|FROM ||Ruben Safir
|SUBJECT ||Re: [Hangout - NYLXS] PBMs and Rebates... lets not just blame Abbott
|From hangout-bounces-at-nylxs.com Sun Jun 11 02:41:38 2017
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From: Ruben Safir
Date: Sun, 11 Jun 2017 02:41:35 -0400
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Subject: Re: [Hangout - NYLXS] PBMs and Rebates... lets not just blame Abbott
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Why are pharmacy benefit management companies -the businesses that put
together the drug benefits for most Americans the latest target of drug
price critics? PBMs generated nearly $130 billion in rebates =E2=80=93
essentially cash that drug companies pay PBMs to reduce the cost of
That=E2=80=99s nearly 30 percent of the $349 billion in gross revenues the =
industry generates each year. On top of that PBMs charge the sickest
patients an average of 40 percent of the list price of medicines. So
why not use these rebates to reduce drug costs.
The PBMs claim that $130 billion in rebates do lower drug prices for
In fact, they pass the rebates directly to insurance companies and some
businesses that contract with the PBM. In turn, the health plans use
their cut for anything they want. For example, a lawsuit against Anthem
claims that the insurer used billions in rebate dollars to buy back its
stock in preparation for its failed merger with Cigna.
Very little, if any, of that money, goes to the patients whose
prescriptions make the rebate revenue happen. Moreover, the PBMs and
insurers make the sickest patients pay between 30 and 100 percent of the
retail (not rebated price) of medicines depending on the drug plan.
Additionally, the PBMs set up the drug benefit to maximize these
rebates. That is, it will cover drugs that generate more rebates and
discourage patients from taking others that produce less profit. That=E2=80=
a big reason why many sick people must fail on one or more drugs before
being able to get a drug that works covered.
Again, PBMs claim this fail first approach is based on medical science.
But if that were the case there wouldn=E2=80=99t be big differences in the =
and sequence of drugs among PBMs and health plans. But they do. As a
recent article about PBM coverage of multiple sclerosis drugs noted:
=E2=80=9CThese variances suggest that objective review of medical literatur=
not the primary basis for guiding decisions about which medications to
cover preferentially. What drives this variance is the opaque
proprietary financial arrangements made between PBMs and pharmaceutical
companies for preferential pricing and rebates.=E2=80=9D
These rigged arrangements explain why most PBMs charge patients with
cancer, multiple sclerosis, autoimmune diseases, HIV up to 50 percent of
the list price of their medicines.
Indeed, the sickest 1 percent of patients (about 2.9 million Americans)
generate $50 billion in rebates and another $10 billion from paying a
chunk of the list price of the drug. Each patient is being overcharged
Such cost sharing is associated with reduced use of medicines, that
means people are sicker than they should be and wind up costing more.
Which is why drug companies =E2=80=93 on top of providing $130 in rebates, =
and discounts =E2=80=93 also pay $7 billion to reduce the out of pocket con=
costs. Of course, that money also goes to the PBMs.
While PBMs are in the crosshairs, in fact they wouldn=E2=80=99t even exist =
drug companies used them to sell their products. So why aren=E2=80=99t drug
companies just passing all rebates directly to patients instead of
paying rebates to PBMs? Why aren=E2=80=99t PBMs and insurers eliminating hi=
It=E2=80=99s all about the money. Government health programs, hospitals,
insurers and PBMs count on that cash to pad their earnings and balance
sheets. In fact, government regulations requiring rebates are at the
heart of this injustice. By law drug companies must pay rebates and
discounts of up to 60 percent to the Veteran=E2=80=99s Health system, Medic=
and Medicaid if they want to sell their products to those programs. (So
much for the claim that the government doesn=E2=80=99t =E2=80=98negotiate=
=E2=80=99 drug prices.)
No one should have to pay thousands out of pocket for lifesaving drugs.
We don=E2=80=99t need price controls to address this situation. In fact, be=
all the rebate money comes from drug companies, they have the power to
make a simple change in who benefits from the value new medicines
generate. Medicines for the sickest 1 percent of patients increase
productivity and reduce spending on other hospitals, doctor visit more
than any change in the way health care is delivered. Passing through
rebates will increase the social return on innovation and end the
discriminatory practice of targeting the sickest patients with the
highest drug costs.
Unless we end the rigged system of rebates, insurers, PBMs and drug
companies will find themselves threatened with more government
regulation. PBMs deserve the criticism they are receiving but every
industry is involved. It=E2=80=99s time for them to stop manipulating drug
benefits for their own self-interest. Our health and lives depend on it.
Robert Goldberg, PhD is Vice President of the Center for Medicine in the
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