Gingrich and Daschle: Senate and House making key steps to fix health care
It's time to reform accessibility to prescription drugs
Too many Americans can't readily access or afford their prescription drugs. Pharmacy benefit managers (PBMs) play a central role in creating this dynamic.
PBMs are hired to administer prescription drug benefits, but these middlemen face little accountability. Increasingly, PBMs extract considerable profit from drug manufacturer rebates, administrative fees on pharmacies and spread pricing (the profit they take from the difference between what they bill the plan sponsor for a medication and what they reimburse the pharmacy).
Since the three largest PBMs emerged in the late 1980s, prescription drug benefit costs have risen 1,010 percent - despite PBM claims that they reduce costs. In addition, too many patients have to wade through the bureaucratic mess of prior authorizations, step therapies or mandatory mail order just to access their prescriptions.
If PBMs were an automobile, you might say they have engine troubles. Their model isn't running properly. We all have a hunch what is wrong, but we have to look under the hood to verify. PBMs operate like that car, but they've put a padlock on the hood.
They won't allow plans to know what they're paying pharmacies on the other end, so the plan sponsor often has little idea of the profit the PBM is keeping for itself. Those problems can't be fixed until the padlock is removed. The veil of secrecy puts health plan sponsors, patients, drug manufacturers, policymakers, and pharmacies at a disadvantage.
Legislation can certainly help. The U.S. Congress should pass legislation that increases transparency and patient access - bill's like the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act; the Prescription Drug Price Transparency Act; and the Ensuring Seniors Access to Local Pharmacies Act.
But moving legislation through our gridlocked Congress takes time.
We don't have to wait. We can make improvements while we press lawmakers to act. Alternatives to the traditional PBM business model do exist. If companies and organizations want to upend the status quo in their benefit plan design process, they should take the wheel instead of riding shotgun.
That's what Caterpillar, the world's leader in manufacturing construction and mining equipment, did. In "Caterpillar Breaks New Ground Managing the Prescription Drug Supply Chain," a 2010 American Journal of Pharmacy Benefits article, Caterpillar's compensation and benefits manager Todd Bisping explained how the company sought to reverse an increase of 14 percent in its annual prescription drug spending from 1996 to 2004.
Caterpillar created direct-to-pharmacy agreements that cut PBMs out of the equation. The arrangements emphasized volume for margin when it came to the prescriptions they dispensed, were subjected to competition as opposed to exclusivity agreements, worked under a new pricing model, and were audited to ensure the methodology was properly applied. By 2009, Caterpillar's total drug costs were down 6.8 percent, and yearly member costs were 13.8 percent lower.
Independent community pharmacies, which are often located in underserved areas, can enhance these efforts by ensuring adequate patient access to prescription drugs and pharmacist counseling services.
Finding more innovative and cost-effective ways to deliver prescription drug benefits is a growing phenomenon. More than 40 major corporations, from American Express to Verizon, have formed the Health Transformation Alliance. HTA is dedicated to reducing the more than 30 percent of waste that bloats health care spending.
When it comes to prescription drugs, their relationships with PBMs have been reimagined to include "full financial disclosure, financial disclosure auditing rights, and participation in the development of formularies." It is an ongoing process where the best practices will be applied.
The time has come for PBM reforms like these, not only for Fortune 500 companies, but also - and especially - for Medicare and Medicaid. Common-sense reforms could actually save our federal government billions of dollars.
Henry Kaiser once said, "Problems are only opportunities in work clothes." All of us - policymakers, insurers, pharmacists, and even PBMs - must roll up our sleeves and create better, more cost-effective prescription drug benefit plans for Americans.
B. Douglas Hoey is a licensed pharmacists and CEO of the National Community Pharmacists Association CEO.
The views expressed by contributors are their own and are not the views of The Hill.