Pharmacy Benefit Managers Unveil a Critical Path Forward to Reduce Prescription Drug Costs

One lesson from the COVID-19 pandemic is that the world relies on the biopharmaceutical industry to produce breakthroughs that improve health and vanquish disease.

Unfortunately, these treatments sometimes come with exorbitant price tags. As policymakers consider the pandemic’s implications for the health care system, we are reminded that prescription drug costs remain too high for far too many people. As a nation, we have an opportunity to implement policy reforms that create a more compassionate, more efficient prescription drug marketplace that works for everyone — in good times and in bad.

America’s pharmacy benefit managers, PBMs, are the only member of the prescription drug supply and payment chain working to reduce drug costs, improve patient access, and increase affordability. Using that lens to prepare for a health care system that integrates curative, preventative, and chronic treatments as affordably as possible, PBMs recommend “A Critical Path Forward,” a three-part policy platform to update Medicare Part D, enhance marketplace competition, and support value-based care and outcomes-based contracting. The policy platform would save taxpayers more than $255 billion over 10 years.

To start, PBMs believe it’s time to implement an annual cap on Medicare Part D beneficiaries’ out-of-pocket spending, in concert with other changes to the program, to reduce costs.

Few federal health care programs can claim the success that Medicare Part D has achieved in 15 years. The market-based framework and public-private partnership has expanded seniors’ and disabled individuals’ affordable access to prescription drugs, achieved taxpayer savings, lowered the actual costs paid for prescriptions, and consistently enjoyed a high level of satisfaction among beneficiaries. Monthly premiums for the basic Part D plan remain affordable, averaging $30 to $32.

Still, a health care program’s past — and current — success should not preclude changes to improve affordability for patients. Even as Part D’s premiums remain affordably low, some enrollees taking high-cost drugs may face unaffordable, high out-of-pocket costs. An annual cap on beneficiary out-of-pocket costs, if done along with other changes to reduce costs and hold manufacturers responsible for ever-higher prices, would help address this problem.

To further reduce costs in Part D, drug manufacturers should pay statutory discounts from start to finish in all phases of the benefit, from initial coverage through the catastrophic phase.

In free markets, rivalry among products contains prices, and nowhere is the price-depressing influence of competition more important than among prescription drugs. Unfortunately, within the brand prescription drug and biologic market, extensive patents and exclusivity protect products against competition and allow manufacturers virtually unlimited pricing power.

To increase competition, it’s imperative to end the anti-competitive tactics used by some drugmakers. Strategies like “patent thickets,” “evergreening,” and “product hopping,” prevent less expensive competing products, like generics and biosimilars, from entering the marketplace. Our health care system should incentivize competition, and policymakers should revise the patent system to prevent abuse.

Congress should re-examine initial exclusivity periods for brand-name drugs and reward innovation. The amount of time biologics and orphan drugs are protected from competition does not strike the appropriate balance between innovation and greater affordability realized through competition. It’s time to take action to support a more competitive pharmaceutical market for all patients. Increasing competition and curtailing patent abuses in the marketplace would save taxpayers between $59.1 billion to $118.3 billion.

Finally, we must align health outcomes with spending. It’s time to kick start a value-based health care system. Congress can clarify that value-based contracts are not violations of the anti-kickback statutes or requirements that Medicaid always gets the best price. Congress should also codify rules allowing manufacturers to share clinical data on effectiveness before approval, so that insurers and PBMs can assess it, and negotiate prices based on value. Post-market surveillance should be strengthened to get better post-approval data on how drugs work in the real world.

PBMs understand the important role of data in improving health and wellness. Access to both medical and prescription drug data allows PBMs to inform health plan sponsors of the totality of patients’ care. In Medicare, Part D plans should be able to access hospital and physician claims data to integrate it with their prescription drug data for a full picture of a person’s health care needs. This enhanced dataset will open the door for indication-based prescription drug formularies and improved care coordination.

As we emerge from the pandemic and assess what policies worked best for patients, we need to remember that a critical aspect of prescription drugs, just second to their effectiveness, is their affordability. Patient access is tied to affordability, and without access to a drug, the most effective, innovative prescription drug in the world is useless.

Policymakers should focus on a path to greater access through greater affordability for patients, and that path leads through more competition, and a focus on getting value for scarce health care dollars. These solutions are the first step.