As practicing physicians and medical professionals, we stand at the front lines of patient care, witnessing firsthand the effect of prescription drug prices on the health and well-being of our patients. It is disheartening to see a system that is supposed to prioritize patients often working against their interests, thanks in no small part to pharmacy benefit managers (PBMs). The time has come to fix the problems created by PBMs, who are exerting pressure on drug prices and harming patients in the process.
A glaring example of this dysfunction is the way PBMs construct prescription drug formularies. Last year, a shocking revelation emerged: a $10,000 brand-name drug for prostate cancer was preferred on a formulary, while its $450 generic counterpart was either not covered at all or relegated to the specialty tier. How can such a stark disparity exist? The answer lies in the intricate web of contracts between PBMs and drug companies.
The underlying premise of this system is shockingly simple. Drug companies pay PBMs for favorable formulary placement, with the payment typically tied to the list price of the drug. This creates a perverse incentive for PBMs to favor drugs with higher list prices because it increases their income potential. Research from the University of Southern California has shown that, on average, a $1 increase in rebates paid by drug companies to PBMs results in a $1.17 increase in the list price of the drug. In essence, the entities tasked with lowering drug prices can actually profit more when drug prices are higher. This is a glaring market distortion that cannot be ignored.
The position of a drug on a formulary is not merely a bureaucratic decision; it directly affects a patient’s ability to access vital medications. When a drug is placed on the specialty tier, patients often face significant access barriers, including burdensome management protocols. Thus, patients are ensnared in a pricing paradox: the payments from drug companies to PBMs may lead to cheaper options being relegated to an inaccessible formulary tier, while those very payments also contribute to higher list prices, against which patient co-insurances are calculated.
Patients are left grappling with reduced access and higher out-of-pocket prescription costs, a lose-lose scenario.
Fortunately, members of Congress from both sides of the aisle have recognized the urgent need for reform. Senators Bob Menendez, D-New Jersey, and Marsha Blackburn, R-Tennessee, have introduced legislation aimed at severing the link between PBM compensation and drug pricing in Medicare Part D. Their proposal, which advanced out of the Senate Finance Committee this summer, would require PBMs participating in Part D to accept flat fee compensation, thus eliminating the perverse incentive to favor higher-priced drugs.
On the House side, Rep. Buddy Carter, R-Georgia, a pharmacist with 30 years of experience, has been a tireless advocate for reining in the PBM industry. His knowledge of the challenges faced by independent pharmacies and patients gives weight to his pursuit of reform. Rep. Lisa Blunt Rochester, D-Delaware, has joined forces with Carter to introduce legislation that, among other crucial reforms, delinks the list price of drugs from PBM compensation in Medicare Part D. The Protecting Patients Against PBM Abuses Act would remove the perverse incentives that encourage PBMs to drive up drug prices.
The fact that lawmakers with diverse political views are united in pushing for targeted reform underscores the urgency of the situation. As medical professionals who witness the effect of soaring drug prices on our patients, we wholeheartedly support efforts to delink drug prices from PBM compensation. Correcting this fundamental market distortion is a crucial step toward a healthcare system where formularies are designed with the best interests of patients in mind, not for the profit of PBMs and drug companies.
It’s time for a prescription for reform that puts patients first. We urge all Americans to join us in advocating for the passage of the Protecting Patients Against PBM Abuses Act and the broader reform needed to ensure affordable access to essential medications for all.