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American College of Physicians Calls for Transparency From Pharmacy Benefit Managers

In a new position paper, the American College of Physicians (a national organization with over 154,000 members) called for sweeping reforms concerning pharmacy benefit managers (PBMs) and how they impact drug prices.

The paper included three recommendations: 1) increased transparency, standards and regulation of PBMs, and strong oversight and regulation of mergers in the PBM market, 2) requiring health plans to make accurate and understandable information about prescription drugs and drug prices available to the general public, and 3) requiring health plans, PBMs, and drug companies to report the amounts paid for prescription drugs, aggregate amounts of rebates, and other pricing information and for this information to be publicly available.

ACP pointed out that drug companies set the prices for prescription drugs and bear much of the responsibility for high prices, but policymakers also need to address areas where other stakeholders benefit from artificially higher prices and work to keep them high. PBMs administer prescription drugs for over 266 million Americans in private and public health plans. But there is little transparency or accountability in the PBM market. The contracts negotiated between PBMs and health plans are secret.

The new report noted that "Prices of prescription drugs have increased by more than 10% per year for each of the top 20 brand-name drugs prescribed to seniors, and PBMs negotiate rebates from those higher prices...Over the past decade, PBMs have seen increased revenue as list prices for drugs, particularly high-priced specialty drugs, have continued to increase. Operating profits for the 3 PBMs with the largest market share increased from $3.4 billion in 2007 to $12.4 billion in 2016."

Moreover, the PBM market doesn't have much competition. Effectively it is a tight oligopoly. The three largest PBMs, CVS Caremark, Optum Rx, and Express Scripts, control as much as 85% of the market share. And CVS has recently merged with Aetna, forming a massive health insurer and PBM company that will further reduce competition and increase prices for consumers.

Robust competition and consumer choice are the hallmarks of a healthy market-but consumers don't have that with PBMs. PBMs also engage in clawbacks, where they charge higher patient copays or coinsurance than the acquisition cost that insurers pay for the drugs.

2019 saw a flurry of state action to regulate PBMs and ensure they do not contribute to higher drug costs. And earlier in 2017 and 2018, twenty-seven states enacted laws that banned PBM gag clauses restricting pharmacists from telling consumers when they can get drugs for a lower price if they pay for the drugs out of pocket instead of through their insurance plan.

The ACP report concludes that policymakers should require more transparency of PBMs. It points out that the National Academy for State Health Policy has a model PBM bill that thoroughly regulates PBMs, requires them to be licensed and responsible, be transparent and without conflicts of interest, and limits patient out of pocket costs and protect consumers. Legislators should use this proposal as a template for their reforms.

We are pleased that the American College of Physicians has added their voice to those calling for PBM reform.

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