There are 14,000 Alabamians on dialysis for kidney failure, most of whom are so sick they can’t work. Living with kidney disease on a fixed income is a huge emotional, physical, and financial burden. Although kidney disease has no cure, some prescription medications can help manage the condition. Unfortunately, the harmful business practices of pharmacy benefit managers (PBMs)—little-known middlemen in the healthcare industry—are placing access to these treatments and many more outside patients’ reach. That has to stop.
Congress must act to reign in abusive PBM activity so Alabamians can access the prescription drugs they need.
But—you might be asking—what are PBMs, and how do they stand between patients and their prescriptions? In theory, PBMs are supposed to consolidate purchasing power to drive down the cost of prescription drugs for patients. PBMs negotiate prescription drug prices paid to drug manufacturers and compensate pharmacy networks that deliver medication to patients. In practice, however, PBMs are playing both sides of the market. They use their commanding market share to drive up the cost of medication and limit patient access to drug treatments.
For instance, PBMs determine health insurance plan formularies—the menus of drugs covered by health plans and available to patients. Drug manufacturers offer rebates and discounts to PBMs in exchange for including their products in formularies. Unfortunately, PBMs do not pass on these discounts to patients in the form of lower list prices. Instead, PBMs use “spread pricing” to maximize the compensation they receive from health plan providers by overcharging them when their beneficiaries fill their prescriptions.
Spread pricing occurs when PBMs pay pharmacies a pre-negotiated rate for prescription medications but charge healthcare providers a higher price for those same drugs. The PBM absorbs the difference, and manifests inflated drug costs via higher insurance premiums, copays, and out-of-pocket prescription drug costs. Practices such as spread pricing allow PBMs to pocket profits at the expense of the patient and the taxpayer. Investigations reveal that PBMs used pricing schemes to overcharge Medicaid programs in Ohio, Kentucky, Illinois, and Arkansas by hundreds of millions of dollars.
To make matters worse, the drugs covered by PBM-controlled formularies do not serve patient health needs. Frequently, PBMs opt to include expensive drug treatments for which they get higher rebates instead of the cheapest options for patients. If PBMs agree to cover multiple treatment options, they will still restrict patient choice. PBMs drive patients toward more expensive drug treatment plans through “fail first” policies, which require patients to attempt a PBM-preferred medication before gaining access to alternative drugs that their doctor may have initially prescribed. Under fail-first policies, a PBM only provides alternatives if its initial prescription fails to treat the patient’s condition or produces harmful side effects.
These PBM “fail-first” policies are wrong. Patients and their doctors should be free to select the treatments they determine are most appropriate. Patients should not be forced into treatment regimens for the sake of a PBM’s bottom line. Yet fail-first policies continue to compel patients to vary and experiment with their prescriptions instead of optimizing for patient health.
Finally, and perhaps most troublingly, PBMs directly compete with the pharmacy networks they are supposed to service. All three major PBMs own pharmacies. PBMs push patients to use their own specialty pharmacies by refusing to fill certain prescriptions at independent pharmacy locations. These practices force independent pharmacies to close, thus reducing the number of prescription drug providers in the market and steering patients to rely on mail-order pharmacies to fill their prescriptions. The risk of delays and errors in the mail-order pharmacy system is high and results in gaps in treatment.
The fact that PBMs limit patient access to life-saving prescription drugs and strip doctors of treatment options is unconscionable. PBMs are supposed to lower drug costs and increase access to vital medicines. But opaque PBM pricing practices and conflicts of interest have actively hindered both goals.
Congress has taken steps to reduce harmful PBM business practices, but more must be done. The House Oversight and Accountability Committee recently launched an investigation into PBM practices, and a bipartisan group of senators is urging the FTC to complete a similar assessment. Hopefully, these efforts will reveal the full extent of PBM abuses.
Bipartisan legislation known as the HELP Copays Act is currently pending. Passing this bill would be a meaningful step toward holding PBMs accountable. We all have loved ones that rely on prescription medications for their health. PBMs put profits before medicine. It’s time Congress did something about it.