Office Visit: PBMs on hot seat

If I were to guess, I have a feeling most people don’t know what the acronym PBM stands for? PBM is short for pharmacy benefit manager. According to Wikipedia, PBMs are middlemen that were originally designed to reduce administrative costs for insurers, validate patient eligibility, administer plan benefits as well as negotiate costs between pharmacies and health plans.

However, according to the Pharmaceutical Care Management Association, PBMs reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs. Both sound similar, but I found three words in Wikipedia’s definition quite different. The words “were originally designed” implied PBMs are no longer what they were intended to be or what they used to be.

That is probably why Sen. James Lankford, R-Okla., is laser-focused on the PBM industry and has not only penned a recent op-ed in Modern Healthcare, but has also introduced the bipartisan Prescription Pricing for the People Act, which requires the Federal Trade Commission to study recent PBM mergers that have created an anti-competitive environment in the drug industry.

In Lankford’s article he chronicles his journey via the Senate Finance Committee to “better understand the complexity of drug pricing.” He acknowledges PBMs were established to advocate for lower prices, but along the way, the mission of the industry changed and Americans were hit with high prices and deprived of accessibility to generic drug options. 

For example, Lankford points out “In Medicare Part D, there are typically five tiers of drug prices within the insurance market that dictate the formulary for the costs patients pay at the pharmacy. When a new drug comes to market, the drug manufacturer negotiates with the Part D plan through the PBM to get the new drug into circulation and gain market share. After a period of time, that drug can also be produced in generic form, which usually costs significantly less.”

What he learned was the drug company negotiated the drugs into the same tier, so no savings. However, the PBM got a “rebate” for helping to block the competition. What?

He also found that currently 3 PBMs (CVS, Express Scripts and United Health’s Optum) control 80% of the volume – so much for a free marketplace. Maybe it is time we all paid closer attention to the role of PBMs in our benefit plans and examine what Sen. Lankford is doing to advocate for us on Capitol Hill. Our awareness and support could make a significant difference.

David L. Holden is a board-certified orthopedic surgeon and past president of the Oklahoma County Medical Society (www.okcountymed.org).