By Ed Weisbart, M.D.
St. Louis Business Journal, February 22, 2019
On Feb. 6, the Department of Health and Human Services published a new rule that diminishes the leverage pharmacy benefit managers have when negotiating prices with drug manufacturers on behalf of Medicare and Medicaid patients.
Manufacturers offer rebates to PBMs in exchange for preferred placement on PBMs’ formularies. Preferred placement means lower copays for patients and increased market share for the manufacturer. An unverifiable percentage of these proprietary rebates is retained by PBMs, with an unclear impact on the at-the-counter cost of prescription drugs.
HHS’s new, restrictive rule is being promoted as necessary to transfer those hidden rebates away from PBMs and into the pockets of patients, but in reality, the negotiating table and profits would abruptly tilt towards the manufacturer. Even in the best case scenario, the rule change would only benefit people on publicly administered programs and would have no impact on anyone with private insurance or those consumers paying out of pocket.
Currently, drug manufacturers must negotiate with a PBM industry that is well armed with massive resources of data analysts, clinicians and contractors. Under the new rule that handcuffs PBMs, manufacturers have better relative negotiating leverage, and that’s far more likely to lead to higher retained earnings for the manufacturers than savings for consumers.
The Trump administration’s proposal would allow manufacturers to charge whatever price can be borne by individual patients.
PBMs have brought this on themselves. Their negotiations are confounded, conflicted and held behind closed doors. The system needs far more sunshine and a more effective advocate to genuinely lower the cost of pharmaceuticals.
There is, however, a fair solution: Medicare should be allowed to hold meaningful negotiations on behalf of all Americans. The United States should do as every other modern nation does: Establish a uniform national formulary with ready access to evidence-based medical exceptions. Rather than expect mandated skin-in-the-game copays to mysteriously reduce the cost of pharmaceuticals, prices should be determined through national negotiations that are based on real evidence of value and the true cost of research, development and production.
Prescription drug prices in the United States are double what is charged in the rest of the modern world. The governments of most leading industrialized nations negotiate on behalf of their citizens, and it’s way past time that we come together and demand the same from our government.
Dr. Ed Weisbart is a family physician in Olivette and chair of the Missouri chapter of Physicians for a National Health Program.