ICYMI: Economic Experts Explain the Misunderstood Role of Pharmacy Benefit Managers

Ike Brannon, former senior economist for the United States Treasury and U.S. Congress, and Anthony Lo Sasso, professor of economics at DePaul University, explain the role of pharmacy benefit companies in the prescription drug supply chain in a new Forbes op-ed. The economic experts liken the role of pharmacy benefit companies to how travel agents support their customers:

"Travel agents leverage their customer base to negotiate deals from airlines, hotel chains, and other service providers, much as PBMs do with drug prices. Travel agents can customize travel packages or itineraries based on individual or group preferences; PBMs customize drug benefit plans to match the needs of the insurance company or employer based on a specific patient population. Like PBMs, there are many travel agents to choose from, so an agent cannot gouge travel service providers-or by extension, consumers. All the entities in the travel supply chain have an incentive to provide high-quality services at reasonable prices, and each of the three must make a profit to stay in business."

They go on to explore several provisions being considered in Congress to target pharmacy benefit companies that could actually lead to increased prescription drug costs:

"One particularly destructive provision among the PBM reform proposals would prohibit linkages between pharmacy benefit companies' compensation and prescription drug list prices in Medicare Part D. A recent NBER paper authored by University of Chicago Professor Casey Mulligan finds that such a provision would undermine incentives for pharmacy benefit companies to maximize competition in the market and secure savings for patients and health plan sponsors. Mulligan estimates that taxpayers and patients would see drug prices increase by $18 billion and Medicare premiums go up by $10 billion."

Finally, Brannon and Lo Sasso conclude that the anti-pharmacy benefit company legislation would do nothing to lower prescription drug costs and if enacted will just serve as a major win for Big Pharma.

"These provisions reveal that the intent behind the plethora of bills by Congress to constrain the negotiating power of PBMs is nothing less than a coordinated effort to remove and otherwise neutralize the mechanisms PBMs employ to reduce drug prices."

"The truth is, in fact, the exact opposite: drug companies want to preserve high prices and avoid competing on price whenever possible. As a result, these legislative initiatives amount to a Big-Pharma-championed strategy to effectively de-link PBMs from incentives to negotiate lower prices. The proposed legislative measures are ill-considered if the goal of policy is to reduce drug costs."

Read the full op-ed HERE and more about the NBER analysis mentioned in the opinion piece HERE.

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See a recent op-ed from U.S. Senator Rand Paul (R-KY) discussing legislation advanced by the Senate HELP Committee HERE.

See a recent PCMA blog highlighting how former Members of Congress are warning Congress against advancing legislation targeting pharmacy benefit companies HERE.

See what more lawmakers have had to say about pharmacy benefits securing savings for employers and patients, and the root cause of high prescription drug prices - Big Pharma's anti-competitive tactics - HERE.

See PCMA's guide to understanding the role and value of pharmacy benefit companies HERE.

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PCMA is the national association representing America's pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients. Learn more at www.pcmanet.org

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