How can we make drugs more affordable without sacrificing future cures?
To a large extent, the current system works fairly well already to make most of the drugs that Americans take affordable. And that’s because of our robust generics market. Around 90% of prescriptions filled each year are for generics — most of which cost only a few dollars.
Nevertheless, many patients do, in fact, struggle to afford their drugs. And policymakers need to take action to address this problem.
On that front, cracking down on the often unscrupulous tactics employed by pharmacy benefit managers, or PBMs, is absolutely critical.
PBMs don’t invent new drugs, they don’t administer those drugs to patients, and they don’t even pay for prescription drugs. The three largest: Express Scripts, CVS Caremark, and Optum control over 80 percent of the PBM market. They are middlemen tasked with designing drug formularies for their health plan clients. They use their control over formularies to demand massive discounts and rebates from drug companies in exchange for prime placement. That role gives them tremendous power to decide what Americans end up paying for their medicines — a power they continue to abuse at the expense of patients.
What recommendations do you have for lawmakers looking at PBM reform?
For one, lawmakers need to bring some transparency to the PBM industry. These companies should be required to disclose the value of the discounts they receive from drug firms. And they should be required to share the bulk of any discounts they secure with patients at the pharmacy counter.
Practices like spread pricing — in which PBMs charge insurers more than a drug actually costs after accounting for discounts, and pocket the difference — is another practice that deserves to be dragged out of the shadows and ultimately abolished.
I’m also hopeful that the kinds of direct-to-consumer efforts we’re seeing throughout the drug industry, including PhRMA’s new website, will help make PBMs increasingly irrelevant. Both Pfizer and Eli Lilly recently announced programs allowing patients to buy straight from the manufacturer, instead of engaging with their insurance company or going through a PBM. That trend could end up lowering prices for patients, simply by taking PBMs out of the equation.
Sally Pipes is the President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute.
