eTech Insight – EmsanaRx to Challenge Powerful PBMs

Pharmacy Benefit Management Companies Deliver Questionable Value

Pharmacy Benefit Manager (PBM) companies participate in the drug distribution channels as middlemen. Their purpose is to manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers. They provide the following services:

  • Develop and maintain drug formularies for the payers they support.
  • Use their purchasing power to drive lower drug prices and rebates for their customers.
  • Contract with local pharmacies to reimburse for drugs dispensed to members.

But PBMs may also have an incentive to favor high-priced drugs over drugs that are more cost effective. Because they often receive rebates that are calculated as a percentage of the manufacturer’s list price, PBMs receive a larger rebate for expensive drugs than they do for ones that may provide better value at a lower cost. As a result, people who have a high-deductible plan or have co-pays based on a drug’s list price may incur higher out-of-pocket costs. PBMs do not share all their rebates with the payers, and in many cases, they create spread pricing when they increase the cost of generic drugs beyond what they pay pharmacies. The payment schedules negotiated by PBMs are not shared with payers of employer customers.

In August of 2021, the Pharmaceutical Care Management Association sued the HHS, the IRS, and the Department of Labor regarding a new regulation for PBMs to disclose their net pricing they negotiate with drug companies. This action does not bode well for PBMs who obfuscate their pricing.

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