Costly health care and pharmacy benefit managers

Drugs on a shelf for sale at a pharmacy. (Photo: i viewfinder, via Shutterstock)

With the rising cost of health care at forefront of nearly every Californian’s mind, lawmakers in Sacramento are rightly considering a range of potential policy proposals to help rein in costs.

In 2018, legislators took positive initial steps to regulate some of the egregious business practices of pharmacy benefit managers (PBMs) – little-known middlemen in the health care system who have contributed to rising costs.

However, more must be done to ensure that Californians are able to access affordable treatment options such as receiving cost savings at point of sale at the pharmacy counter, for example.

PBM profits – the rebates they were supposed to be passing on to consumers – were the leading contributor to rising health insurance premiums in California.

The original purpose of PBMs was to lower health costs for patients by negotiating rebates from drug manufacturers on behalf of health insurers and then passing those savings onto patients.

But, because PBMs largely operated in a black box with little transparency or accountability, it was impossible to know if they ever passed these savings down to the consumer or simply pocketed the profits themselves.

We now know the answer.

The California Department of Managed Health Care recently published its Prescription Drug Price Transparency Report which found that PBM profits – the rebates they were supposed to be passing on to consumers – were the leading contributor to rising health insurance premiums in California. In fact, California’s health insurance company profits spiked by 172 percent in just one year and insurance premiums increased by 14.8 percent. According to the report, pharmaceutical company discounts – paid as rebates – totaled over $1 billion. Unfortunately, California consumers have not been benefitting.

Lawmakers should end this practice and take action to ensure that rebates paid to PBMs are passed along as cost savings to California consumers.

Taking steps to reform PBM rebate practices will take on even greater urgency as a new class of medication – biosimilars – comes to market. Biosimilars are cheaper versions of biologic drugs – a class of drug manufactured from living cells. A biosimilar is an almost identical copy of its biologic drug equivalent and is analogous to a generic version of a traditional small-molecule drug.

As many biologic drugs come off patent in the next few years, there is an impending surge of cheaper, equally effective biosimilars in the pipeline ready to come to market. While this should lower costs and increase access to care for patients – particularly those living with chronic conditions – patients may never experience the benefit of biosimilars if PBMs are allowed to prioritize their own profits over patient savings.

As it stands now, PBMs receive rebates from drug manufacturers based on the list prices of their drugs. In other words, the higher the price, the bigger the rebate for the PBM. Which also means they will have little incentive to allow patients to access cheaper biosimilars when they come to market. For patients this could mean the cost of care will remain high, even when more affordable treatment options are available.

As a patient advocate with the California Hepatitis C Task Force, an advocacy organization working to remove barriers to vital treatments, I interact with hundreds of patients living with debilitating diseases. Many of them are struggling to afford their care, with some even forced to make agonizing choices between affording their medications or paying for other essential costs like food or rent.

I urge California lawmakers to make things a little easier for those patients and their families by making sure that PBM rebates are passed down to patients as cost savings at the pharmacy counter.

Ed’s Note: Bill Remak is a Petaluma resident and an advocate for patients living with Hepatitis C and other chronic diseases.

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