Congress has a rare chance to lower drug prices

Salvatore J. Giorgianni:©Healthy Men Inc.

Concerns about high drug prices can take a significant toll on Americans every day. A new West Health-Gallup study recently found that a mere 55% of Americans believe they can afford their health care and prescription drugs, down six points in just one year. Thankfully, Congress has a rare bi-partisan opportunity in this upcoming lame duck session to address one of the primary drivers of this crisis: pharmacy benefit managers, or PBMs.

These powerful middlemen control prescription drug access for millions of Americans, and their business model is nefarious -- but currently legal. PBMs, which represent for-profit insurance companies, extract (or dictate) substantial rebates and discounts off the nominal "list" price of medicines and also decide which medicines should be covered on different insurance plans.

There's nothing inherently wrong with driving a tough bargain, in fact, our free-market system depends on it, and PBMs were created, in large part, to drive down patient out-of-pocket costs. This is not how things have played out. Rather than legitimately manage costs, the problem is that these negotiated savings don't flow to patients or reduce out-of-pocket expenses.

In fact, just the opposite has happened. These for-profit PBMs pocket the lion’s share of these discounts for themselves and send the rest to insurers -- while patients are stuck paying copays and coinsurance based on the much higher list prices.

It gets worse. Because their revenue model is based on product prices, PBMs all too often prefer drugs with higher list prices. Because a bigger list-price means they have more room to negotiate big discounts. PBMs can make more money by negotiating a 50% discount on a $1,000 drug than negotiating a 50% discount on a $100 drug.

The consequences are heartbreaking. The West Health-Gallup study reports that "72.2 million Americans avoided necessary medical care in the past three months due to cost." This only exacerbates other barriers to care for vulnerable populations. Many patients who have walked away from the pharmacy counter empty-handed did so because of unaffordable copay or coinsurance payments.

Inability to adhere to a prescription drug regimen can be a matter of life and death. If nothing changes, nonadherence may result in more than 100,000 preventable deaths annually and more than $100 billion in avoidable health care expenses.

One of the most important remedies to this dangerous situation is to reform how PBMs work and require them to be accountable and to return discounts and rebate savings to patients. Two bipartisan bills currently before Congress offer real solutions. The first, the Modernizing and Ensuring PBM Accountability Act, would "delink" PBM compensation from drug prices. Currently, PBMs earn fees calculated as a percentage of a drug's list price. PBMs would have to charge flat fees based on actual services provided, eliminating their incentive to favor higher-priced medications.

The second bill would require patient cost-sharing to be based on a drug's actual net price -- what insurers pay after rebates and discounts -- rather than its list price. This seemingly simple change could dramatically reduce out-of-pocket costs for patients with conditions like asthma, heart disease, and those requiring blood thinners.

The urgency for reform is clear. It is stunning to know that just three PBMs control nearly 80% of prescription drug access. These companies have turned a straightforward market into an impenetrable maze of rebates and fees, posting record profits while patients struggle to afford their medications.

These PBM practices also have an impact on overall health and wellness. When patients can't afford medications, manageable chronic conditions can escalate into medical emergencies. This creates a cascade of costly hospitalizations and complications that strain our entire health care system. They also adversely impact access to care. Pharmacies, particularly independent community pharmacies that proudly serve vulnerable populations are being squeezed to the breaking point by PBM practices. This is particularly appalling when you consider that one of the largest chain pharmacy corporations also owns one of the largest PBM operations.

Some argue that PBMs help control drug costs through their negotiating power. But if that were true, why are patient out-of-pocket costs continuing to rise while PBM profits soar? The reality is that the current system allows PBMs to pocket much of the savings they negotiate rather than passing them on to patients.

Congress needs to seize the moment and act now to address PBM overreach and abuses. Strong majorities across party lines are demanding change. These reforms wouldn't solve every problem, but they would represent a significant step toward a more transparent, patient-centered system.

Salvatore J. Giorgianni, PharmD, CMHE is the Vice-President and Cofounder of Healthy Men Inc. and Chair-Emeritus and Cofounder of the American Public Health Association Men's Health Caucus.