On pharmacy benefit managers
May 14, 2023
KFF Health News published an illuminating article on how pharmacy benefit managers (PBMs) operate and complicate drug sales. The initial idea was probably for PBMs to specialize in the procurement of drugs to reduce drug costs for insurers and patients by purchasing drugs in large volumes. The article paints a very different picture of the role of PBMs. Over time, PBMs popularized the concept of large rebates while keeping list prices high (PBMs are frequently paid a percentage of prices, not of net payments). It appears that PBMs have gone far beyond large rebates, with the article offering:
"In other words, drug companies blame PBMs for high drug counter prices, PBMs blame insurers, and insurers blame the drug companies, all part of a health care system that hinges on an unspoken bargain: Make life comfortable for some — mostly the upper and middle classes — at the expense of lower-income and poorly insured people who get what they get."
Of particular concern is how the system has become complex enough that patient health is affected, with some patients believing that they are not able to find affordable options. The article reports on one provider who complains that the system is designed to obfuscate prices and how some of that provider's patients skip medications because of cost.
One of the major problems seems to be that the PBM industry was allowed to consolidate, with now only three PBMs controlling about 80% of prescription drug sales in the US. Earlier policy-makers might have expected that more powerful PBMs would have been able to bring more pressure to insurers and manufacturers, but perhaps missed other distortions that the powerful PBMs have brought.