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HIGH COSTS

Insurers – including state Medicaid programs – contract with PBMs to provide a number of services. One job of the PBMs is to negotiate prices with manufacturers, in theory to get the lowest prices for insurers, and therefore, for you. PBMs have a lot of leverage over manufacturers, which puts them in a great position to negotiate. Where does that leverage come from?

While you might assume doctors are the ones deciding what drugs are covered by insurance, it is actually PBMs that make those decisions. In order to be profitable, manufacturers need their drugs to be covered, which makes the PBMs gatekeepers. So a pay-to-play system ensues in which manufacturers offer PBMs rebates that go straight into the PBMs’ pockets. How is that possible? PBMs are not required to disclose those rebates. So two things happen. Because more expensive drugs mean bigger rebates, PBMs are incentivized to favor drugs that cost more, keep drug prices high or even pressure manufacturers to inflate prices. And manufacturers build the cost of those rebates into their prices, again keeping costs high.

BAD DECISIONS

PBMs also control what drugs your doctors can prescribe you, making healthcare decisions based not on your best interests but on maximizing profit.

Increasingly, PBMs are requiring doctors to seek prior authorization before pharmacies can fill prescriptions for certain drugs. Prior authorization programs can:

 

  • Delay patients receiving drugs they need, as doctors often must jump through hoops to obtain permission from PBMs.

  • Prevent patients from accessing drugs PBMs deem too expensive, even when their doctors identify them as the most effective treatments.

  • Require patients try and fail with a series of less expensive drugs prior to receiving authorization for their doctors’ preferred treatments (step therapy).

"We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from artificial list prices, would likely serve patients far better, as would a system where PBMs receive no compensation from the very pharma companies they’re supposed to be negotiating against"

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- Alex Azar
Secretary of US Department of Health & Human Services

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