The man behind the curtain in drug price increases

Published: Sep 29, 2016

Author: Buddy Carter

Publication: The Hill

More so than most issues we deal with in Washington, health care is personal.  We all feel it when something changes in our health care system.  No one is immune, and for some, those changes mean life or death.

It is very understandable, then, that fluctuation in drug prices draws so much public attention.  Lifesaving medications are not a choice for a family relying on them to protect a loved one, they are a necessity.

As a pharmacist for more than 30 years, and the only pharmacist in Congress, I’ve seen firsthand the anguish of families balancing their health care needs with their bottom line.  It is indescribably heart wrenching to see a mother decide whether to buy groceries or her child’s medication, or a senior citizen struggle to pay for medicine on a fixed budget.

Often those of us behind the counter are left to answer for factors contributing to increasing health care costs that are completely out of our control, and many times we don’t have the answer.

Similarly, when Heather Bresch, CEO of EpiPen distributor Mylan, was brought before the Oversight and Government Reform Committee to answer for the drastic price increase of EpiPen, she also didn’t have all the answers.

While it makes for attention grabbing headlines and may make those of us on the other side of the dais feel better, hollering at drug manufacturers does not get to the root of the problem.

Why?  Consider that, despite a 32% increase in the list price of EpiPens, Mylan claims their average revenues from the product decreased in 2015. If the manufacturer that develops and markets a drug is not benefiting from the increased prices, where is the money going?

To answer this question, it’s time to start paying attention to the man behind the curtain.  In the drug pricing equation, that is the Pharmacy Benefit Manager or PBM.

PBMs were conceived to serve as an intermediary between the many facets of the pharmaceutical industry. Through negotiating prices, aggregating purchasing power, and processing claims, they were designed to drive prices down.

Since their creation, however, PBMs have evolved from fiscal intermediaries into companies that dictate the products and providers used by patients to treat their medical conditions.  This evolution has resulted in fewer choices in care for patients and the erosion of free market principles that truly drive prices down.

Many PBMs will tell you that they do a great service for their patients, and that they’ve saved their customers millions of dollars on prescription drugs. In reality, it’s hard to understand what value they bring to the health care system at all.

At the same time, PBMs are experiencing remarkable consolidation and growth.  The three largest now cover roughly 78 percent of all Americans with pharmacy benefits.  In just over ten years, the two largest saw their profit margins increase 600 percent.  That is impressive growth in any market but especially so when you consider it happened during the worst financial crisis since the Great Depression.

Even with this outstanding growth though, PBMs don’t invest in consumers like pharmaceutical companies who are putting profits back into research and development resulting in the creation of new, cutting-edge treatments and medications.

In our oversight hearing, we discovered that no one – not even the CEO of the company manufacturing EpiPens – knows how the retail price breaks down along the supply chain.

Ms. Bresch stated repeatedly she does not even know how much goes to the PBM, despite her company being a party to a contract with them. Nobody knows how much PBMs and other middlemen are pinching along the way and most are afraid to ask for fear of retaliation.

For manufacturers and distributors, questioning a PBM could result in their medications being shut out of a formulary list and therefore out of reach of most patients.

Many pharmacists are afraid to say anything because they have seen their colleagues suffer harassment and retaliation for daring to question a PBM’s business practices.

While there are good and bad actors in any line of business, the lack of transparency in PBMs limits our ability to separate the wheat from the chafe or enact much needed reforms.

Patients deserve to know if the price increase of EpiPens, as well as other drugs, is due to supply issues or if they’re due to deceptive business practices benefitting PBMs.

It is time for patients to be given the truth about drug pricing increases.  It’s time for PBMs to step out from behind the curtain.