Transparency needed in administration of drug benefits by pharmacy benefit managers

According to a new AARP report, the average retail price of the most popular brand-name drugs increased by 8.3 percent in 2009 and by 41.5 percent over the past five years – rates well in excess of inflation as measured by the Consumer Price Index.  At the same time, major pharmacy benefit managers (PBMs) like CVS Caremark, Express Scripts, Inc. and Medco Health Solutions, Inc., hired by employers and other health plan sponsors to negotiate lower prices from drug manufacturers, experienced record profits, in some cases increasing five-fold over the past decade.

Joseph H. Harmison, PD, President of the National Community Pharmacists Association (NCPA) and Arlington, Texas pharmacy owner, issued the following statement in response to the AARP report, first covered by The New York Times:

"This report should serve as a wake-up call to both patients and health plan sponsors relying on major pharmacy benefit managers to administer their drug benefits. Community pharmacists regularly work with patients to stretch their health care dollars, such as by promoting the use of cost-saving generic drugs. And local pharmacists know all too well the frustration patients have with drug costs set by factors well outside the pharmacist's control, such as brand name manufacturers and PBMs.

"In recent decades, PBMs have grown from simple claims administrators into unregulated, billion-dollar middlemen whose profit motivations routinely conflict with clients' interests. AARP's analysis calls into serious question what patients and health plans are getting in return for billions of dollars spent on pharmacy benefit management.

"Drug manufacturers pay PBMs billions of dollars each year to drive brand market share, resulting in enormous PBM profits, with the remainder passed on to health plans. These rebates have become predictable costs, simply budgeted into the overall, rising cost of brand name drugs. The pursuit of more rebate revenue has been known to lead PBMs to switch patients from generic drugs to pricier name brands. In addition, among the drugs experiencing the greatest price inflation are so-called specialty drugs that PBMs often require to be dispensed solely through their own mail order pharmacies.

"AARP's findings, combined with windfall PBM profits, make it clear why PBMs so strongly resist greater transparency requirements, such as assuming a fiduciary duty to put clients' interests above their own.

"Congressmen Anthony Weiner (D-NY) and Jerry Moran (R-KS) are the lead sponsors of H.R. 5234, the PBM Audit Reform and Transparency Act of 2010, which tackles some of the most egregious practices of the PBM industry and should be passed. PBMs do not have a truly vested interest in reining in prescription drug prices, because that would hurt their profits. The Weiner-Moran bill will ensure that finally happens."