PBM Expertise Crucial to Success of Potential New Rebate System in Medicare and Medicaid

When it comes to conversations about health care in the United States today, the focus is on the price of prescription drugs. The Trump administration and Congress are pushing forward with several new ideas to help lower drug costs for consumers. America’s pharmacy benefit managers (PBMs) have the expertise, tools, and unique capabilities to help enact these solutions, and ensure prescription drugs are accessible and affordable.

As the head of the trade association representing PBMs, I know that PBMs are not always well understood. PBMs are an important link in the drug supply and payment chain that includes manufacturers, wholesalers, physicians, pharmacies and Pharmacy Service Administrative Organizations, all working to get therapies to patients. Within that chain, PBMs are the only organizations whose mission is to control drug costs through tools that encourage competition among drug manufacturers, and incentivize consumers to take the most cost-effective, clinically appropriate medications. PBMs also facilitate patient care management and provide real-time information to make sure consumers have a seamless experience getting their medications at the pharmacy counter.

When it comes to containing cost, competition is key. Policies that encourage greater competition among drug manufacturers and address expensive, sole source drugs will help PBMs leverage their negotiating tools to solve some of the most egregious examples of high prices today.

As part of an overall plan to address prescription drug spending, the administration is advancing a proposed rule to change the use of price concessions — rebates — negotiated from drug manufacturers by PBMs for Medicare Part D plans and Medicaid managed care organizations. The administration is proposing to require the savings be administered as “chargebacks”, with the aim of helping the few consumers with really high drug costs at the pharmacy counter, while preventing the use of the savings to help all beneficiaries through lower monthly premiums.

The Congressional Budget Office recently agreed with government actuaries that the proposed rule will increase premiums for Medicare beneficiaries and impact taxpayers through significantly higher spending in the programs. And a number of diverse organizations, from patient groups to the business community, have expressed opposition to the proposal.

In addition, the proposed rule does nothing to address drug prices set by drug manufacturers. Recently, Sen. Ron Wyden issued a statement saying that drug companies refused to support legislation that would require lower list prices in lieu of eliminating rebates. It is not news to us that drug manufacturers will not voluntarily reduce their list prices in response to this proposed rule. The manufacturers’ admission in reply to Senator Wyden’s question, however, is confirmation that to keep drug costs as low as possible, PBMs’ role as negotiators must be preserved and enhanced.

If, nonetheless, policymakers prefer PBM-negotiated savings be used to reduce beneficiary cost-sharing in Medicare, PBMs can and will make a new system work, and in a way that at least mitigates some of the projected taxpayer cost and premium impact of the original proposal. To do so, it is crucial that PBMs maintain their role as negotiators and retain the existing administrative framework and infrastructure to avoid the disruption and expense of a newly created, untested, and duplicative system.

Since the inception of the Medicare prescription drug benefit 14 years ago, PBMs have administered a smooth and efficient prescription drug benefit program that ensures beneficiaries have easy access to their medications. And many PBMs already operate point-of-sale rebate systems in the prescription drug market today, including in Medicare Part D. These systems provide the only existing framework with the information, experience, and technology to integrate patient benefits, cost-sharing, and price concessions into pharmacy transactions in real time.

To be clear, the proposed rule is not a panacea for high prescription drug prices. It is instead a way for some beneficiaries — an estimated 9% of Part D beneficiaries — to experience lower cost sharing, while all beneficiaries will see higher premiums.

If a new point-of-sale system for rebates is to work, it must allow PBMs to do what they do best. Any form of disintermediation of PBMs from either the Medicare or Medicaid managed care programs would create significant disruption, potentially leaving beneficiaries standing at pharmacy counters, waiting for their medications as their cost-sharing is determined and as the pharmacy figures out what it's owed and by whom. PBMs have the technical ability to avoid this type of healthcare.gov 2.0 scenario.

It’s important for policymakers to understand that PBMs have not just the expertise but also the infrastructure necessary to provide consumers with real-time access to prescription drug benefits. And that is why PBMs stand ready to ensure any new system is administered effectively and efficiently.