The Hidden Middlemen: How Pharmacy Benefits Managers (PBMs) Impact Drug Pricing and Community Pharmacies

Pharmacy Benefits Managers (PBMs) have long operated behind the scenes in the healthcare industry, but their influence on drug pricing and community pharmacies has become a topic of growing concern. As intermediaries between insurers, pharmacies, and drug manufacturers, PBMs wield significant power over the cost and accessibility of medications. This blog post delves into the role of PBMs, the impact they have on retail and independent pharmacies, and the new legislation aimed at curbing their influence.

What Are PBMs and How Do They Work?

PBMs are third-party administrators of prescription drug programs for health insurance plans. Their primary functions include negotiating discounts and rebates with drug manufacturers, creating formularies (lists of covered drugs), and processing prescription drug claims. While PBMs were originally designed to reduce drug costs and streamline the distribution process, their practices have raised concerns about transparency and fairness.

The Impact of PBMs on Drug Pricing

PBMs claim to negotiate lower drug prices on behalf of insurers and patients. However, the reality is more complex. PBMs often receive rebates from drug manufacturers, but these savings are not always passed on to consumers. Instead, PBMs may favor higher-priced drugs that offer larger rebates, driving up overall drug costs.

Community pharmacies, particularly independent ones, bear the brunt of these practices. PBMs determine the reimbursement rates pharmacies receive for dispensing medications. These rates are often set below the cost pharmacies pay to acquire the drugs, leading to financial losses. Independent pharmacies, with smaller margins and less negotiating power than large chains, are especially vulnerable.

PBMs' Impact on Retail and Independent Pharmacies

Recent data highlights the detrimental effects of PBMs on pharmacies. According to a 2019 survey by the National Community Pharmacists Association (NCPA), 58% of independent pharmacies reported that PBM reimbursement practices have forced them to turn away patients or fill prescriptions at a loss. Additionally, a 2020 report by the University of Southern California Schaeffer Center for Health Policy & Economics found that PBM practices contribute to higher drug prices and reduced pharmacy access for patients.

PBMs, in their current form, have caused considerable harm to the pharmaceutical industry and pharmacy practice. By prioritizing profits over patients, they have contributed to escalating drug prices and the financial struggles of community pharmacies. Independent pharmacies, vital to many rural and underserved areas, are at risk of closure due to unsustainable PBM practices.

The lack of transparency in PBM operations has obscured their true impact, allowing them to operate with little accountability. The new legislation offers hope for change, but it is crucial for policymakers, healthcare providers, and consumers to remain vigilant and advocate for reforms that prioritize patient access and fair pharmacy practices.

New Legislation On the Horizon

In response to growing criticism, new legislation aimed at regulating PBMs has been introduced. The Pharmacy Benefit Manager Transparency Act, passed in several states, requires PBMs to disclose rebate amounts and the criteria used to determine reimbursement rates. At the federal level, the proposed Prescription Drug Pricing Reduction Act seeks to increase transparency and reduce the power of PBMs.

If enacted around the country, these laws could have significant implications for pharmacists and pharmacies. Increased transparency may expose and curb practices that lead to higher drug costs and inadequate reimbursements. Independent pharmacies could benefit from fairer reimbursement rates, improving their financial stability and ability to serve their communities.

Summary

Pharmacy Benefits Managers have profoundly affected the landscape of drug pricing and community pharmacies. While they were intended to streamline drug distribution and reduce costs, their practices have often led to the opposite effect. The new legislative efforts to regulate PBMs are a step in the right direction, aiming to restore fairness and transparency in the pharmaceutical industry. For the sake of community pharmacies and the patients they serve, it is imperative to continue scrutinizing and reforming the role of PBMs in healthcare.

Sources:

1. National Community Pharmacists Association (NCPA). 2019 NCPA Digest Sponsored by Cardinal Health. Alexandria, VA: National Community Pharmacists Association; 2019. Available from: https://ncpa.org/sites/default/files/2020-02/2019-Digest.pdf

2. Van Nuys K, Joyce GF, Ribero R, Goldman DP. Overpaying for Prescription Drugs: The Copay Clawback Phenomenon. University of Southern California Schaeffer Center for Health Policy & Economics; 2020. Available from: https://healthpolicy.usc.edu/research/overpaying-for-prescription-drugs-the-copay-clawback-phenomenon/

3. Pharmacy Benefit Manager Transparency Act. Public Law No: 116-136. 2020. Available from: https://www.congress.gov/bill/116th-congress/house-bill/5304

4. Prescription Drug Pricing Reduction Act of 2020. S.2543. Available from: https://www.congress.gov/bill/116th-congress/senate-bill/2543