Pharmacy benefit managers caught in crosshairs of battle to reduce drug costs

As experts and lawmakers attempt to reduce prescription drug costs in the United States, some are setting their sights on pharmacy benefit managers (PBMs), the organizations that negotiate drug prices with insurance providers.

Many patient advocates and industry experts see them as middlemen, only adding to the complication of the pharmaceutical industry and increasing costs.

“There are too many people in the middle. Probably 30 to 40 percent of costs go to people in the middle like PBMs,” said Douglas Hoey, CEO of the National Community Pharmacists Association. “We need to have more direct connections between providers and patients.”

Hoey and other industry experts spoke at the Pathways to Patient Affordability event on Thursday, hosted by The Hill and moderated by Editor-in-Chief Bob Cusack. The event was sponsored by industry trade group PhRMA. 

Layers of bureaucracy, like PBMs, have added unnecessary complication to health care and changed the focus of the industry from patient outcomes to money, said Gary Puckrein, a minority patient advocate.

“It’s discordant to stand up and say ‘I actually want a health care system that is focused on patients and not money,’” Puckrein said. “Look at the existing system. All it’s doing is doing financial risk management, not really patient risk management, and those are two very different things.”

Representatives from PBMs defend their industry by showing the savings they bring to patients. PBMs use their size to negotiate with insurers and manufacturers for lower drug costs and larger discounts and rebates for medications. 

The Inflation Reduction Act (IRA) introduced federal price negotiation for certain drugs for Medicare recipients, which Pharmaceutical Care Management Association Chief Policy and External Affairs Officer Kristin Bass harshly criticized.

“Our companies are very good at negotiating with drug manufacturers to get costs down,” she said. “So for the drugs that aren’t being negotiated by the government — we would prefer that none of them are — PBMs would be able to bring competition to bear and really get the cost down for all of us, not just Medicare beneficiaries.”

PBMs have also drawn bipartisan ire in Congress. House Oversight Committee Chair Rep. James Comer (R-Ky.) launched an investigation into PBMs’ role in drug pricing earlier this month. The Senate Finance Committee held a hearing on PBMs Thursday at the urging of Chair Sen. Ron Wyden (D-Ore.). The FTC started an inquiry into pharmacy industry middlemen last year.

“I see a growing number of people mentioning PBMs and questioning the value they provide and whether or not they provide value and their impact on costs,” Sen. Tom Carper (D-Del.) said, noting concerns from his constituents.

Rep. Buddy Carter (R-Ga.) was more pointed in his criticism. He said that industry middlemen, including PBMs, can take nearly two-thirds of drug costs for themselves.

“I’m not opposed to anybody making money … but tell me the value they’re bringing to health care. They’re not bringing value to health care,” Carter said. “At least the pharmaceutical manufacturers are putting more money into research and development.”

Carter, who was a practicing pharmacist himself, said he believes there can be bipartisan action regulating PBMs and that regulating drug prices should be a priority for Congress in the coming year.

“I’ve seen it firsthand. I was the person on the other side of the counter who had to tell the senior citizen how much their prescription was and watch them make a decision on whether they won’t buy groceries or whether they won’t buy their medicine,” he said. “I was the one who had to tell the mother how much the antibiotic was going to be for her child and watch her in tears as she tried to call someone to get help to pay for that medication.”

Carter’s office recently launched a campaign to shine a light on what he believes are abuses in the industry, driving up prescription drug prices.

“These are issues Democrats and Republicans all over the country and in Congress agree must be addressed,” he said in an informational pamphlet on the issue. “The PBM lobby is powerful and influential, but it is not untouchable. We know how to fix this mess.”