Why do Pharmaceutical Companies hate PBMs so much?

You may have been hearing a lot about Pharmacy Benefit Managers (PBMs) recently. That’s because the pharmaceutical industry needs to point the finger at someone for the rising cost of drugs and has decided PBMs make a convenient scapegoat for the rising price of drugs in America. And to their credit, they are doing a great job of getting their message out there.

But is it correct that PBMs are responsible for rising prices? Let’s look at the claims of Phrma – a gang that lobbies on behalf of the pharmaceutical industry.

"Middlemen in the prescription drug supply chain called pharmacy benefit managers (PBMs) negotiate large rebates from biopharmaceutical companies on behalf of insurers and employers. But rather than getting paid based on the value their services provide, their compensation is tied to the list price of a medicine, in the form of retained rebates. They also charge fees to biopharmaceutical companies and health plans that are often based on list prices, and these fees nearly quadrupled between 2014 and 2016. This creates a system where middlemen make more money when your medicine prices increase."

If it sounds like it doesn’t make sense, that’s because it doesn’t.

Let’s start by looking at this claim.

“…they get paid as a percent of the list price of a medicine. This creates a system where middlemen make more money when your medicine prices increase.”

Is Phrma seriously trying to get us to believe that this is what happens behind closed doors?

1. Drug makers set a high price.
2. PBMs, representing patients, come into the room and demand the price be higher.
3. Drug makers say “No, no! Our shareholders can’t handle any more profits! They’re too rich already!”
4. But the PBMs are adamant! “Raise your prices even higher!”
5. The sad drug makers reluctantly raise their prices forcing them to be the most profitable industry in the world.

In a piece for Forbes, Avik Roy lays out the truth about PBMs:

"Prescription drug prices, insurance premiums, and overall health spending would all be far higher if PBMs weren't driving more market share to low-cost generic drugs."

URGENT: SB 432, which will enable Big Pharma to raise drug costs even higher, just moved one step closer to passing.

So why does Big Pharma hate PBMs?

A recent report by Visante, a “clinician-composed consulting firm specializing in the business of pharmacy and healthcare compliance,” found:

“PBMs save payers and patients 40-50% on their annual prescription drug and related medical costs compared to what they would have spent without PBMs.”

So why does Big Pharma hate PBMs? Because PBMs do their job well.

The powerful pharmaceutical lobby knows that the public is furious about rising drug costs. They have been trying to put the blame on PBMs - despite the fact that PBMs job is to represent the financial interests of patients in the negotiation. But we know that only one party sets list price of drugs and that is the pharmaceutical manufacturers themselves.

We cannot let big pharma use the law to eliminate our only advocate in price negotiations.

Here’s what you can do to help: Write your legislator and ask them to oppose the language in SB 432.