The ‘vendors’ in HHS’ new drug pricing plan sound an awful lot like PBMs, experts say 

Drug prices
Experts say HHS' proposed Part B "vendors" bear resemblance to pharmacy benefit managers. (Getty/Charles Wollertz)

Despite railing against the role of middlemen—namely pharmacy benefit managers—in rising drug prices, the Trump administration appears poised to introduce some of its own into the Part B program. 

The Department of Health and Human Services unveiled its International Pricing Index (IPI) model last week, which aims to bring down the costs of pharmaceuticals in Medicare Part B by aligning those prices with what other countries pay. 

A key element of the plan is to empower private sector vendors to negotiate with pharmaceutical companies and purchase their products to then distribute to providers. HHS Secretary Alex Azar said that the vendors will make it easier for hospitals and practices to manage their pharmacies and eliminate major upfront investments in these drugs. 

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“Our model will allow private vendors to take title to drugs and compete for business, letting physicians and hospitals get out of purchasing and holding drugs,” Azar said in a speech at the Brookings Institution on Friday. “Hospitals and physicians’ practices should be focused on caring for patients—not floating capital for pricey drugs.”

RELATED: Trump administration faces uphill battle in convincing provider skeptics to back its new drug pricing plan 

The setup sounds similar to the role that PBMs play in commercial market plans, to the extent that financial analysts note that insurers with established PBMs would serve most effectively as these vendors. 

report (PDF) from Leerink Partners on the proposal notes that “the transition to Part B vendors portends well for [Medicare Advantage] plans with Part D business, specialty pharmacies and captive PBMs.” In particular, Humana and UnitedHealth are well-positioned to serve as these intermediary vendors, Leerink’s analysts concluded. 

“We believe these plans will be the most adept at handling the complexities of managing eligibility, inventory, shipping and billing,” according to the analysis. 

The similarities were not lost on the PBMs themselves, either. 

In a statement, J.C. Scott, president of the Pharmaceutical Care Management Association, a trade group that represents PBMs, said the group looks forward to working with policymakers “to explore additional ways to leverage proven private-sector PBM negotiating tools.” 

“We are encouraged the administration is exploring greater use of competitive pharmacy benefit manager tools in Medicare Part B to ensure beneficiaries have access to medications that may otherwise not be affordable,” Scott said. “Some of the highest priced drugs are found in Medicare Part B, where PBMs currently do not play any meaningful role.” 

RELATED: Trump administration’s push for prices in drug ads facing a likely legal fight 

Centers for Medicare & Medicaid Services officials told FierceHealthcare that the agency is exploring its options for the best partners to serve as vendors, and said that group purchasing organizations (GPOs), wholesalers, distributors, specialty pharmacies, Medicare Part D plan sponsors and individual providers and manufacturers are all under consideration. 

CMS Administrator Seema Verma and Azar have both emphasized GPOs and wholesalers as options since the IPI model was announced. 

PBMs have been a prime target in the White House’s efforts to bring down drug prices. Critics of the current rebate structure say that PBMs operate in a space that’s too opaque, and that they pose a barrier to pharmaceutical companies lowering their prices. 

Azar has offered split opinions on PBMs. At a Senate hearing on the administration’s “American Patients First" blueprint on drug prices, Azar said that PBMs would be critical partners in bringing down drug prices, and that they can perform better with some reform.  

Azar also said, though, that PBMs are standing in the way of lowering list prices

RELATED: In a blow to PBMs, Trump administration mulling overhaul to drug rebate safe harbor protections 

Concerns about transparency would extend to Part B if HHS wants to pursue a PBM-esque approach there, Lindsay Bealor Greenleaf, director of ADVI, told FierceHealthcare. 

“It is interesting—the idea of inserting new middlemen into the process, when the administration has raised serious concerns of the role of middlemen on the Part D side of the benefit,” she said. 

Wayne Winegarden, Ph.D., senior fellow in economics at the Pacific Research Institute, told FierceHealthcare the vendor piece of the IPI model is “inconsistent” with other policies the administration has pursued on drug prices. 

Winegarden said he “can’t get [his] head around” the vendor element’s inclusion in the broader policy. 

“We don’t have transparency in pricing, it’s a big part of our problem,” he said. “Adding in more layers doesn’t work toward that goal.” 

CMS officials said the agency intends to learn from the “experience with PBMs” to make sure its vendor model is transparent. Stakeholders can submit their suggestions on how to do this with their comments on the policy, the officials said.