Posted on August 23, 2021 in: Professional Practice
Prescription drugs sit on a pharmacist’s counter. Photo by John Moore/Getty Images.
An industry group representing powerful drug middlemen has gone to court to stop a federal rule intended to bring transparency to rebates middlemen get from manufacturers.
The middlemen are arguing that the rule, initiated by the Trump administration, will increase drug costs. But the group’s critics say that secretive rebates are a primary driver of drug inflation — and the profits the middlemen extract from it.
The group, the Pharmaceutical Care Management Association, last week filed the suit in federal court in Washington, D.C., on behalf of companies known as pharmacy benefit managers, or PBMs. The companies are hired by payers such as Medicare, Medicaid and private health plans to administer prescription benefits.
Among their functions, PBMs control “formularies” or lists of covered drugs. They tell drugmakers that in order to get their products on their formularies they have to provide rebates and other discounts.
PBMs claim that by using their heft to make drugmakers provide discounts, they’re creating savings for their clients.
But the industry’s critics say the big three PBMs work behind a veil of secrecy to pocket a lot of dough. As evidence, they point to escalating drug costs as three PBMs — CVS Caremark, Express Scripts and OptumRx — have come to occupy dominant positions in the marketplace, together controlling an estimated 77% of it.
Some of those who hire PBMs might think they’re collecting all manufacturer discounts because their contract entitles them to 100% of rebates. But Linda Cahn, a top lawyer challenging the industry, has said PBMs often label additional discounts as something other than “rebates” and pocket them anyway.
The lawsuit filed last week by the PBM industry group subtly acknowledged that the corporations are holding back some of the discounts they extract from drugmakers.
“In general, PBMs pass these negotiated price concessions on to their health plan and health insurance issuer clients, who in turn use these cost savings to lower premiums and cost-sharing for their enrollees,” it said.