Critics say time to regulate powerful pharmacy benefit management industry

Critics say time to regulate powerful pharmacy benefit management industry

They may be the biggest part of the health care puzzle consumers have never heard of: Pharmacy Benefit Managers -- a handful of large companies that, together, touch nearly every prescription medication dispensed in the United States.

"Together they process nearly 75 to 80 percent of all prescriptions nationwide," said Marc Chammas, co-owner of Sudbury Pharmacy in Sudbury, Massachusetts.

That volume has given Pharmacy Benefit Managers -- commonly known as PBMs -- enormous power to negotiate discounts from drug manufacturers.

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Ideally, those discounts, known in the business as "rebates," would be passed on to health insurance companies and then to consumers. That would help lower the cost of health care. But critics say that is not happening enough.

"Increasingly, PBMs are using their market power to demand higher and higher rebates which inflate the price of drugs and ultimately consumers are paying more," said David Balto, an antitrust attorney in Washington, DC, who has testified against PBMs to Congress.

Balto suggests that what the PBMs are really getting from the drug manufacturers is a form of 'payola.'

"The problem is that payola ends up in that PBM's pockets and doesn't reduce the cost of those drugs," he said."

By some estimates, the pockets of PBMs are bulging. The National Community Pharmacists Association, which bills itself as The Voice Of The Community Pharmacist, says they are earning billions of dollars in annual revenues.

This does not surprise David Balto, who said PBMs are living "in a world that John D. Rockefeller couldn't imagine in his wildest dreams."

"There's a lack of competition. There's no regulation. And there's no transparency," Balto said. "That's a recipe for skyrocketing monopoly profits."

A spokesperson for ExpressScripts, one of the largest PBMs, tells Boston 25 News that the company does share some of those 'rebates' with its clients (insurance companies) and that in 2017 those clients only saw a small increase in drug costs.

CVS Caremark, another big player in the PBM arena, said despite the fact drug prices went up about 10 percent last year, "We kept drug price growth nearly flat for our PBM clients."

Still, local pharmacies see some of the deals PBMs make with drug manufacturers and question the commitment to lowering consumer drug costs.

Recently, one PBM required pharmacies to dispense, in some cases, brand-name drugs instead of generics -- even though that meant a likely higher co-pay for customers.

Mandating a more expensive brand name drug when a cheaper generic is available would seem to make no sense. The frustration, pharmacists and store owners tell Boston 25 News, is that no explanation is available from the PBM because its negotiations with drug manufacturers are confidential.

"We don't know where the money goes," Chappas said. "And there's no transparency. No one that these PBMs answer to."

But that is changing.

Arkansas recently became the first state in the country to require licensure of PBMs -- which opens the door to regulation -- this after an outcry from independent pharmacists who charged the PBMs were trying to put them out of business.

And at the federal level, Health and Human Services Secretary Alex Azar just addressed the PBM issue last week -- making it clear their business practices are under scrutiny. "They're taking it now from both sides. They're getting compensated by their customers, the insurance companies, but they're also getting compensated by the drug companies they're supposed to be negotiating against," Azar said. "They're getting rebates, and keeping some of the rebates."