Pharmacy benefit managers, which health insurers rely on to manage the cost of drugs covered by their plans, may actually be a part of why drug prices are getting so out of control.
This criticism is primarily rising from the ranks of drug manufactures, which are under increasing pressure to justify drug price hikes, according to the Wall Street Journal.
Because the rebates PBMs receive from negotiations with drugmakers are based on the percentage of a drug’s list price, they can spur manufacturers to further increase prices, according to Ron Cohen, M.D., CEO of Acorda Therapeutics Inc. Ian Reid, CEO of Pfizer, has also said the system would be better off without rebates, the article notes.
And Mylan CEO Heather Bresch, testifying before Congress last month to defend her company’s highly criticized price hike for EpiPens, pointed out that her company makes far less on a single treatment than some assume after accounting for “rebates and various fees” among other costs.
“The misconception about our profits is understandable, and at least partly due to the complex environment in which pharmaceutical prices are determined,” she said in her prepared remarks.
The PBM industry, however, brushed off suggestions that it is responsible for the inflation of drug costs, according to the WSJ.
“EpiPens are expensive because Mylan raised the price of EpiPens,” Steve Miller, chief medical officer at Express Scripts, told the publication. “To blame it on distributors … is just ridiculous.”
Similarly, Troyen Brennan, chief medical officer at CVS Health Corp., told the WSJ that PBMs have strong incentives to keep drug costs as low as possible, given that they must compete on price to win business from purchasers.
Yet in one notable case, even an insurer has taken issue with PBMs' operating practices. Anthem sued Express Scripts this past spring, alleging the PBM refused to engage in good-faith negotiations to ensure the insurers is receiving competitive pricing on prescription drugs. Express Scripts responded with a counter-suit, and then both became the target of a class-action lawsuit from their clients.
From a regulatory standpoint, federal prosecutors have been probing agreements PBMs and drugmakers, looking for evidence of potential False Claims Act violations.