Overregulation of PBMS would harm public
Taking on the mantle of supposedly reducing drug prices and eliminating alleged fraudulent activity within the pharmaceutical marketplace, some of Ohio’s largest newspapers and government officials are targeting pharmacy benefit managers.
PBMS are utilized by insurers, selfinsured employer health benefit plans, union health plans, Medicare Part D plans, state government plans, Medicaid managed care plans and other entities to manage pharmaceutical benefits for their employees or members.
PBMS administer prescription plans for more than 266 million Americans.
Attacking PBMS over high drug costs is unfounded when they have helped to save money and often must respond to government actions that have distorted the marketplace.
The December 2020 Supreme Court decision in Rutledge v. PCMA, which found that the Employee Retirement Income Security Act, a federal law that regulates private-sector employeebased health plans, did not preempt an Arkansas law establishing a statutory minimum payment to network pharmacies (a price control), will invite further government meddling.
Several states have passed, or are considering, regulating PBMS.
Provisions include requiring PBMS to reimburse any pharmacy, regardless of whether it is in their network; restricting mail-order delivery, which delivers pharmaceuticals at lower costs; allowing any pharmacy to be a “specialty pharmacy,” which dispense complex medications for chronic diseases requiring special handling that many pharmacies are unqualified to undertake; and limiting PBMS’ ability to conduct audits of pharmacies within their network to ensure proper dispensing and preventing fraud.
Other initiatives include transparency requirements that would reveal proprietary information within private contracts.
Patients should know what their drugs will cost, but revealing proprietary pricing information among different providers helps competitors game the system. If states implement “reforms” and micromanage PBMS, drug prices will increase.
Processing huge volumes of prescription drug programs is complicated and overwhelming, so health insurers in the 1960s hired PBMS to fill that role.
In the 1980s, when insurance and pharmaceutical markets grew exponentially due to medical advances, PBMS expanded their roles to negotiating lower drug prices with pharmaceutical manufacturers and pharmacies.
In 2005, before Medicare Part D was implemented, the Congressional Budget Office estimated it would cost taxpayers $174 billion by 2015, but it cost only $75 billion thanks to private-sector negotiations by PBMS.
Some say the PBM industry is anticompetitive because Cvs-caremark, Express Scripts and Optumrx control about 70 to 75% of the market. However, the National Association of Insurance Commissioners says there are 66 PBM companies nationwide.
This does not mean market reforms are unneeded in health care.
Reforming Medicare Part D is a good place to start. Congressional meddling through the Affordable Care Act and the 2018 Bipartisan Balanced Budget Act placed a price control on drugs, now 70%, within the coverage gap in Part D, which distorts market dynamics and drives up costs.
That problem can be resolved with the American Action Forum plan, which places a cap on beneficiary out-of-pocket costs, eliminates the coverage gap and puts greater financial risk on insurers and PBMS that would encourage more negotiations on pharmaceutical prices and use of generics, making Part D behave more like true insurance.
Greater use of Health Savings Accounts and Health Reimbursement Accounts would also put consumers in charge of the health plans they want, and need, helping to drive real freemarket reforms and lower health care costs.
Lowering drug costs should be achieved through marketplace reforms, not heavy-handed laws and regulations.
Elizabeth Wright is director of Health and Science Policy for Citizens Against Government Waste.