, these entities evolved into money-making behemoths at the expense of patients and employers.
The top three PBMs control more than 80% of all prescriptions. What is hidden from public view is higher price drugs bringing in higher profits for PBMs. This trend forces our patients to carry the additional burden of higher costs — often for drugs that may not be best for their care.
The “tools” PBMs use to create the most profitable formularies can make chronically ill adults and children take drugs that their physicians know won’t work for them all in the name of profit. This is not to place all of the blame on PBMs for higher drug prices, as we know manufacturers share in that blame as well.
However, PBMs have not been regulated in the ways that doctors, pharmacies, drug manufacturers, and other health industries are. It was only recently that a handful of PBMs were required to register with state insurance departments, with the goal of obtaining at least some accountability and transparency.
Each year, more and more PBM legislation is introduced to require transparency, cost savings for patients, and an attempt to preserve the doctor-patient relationship — and several bills have even made it across the finish line to enactment. Yet, PBMs quickly evolve to bypass new laws through definitional changes in their contracts and euphemistically titled programs that are camouflaged as “cost-savings” to patients, when in reality they accrue more revenue for the PBM. Even the biosimilar market has been distorted a lower priced interchangeable biosimilar being ignored by national PBM formularies in favor of the exact same higher priced interchangeable biosimilar because it makes more money for the PBM.
According to UnitedHealth Group’s 2022 second quarter earnings report, “revenues of $80.3 billion grew 13% Year-Over-Year, with double-digit growth at both Optum and UnitedHealthcare.” That is an eye-watering amount of revenue for a middleman — in fact, it beats the revenue at most pharmaceutical companies, who actually produce the drugs.
If traditional PBMs bring such value to large companies, why are many employers sloughing off their traditional PBM and turning to transparent, flat fee-based services to help administer their prescription drug benefit? Likely because the employers who save millions of dollars and keep premiums lower for their employees.
Practicing physicians see first-hand the damage done to patients through the business practices of PBMs: ever-rising out-of-pocket costs, nonsensical formularies, and mandated switching of medications leading to loss of disease control, all in service of the PBM’s bottom line, no matter the physical or monetary cost to the patient. We applaud the Federal Trade Commission’s recent decision to probe the behaviors of these entities that have remained out of public view for far too long, and we hope that the results of that work will lead to meaningful reform by Congress.
Madelaine Feldman, MD FACR, is President of the Coalition of State Rheumatology Organizations, a member of Alliance for Transparent and Affordable Prescriptions.