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    Senate takes aim at pharmacy benefit managers’ role in rising drug costs

     

    Due the steep nature of rebates and other discounts produced by PBMs, manufacturers report retaining only between 40% and 60% of the list price of a drug. Because the list price does not accurately represent the actual revenue generated by the sale of a drug, the system of rebates exerts artificial inflationary pressure on list prices where pharmaceutical manufacturers will set list prices with the expectation of substantial concessions baked in. This is not inherently problematic as the list price does not represent the final cost of acquiring a drug, but because patients pay their cost-sharing obligations based on list prices, there is often a substantial difference between the actual cost to acquire a drug and what a patient pays at the pharmacy level.

    This price differential is then recouped by a PBM in the form of a “claw back.” In this scenario, it would be cheaper for a patient to pay for their prescriptions out of pocket, but pharmacists are subject to gag clauses in their contracts with PBMs that prevent them from relaying this information. This asymmetric information economy prevents consumers from making informed decisions by obfuscating real costs in the pharmaceutical supply chain.

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    Legislators in Washington have finally begun to take notice of the harmful effects that the opacity PBMs have introduced to pricing in the pharmaceutical supply chain have had on prescription drug costs. Aside from garnering attention during the Senate HELP Committee hearing this summer, Sen. Ron Wyden (D-OR) sponsored legislation seeking to remedy the issue. His “Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017” was introduced last spring.

    Wyden’s bill would require that PBMs that administer drug benefits for Affordable Care Act Exchange plans or Medicare Part D recipients operate with greater transparency. It would require disclosure of data concerning price concessions negotiated from manufacturers, establishment of a minimum percentage of rebates that must be passed back to health plan sponsors, and amendment of the definitions to make it harder for PBMs to reclassify rebate income to avoid passing it back to plan sponsors. The bill is not perfect, but offers transparency measures that provide stakeholders further elucidation of how money moves through the pharmaceutical supply chain, providing a clear path toward reducing unsustainable prescription drug costs.

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