Previews of President Trump’s speech on drug pricing made it quite clear that he wants to eliminate the bribes and barriers that are pushing drug prices higher and make access to the medicines that work best for each individual affordable. At the heart of this effort is to change or eliminate the role PBMs play in perpetuating such scams. If there was a slogan that captured the tenor of Trump’s address it is: Replace PBMs with affordable access to important medicines.
Currently, about 30-40 percent of the price of a drug goes to PBMs, insurance companies, state Medicaid programs and Medicare in the form of rebates, not lower prices. Drug companies have an incentive to launch or raise prices as high as possible, so they can give PBMs the biggest rebates possible. PBMs and insurers then steer you to medicines that can make them the most money. Often people seeking a drug that is more effective must fail to get better or wind up getting sicker using the rebate rich drugs instead of the medicine that works best. Moreover, while PBMs and insurers pocket the rebates, the sickest patients who need the newest medicines are paying a part or all of, the retail price of a drug.
Indeed, the gaming of the system is cruel and discriminatory.
In fact, individuals with Medicare and employer-sponsored plans with people with cancer, HIV, hepatitis C, autoimmune conditions, multiple sclerosis and rare diseases are also much more likely to have to pay up to 40 percent of the retail price of a medicine. They comprise about 2 percent all insured consumers – 4.4 million people -- and less than 3 percent of all prescriptions.
Though specialty drugs are only 1.9% of all prescriptions dispensed each, they and the patients that depend on them generate nearly 30 percent of all rebates.
PBMs and health plans could use rebates to reduce cost sharing. Instead, they systematically maximize their use for the sickest patients. They do it because they can and because by doing it, they rake in tens of billions of dollars in a predictable manner.
In addition, the 2 percent paid PBMs and insurers approximately $12 billion in cost sharing based on a percentage of the full price of the medicine, not the rebated price.
Put another way, each of the 4.4 million patients in the 2 percent provides PBMs and health plans close to $11000 in rebate and coinsurance revenue. Discrimination makes net price profitable under these circumstances.
The combination of withholding rebates and retail priced based cost sharing – in addition to other ways PBMs (on behalf of insurers) use to reduce access –discourages a large percent of people from simply not picking up prescriptions or refilling them. And when they don’t pick up or refill their prescriptions, people get sicker. Or they die.
Incredibly, there are groups that want to go after the list price of drugs and not address the assault on human health that fills the pockets of the PBMs. The fact is, cutting the launch price of expensive drugs for small populations (price controls in effect) will have no effect on PBM discrimination.
Indeed, those groups and politicians who want to chop launch prices want to give PBMs more control over access such drugs to achieve that goal. They want PBMs to force patients to get sicker on cheaper drugs. They want them to continue to exclude such drugs when they can. Which means they are willing to let them pocket rebates and force patients to pay a share of the retail price that is unaffordable.
PBMs are systematically exploiting the vulnerability of the sickest 2 percent of Americans to maximize profit. They can profit from the suffering because they can design prescription drug benefits to impose a special burden on people with pre-existing conditions. Giving PBMs more power to cut launch prices and keep the spread between list and net prices would only deepen the discrimination the President has pledged to eliminate.