- PhRMA sees an opportunity in the Trump administration's plans to bring down the cost of prescription drugs, this week proposing a major change to the convoluted system of rebates and discounts that's emerged between drugmakers and pharmacy benefit managers.
- In an official comment to the administration's drug pricing blueprint, the powerful trade lobby said PBMs should no longer be compensated by payments linked to the list price of a drug, but rather by a fee for the negotiation services they provide.
- With its new proposal, the industry group continues a war of words over which cog of the drug pricing chain is most responsible for high drug prices and taking aim at one of its favorite targets in PBMs.
PhRMA's proposal is in line with its efforts over the past few years to shift some of the blame for rising drug costs onto PBMs. The industry is often quick to note that list prices don't actually represent what consumers, or even insurers, pay for medicines.
In a simplified telling of the current system, drugmakers set a list price, or wholesale acquisition cost, for their branded drug products. Negotiating on behalf of insurers, pharmacy benefit managers extract rebates from drugmakers on that list price, resulting in a lower net price. Consumers may not actually see either price, depending on the copayment or out-of-pocket maximum set by their insurer.
Over the past several years, the drug industry has been excoriated for rapidly rising prescription drug prices — a pain felt all the more acutely by consumers as more and more plans feature high deductibles or coinsurance for certain drugs.
One of PhRMA's favorite defenses is that list prices don't tell the whole story, that drugmakers give substantial discounts that don't get accounted for in the public eye.
Last year, for example, Iqvia calculated that list prices for protected brands — drugs still defended by patent exclusivity — rose 6.9%. Accounting for rebates and discounts, however, brought the net price increase down to 1.9%, below the level of inflation.
PhRMA, citing estimates from the industry watcher Adam Fein at the Drug Channels Institute, claims the industry's so-called "gross-to-net" reductions surpassed $150 billion last year.
Now, the trade lobby is proposing that the Trump administration should help shift how pharmacy benefit managers are compensated away from percentage cuts of a drug's list price. They're not out-and-out suggesting rebates should be done away with — PhRMA still sees a role for such payments in value-based contracts — but the idea, if adopted, would mark a substantial change to the drug pricing system.
Core to the group's argument is the claim that PBMs have an interest in keeping list prices rising, so that the rebates they collect can grow as well.
The pharmaceutical industry appears to have won over the Trump administration to its view that PBMs are part of the problem.
In recent comments, Department of Health and Human Services Secretary Alex Azar suggested it might be necessary to "disrupt the entire system of rebates."
"Everyone in the system, from drug manufacturers to pharmacy benefit managers and wholesalers, makes their money as a share of list prices, so they have little incentive to force them down," Azar said in remarks to the 340B Coalition earlier this month.
It's an idea likely to generate substantial resistance from PBMs, which argue the only parties responsible for rising drug costs are the drugmakers hiking prices for their products.
"At a time of rising drug prices, we think it would make no sense to undermine plans’ ability to negotiate rebates or other price concessions from drugmakers," wrote the Pharmaceutical Care Management Association in a July 16 statement. "That would raise costs while offering no corresponding benefit to either consumers or taxpayers."
Major PBM Express Scripts, for example, touted earlier this year that its negotiation efforts limited prescription drug spending growth to just 1.5% per person, the lowest increase in 24 years.
PhRMA also proposes that, if rebates are to stay, savings should be passed on direct to consumers at the point of sale. A number of payers, including UnitedHealthcare and Aetna, have announced plans to begin doing this, and the Centers for Medicare and Medicaid Services has proposed piloting the approach in Medicare Part D.
The trade group isn't a fan of all of the Trump administration's ideas, though. PhRMA came out against the White House's idea of putting prices in direct-to-consumer drug advertising, and is against shifting drugs from Medicare Part B into Medicare Part D.