Drug middlemen switch tactics, but the outcome is the same: high prices
Prescription drug middlemen are shifting away from rebates that have been blamed in part for rising brand drug list prices and are using new tactics, including charging drugmakers and pharmacists increasingly larger administrative fees and overcharging for generics. But the outcome is the same for taxpayers and anyone in need of expensive medicines: higher costs.
The changes came to light at a Senate Finance Committee hearing Thursday on the impact of PBMs on drug costs — a meeting that made it clear both parties are considering reining in common industry practices. Of the five panel members who testified at the hearing, just one, University of Pennsylvania Wharton School professor Lawton Burns, had anything nice to say about PBMs. Members of both parties complained about the murkiness of PBM business practices and the incentives of the system, which Sen. John Thune (R-S.D.) said he would “blow up” if he could.
It’s a new focus for Democrats, who largely spared PBMs in the major package of drug pricing reforms they passed last year. That law even benefited PBMs by putting on ice a Trump-era measure that would have undermined the rebates that are key to PBM profits.
One of the new revelations that came up at the hearing is that prices for generics, at least specialty generics, are now also impacted by PBM practices. PBMs for years have been blamed for contributing to higher brand drug prices, but generics had seemed unaffected by them.
However, the nonprofit generic drug maker CivicaRx is now saying pharmacy benefit managers also are responsible for the high prices of specialty generics, too.
CivicaScript, which was created to avert drug shortages at hospitals, used the generic oral prostate cancer drug abiraterone to highlight its suspicion that PBM-owned specialty pharmacies are inflating prices of specialty generics. Several companies make the drug, so it is a competitive market, yet the average cost to Medicare Part D for a month’s supply of abiraterone is $3,000.
Civica sells the drug for around $160, but try as they might, Civica executives cannot get PBMs to buy abiraterone, according to CivicaScript President Gina Guinasso, who wrote to Finance Chair Ron Wyden (D-Ore.) about the issue before the hearing.
Wyden brought up the letter during the hearing, and he said he is going to focus on the issue as he works on PBM reforms.
“We’re talking about a markup of almost 2,000%,” Wyden said. “There’s something way out of whack here.”
Guinasso’s letter says large PBMs likely buy the drug for less than $160.
“But if so, the question remains: Why are consumers, health plans, and Medicare paying such high prices?” Guisasson asks.
Specialty pharmacies typically dispense abiraterone because it is classified as a specialty drug. PBMs own the vast majority of specialty pharmacies, which accounted for about 32% of PBM gross profits in 2019.
“Therefore, the same entity that is theoretically working on behalf of health plans, consumers, and Medicare to reduce drug costs also has an incentive to maximize its revenues from dispensing,” the letter states.
Reporter: John Wilkerson John Wilkerson is a Washington correspondent for STAT who writes about the politics of health care.