Prescription Drug Pricing
The debate over prescription drug costs is taking place across the country and right here in New Hampshire. While medical innovations have yielded unprecedented advances in how we treat – and even cure – many serious diseases, the price and actual costs of prescription medicines for patients and purchasers remain largely a mystery.
The Role of PBMs
Pharmacy benefit managers (PBMs) are companies that manage the prescription drug benefit for public and private health insurers. PBMs determine which drugs will be covered by insurance plans by creating lists called “formularies.” They also set reimbursement rates paid to pharmacies for filling prescriptions.
After a pharmaceutical company sets the initial list price for a medicine, it negotiates with PBMs for placement on the PBMs’ formularies. PBMs act as middlemen between prescription drug manufacturers and patients’ health plans, negotiating savings on prescription medicines. However, PBMs fail to pass a very large portion of those savings to the patients, employee health plans, and the public insurance programs that pay the final price.
Patients are Paying More
The PBM system was originally meant to lower the prices of medicines and ensure patient access to needed medications through their insurance plans. In reality, a large portion of the negotiated savings never get to the patient; they go back to the PBM.
In fact, PBMs often set patient out-of-pocket costs based on the initial list price of a medicine rather than the discounted cost negotiated with the pharmaceutical manufacturer. In some cases, the copay for a prescription is more than the full retail price for the same medication.
Pharmacists and States Struggle
PBMs are not only keeping savings from patients, but also from pharmacists and state governments. PBM reimbursement practices have forced some local pharmacies out of business. At the same time, a growing number of states have found that they’ve been overcharged by PBMs to the tune of hundreds of millions of dollars. In New Hampshire, the legislature recently passed a bill establishing a commission to study greater transparency in pharmaceutical costs and drug rebate programs.
How PBMs Drive up Costs Across the Healthcare System:
PBMs calculate some patients’ out-of-pocket costs based on the list price of a medicine, rather than the lower price the PBM negotiated with the pharmaceutical company.
PBMs reimburse independent pharmacies for prescriptions at such low rates that it’s hard for some to stay in business.
Self-insured employers often hire PBMs to manage the prescription drug benefits for their employees. Many employers are not seeing the savings PBMs have negotiated with pharmaceutical companies for prescription medicines.
Many states have discovered that PBMs overcharged their Medicaid programs for prescription medicines.
See our map detailing the overcharges and ongoing investigations.