Pharmacy benefit managers are outwitting attempts at accountability, tougher rules

·3 min read
As business and government leaders try to trim health-care costs by revamping agreements with pharmacy benefit managers, the drug supply middlemen have evolved their tactics to get their money in other ways, a new study shows.
As business and government leaders try to trim health-care costs by revamping agreements with pharmacy benefit managers, the drug supply middlemen have evolved their tactics to get their money in other ways, a new study shows.

A new national report released Thursday details how pharmacy benefit managers recalibrated their tactics in response to government and business attempts to clamp down on them, which actually increased their revenue.

“PBMs have been remarkably adept at creating clever ways to divert prescription drug savings away from health plan sponsors and patients and into their own growing profit," said Mark Blum, executive director of America’s Agenda, founding member of the PBM Accountability Project, a coalition of pharmacy, labor and patient advocacy groups that sponsored the study.

The report was prepared by 3 Axis Advisors, a firm that analyzes drug prices that is run by Antonio Ciaccia, former lobbyist for the Ohio Pharmacists Association.

"Just when you think you’ve got these problems solved, they reappear in new ways," he said.

Antonio Ciaccia, President of 3 Axis Advisors, testified to the Ohio legislature's Joint Medicaid Oversight Committee in late October about abuses by pharmacy benefit managers.
Antonio Ciaccia, President of 3 Axis Advisors, testified to the Ohio legislature's Joint Medicaid Oversight Committee in late October about abuses by pharmacy benefit managers.

"Price setters should not be price takers. ... To me, the way that PBMs make money above and below the line are in direct conflict with what the interests of their actual clients are, which are people who pay the bill for prescription drugs."

In other words, as those familiar with the setup sometimes say, PBMs are playing three-dimensional chess while those attempting to rein them in are playing checkers.

Greg Lopes, assistant vice president of strategic communications for the PBMs' trade group, the Pharmaceutical Care Management Association, said, "The group behind the report is founded and operated by special interests. PBMs have a proven track record of reducing prescription drug cost for clients and patients."

Pharmacy benefit managers' profits rose $3 billion in two years, study shows

Pharmacy benefit manages are in the middle of the drug supply chain between drugmakers, health insurers and pharmacies. It's a near-monopolistic marketplace, with three PBMs accounting for nearly 80% of the business. Those three PBMs — CVS Caremark, United Health Group's OptumRX and Cigna's Express Scripts — are part of corporations that are among the largest in the world.

Just three PBMs occupy close to 80% of the pharmacy benefit manager market.
Just three PBMs occupy close to 80% of the pharmacy benefit manager market.

From 2017 to 2019, PBMs' gross profit (revenue minus the cost of goods sold) increased by 12%, from $25 billion to $28 billion, the study found. But as regulators stepped up their efforts, the sources of that profit evolved.

As businesses demanded that PBMs pass through rebates from pharmaceutical companies, the PBMs have simply started assessing other types of fees on the private sector. And the middlemen increased their use of complicated contracts that allow them to assess "clawbacks" on pharmacies, demanding additional money months after a prescription payment is supposedly finalized.

In an admittedly limited survey of PBM "industry insiders," three-quarters acknowledged an increasing use of both new fees and clawbacks. And 50% said they expect revenue from both sources to go up even more in coming years, said the report, entitled "Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers."

The drug supply chain, as illustrated in a new report by the PBM Accountability Project.
The drug supply chain, as illustrated in a new report by the PBM Accountability Project.

Even with a dense, 28-page analysis, Ciaccia said the most-frustrating part was the realization that details about 40% of PBM revenue cannot be calculated.

"Payers and patients cannot properly evaluate the cost and quality of the pharmacy benefits they receive due to PBMs’ multi-layered, proprietary business models, which have been frequently characterized as packaged in a 'black box,'" the report said.

"PBMs’ general lack of transparency is critical to their operations and allows them to buy a product or service from one stakeholder in the system and sell that product or service to another stakeholder at a higher price, without the payer understanding the true cost or inflationary nature of the services purchased — a practice known as 'arbitrage.' In other words, PBMs are able to 'bury' the fees."

drowland@dispatch.com

@darreldrowland

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This article originally appeared on The Columbus Dispatch: US drug prices remain excessive in part due to failure to rein in PBMs

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