By Mark Merritt
As policymakers consider new ways to reduce prescription drug costs, they should start by rejecting schemes to undercut the cost-savings tools widely used by employers, unions, health plans, and popular, affordable programs like Medicare Part D. Specifically, lawmakers must protect the ability of the employers and unions that provide coverage – and the pharmacy benefits managers (PBMs) they hire – to negotiate aggressive discounts from competing drug companies. This first means rejecting drug manufacturers’ spin to deflect responsibility for their pricing strategies.
The drug industry’s game plan became apparent last year when Congress launched investigations into the pricing strategies of Valeant, Turing, Mylan, and other drug companies. Drug industry executives first tried to convince Congress and the media that higher prices were irrelevant since manufacturers offered copay coupons to patients. This was quickly debunked as policymakers realized drug manufacturers were using copay coupons to steer patients away from generic drugs (with low copays) and toward more expensive brand drugs (with high copays). Patient copays make up only a fraction of a drug’s actual price, which can be hundreds, thousands, or tens of thousands of dollars. Two-thirds of these costs are paid by the groups that offer health benefits, and ultimately, the coupons mean higher premiums for patients.
Some in the drug industry blame high prices on the PBMs that negotiate rebates with drug companies. They say PBMs somehow “make” drug manufacturers raise prices so they can get bigger discounts and rebates. This makes little sense since the groups that hire PBMs – not PBMs themselves – determine how these savings are applied, which is most often to reduce premiums and other costs. Like Walmart, Costco, and every other discounter, PBMs want lower, not higher prices.
A good example of PBMs’ commitment to low prices can be seen in how they protected consumers and health plans during the launch of the new, $14,000 anti-cholesterol PCSK9 inhibitors. Once physician groups determined, that for most people, these drugs were no more effective than existing, less expensive options, PBMs recommended benefit designs that encouraged patients to try generic statins first. As a result, these expensive products were virtually ignored in the marketplace, except for a small number of patients for whom statins did not work.
If PBMs wanted higher prices, wouldn’t they have encouraged, rather than discouraged, broader use of these high-priced drugs?
The drug industry’s most recent salvo is to blame high-deductible health plans, which many organizations rely on to reduce overall costs. They claim these health plans benefit from drug manufacturer rebates and discounts but patients still have to pay the full price of the drug before satisfying their deductible. While it’s true that most health plan sponsors choose to use rebates to reduce premiums instead of cost-sharing, the argument ignores the most important issue. Indeed, the very reason employers offer, and individuals choose, high-deductible plans is to defray higher drug and medical costs. In fact, most consumers blame drug companies, not insurers, for higher cost-sharing.
These tactics are simply attempts to get the spotlight off the high price of the drug.
The truth is PBMs reduce costs for payers and consumers by 30 percent or more and are part of the solution. It’s time for drug manufacturers to take responsibility for their own business mistakes instead of blaming others.
Mark Merritt is President and CEO of the Pharmaceutical Care Management Association (PCMA), the national association representing America’s pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 266 million Americans with health coverage provided through Fortune 500 employers, health insurance plans, labor unions, and Medicare Part D.