- Criticism of rising prescription drug prices has brought the threat to tighter regulation and scrutiny to the pharmaceutical industry, but a new report from Moody's signals that pharmacy benefit managers (PBMs) are likely to share some of that backlash as well.
- "The current PBM model could be altered or undermined by changes proposed by employer customer groups, legislation that is aimed at drug companies, or even a slowing of brand drug price inflation," the report, which was released Tuesday, said.
- Mooted changes include requiring greater transparency in negotiations with drugmakers, or shifting how PBMs set benchmark pricing for Medicare Part D patients.
PBMs serve as a bridge between drugmakers and consumers. They manage prescription benefit programs for federal employees, state government workers, health insurers and others. They also determine what products are available on pharmacy shelves, and barter with pharmaceutical developers to win rebates and discounts on list prices of drugs.
But PBMs' close relationships with those developers means they could get caught in the current whirlwind of drug pricing backlash, which would negatively affect their value.
Drug pricing repercussions would likely have the biggest effects on large PBMs, such as CVS Health, Express Scripts and UnitedHealth Group.
“If any legislative and reimbursement proposals aimed at reining in drug prices take hold, we believe they would erode the value of the pharmacy benefit manager model,” Diana Lee, a Moody's Senior Credit Officer, said in a Dec. 13 statement.
Amid the mounting push for drug pricing reform, Moody's anticipates PBMs will exclude more products from their formularies as a means of providing lower costs to their clients.
The logic there is that making formularies more exclusive pushes medicine makers to offer greater discounts to keep their products available at the pharmacy, at which point PBMs claim they are able to pass those discounts on to consumers. In 2017, Express Scripts is excluding 85 products from its formulary while CVS Health is excluding 154.
As a result, Moody's says biopharmas will limit price increases on their branded drugs to keep pace and stay on the formularies.