By Dr. Robert Popovian, Senior Health-Policy Fellow for PPI;
and Catherine Barr Windels
For decades, lobbyists for the pharmacy-benefit-management (PBM) industry have been telling policy-makers, employers, and patients that PBMs (middlemen responsible for the administration of the prescription-drug benefit for various health-plan payers) save everyone money. They argue that opaque negotiation, rebate contracting, and vertical and horizontal integration are intended to help lower biopharmaceutical spending. Unfortunately, the promises of savings are a mirage, with no data-driven analysis to back them up. The PBM industry is thus staunchly opposed to laws that provide transparency into their business practices.
Fortunately, states and federal legislators are finally taking action. They have decided to scrutinize the flow of untold billions of dollars in discounts, fees, concessions, and rebates that are siphoned off from the biopharmaceutical industry by the pharmacy-benefit managers. The estimated total collected by the middlemen is over $200 billion annually, which makes up almost 40 percent of drug spending in the U.S. Unfortunately, because of a lack of transparency, no one, including federal and state governments, has a clue as to how much of that money provided by the pharmaceutical industry is kept by PBMs. At best, there are estimates by various governmental agencies of the amount of savings that is passed back to those who are supposed to benefit from the work of PBMs: the employers, the state and federal governments, and most importantly, the patients. It is important to note that such estimates are primarily based on modeling data, testimony by PBM officials, or incomplete information.
