Virgilius the Sorcerer

The Dark Art of Pharmacy Benefit Managers

Drug pricing has been getting a lot of attention for some time now, so it’s no surprise that the prices of obesity medicines would get attention, too. New medicines are coming, competition will be increasing, and one factor in that competition will be prices. The only way to get good value is to consider both costs and benefits. But drug pricing in the U.S. is screwy. Though we can look at list prices, the abundance of discounting schemes is enough to make our heads spin. For a glimpse of the problem, take a look at the dark art of pharmacy benefit managers.

Both Arsonists and Firefighters

The business of these benefit managers is simple enough on the surface. They manage prescription drug benefits for the folks who pay the bills for healthcare – health insurers, Medicare drug plans, large employers, and a host of others (including, ultimately, you). They’re supposed to negotiate with drug companies and pharmacies to control drug prices. But lately, pharmacy benefit managers (PBMs) are getting a lot of attention because of the possibility that some of their business practices actually contribute to rising prices for prescription drugs.

The PBM industry presents itself as a bold firefighter keeping the blazing fire of prescription drug prices under control. But in practice they can benefit from high drug prices because their profits come from negotiating big discounts off a high list price. Thus, Antonio Ciaccia describes PBMs both as arsonists and firefighters with respect to drug prices.

Scrutiny of a Murky Industry

Senators Charles Grassley (R-Iowa) and Maria Cantwell (D-Washington) introduced legislation this week to give the FTC more power to curb problematic business practices of PBMs. These include something called spread pricing. It’s a scheme where a PBM pays a pharmacy one price but charges the person’s health plan a higher rate to boost the PMB’s profits.

Another problematic practice is secrecy around the details of PBM arrangements. Thus costs are anything but transparent. We cannot easily determine, for example, if the higher list price of Wegovy for obesity (compared to Ozempic for diabetes) results in a higher net price or not. It’s common for PBMs to demand big discounts for innovative new therapies where coverage is a challenge. That incents a pharmaceutical company to charge a higher list price so it can gain coverage and recover its huge investment in R&D.

A Big Hairy Problem

No two ways about it. Drug pricing is a big hairy problem that encompases much more than obesity drugs. PBMs appear to be part of the problem. But people need access to good healthcare, and that includes innovative therapies for obesity. Right now insurance coverage is so spotty that these innovative therapies are only available to a tiny percent of the people who might benefit from them.

It’s not enough to sigh and say that this is hard. Leaders in obesity care will clear a pathway for better access to care. Because innovation is worthless if it’s only available to the most fortunate 0.1 percent of people who live with this complex chronic disease.

Click here, here, and here for further perspective on some of the current issues with PBMs.

Virgilius the Sorcerer, illustration by Aubrey Beardsley / WikiArt

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May 25, 2022