The right prescription to bring down pharmaceutical costs

You don’t need to tell Americans that health care costs are out of control. This includes the prices for prescription drugs. Thankfully, there is a bipartisan proposal in Congress to address these costs led by Idaho Senator Mike Crapo.

From the newsroom of the U.S. Senate Finance Committee: “U.S. Senate Finance Committee Chairman Mike Crapo, R-Idaho., and Ranking Member Ron Wyden, D-Ore., recently introduced the Pharmacy Benefit Manager (PBM) Price Transparency and Accountability Act to fix market distortions and increase transparency in federal prescription drug programs to lower patient costs at the pharmacy counter.”

This is a bipartisan attempt to bring down the costs of prescription medications for patients in the Medicare and Medicaid programs.

As background, manufacturers do not set the final price of their drugs. Pharmaceutical pricing goes through a series of steps before drugs actually reach patients. Depending on whether people buy their prescription drugs directly from a pharmacy or through their insurance, several transactions and multiple layers of profit are built into the system.

In general, manufacturers sell to wholesalers who then sell to pharmacies. Most, if not all, insurance companies use pharmacy benefit managers to negotiate the best pricing from manufacturers. Drug wholesalers and PBMs provide a service, but this comes at an added cost to the consumer.

Wholesalers and PBMs will argue that they obtain better prices from manufacturers, but these contracts and the supposed benefits are not transparent. Actual contract pricing and rebates are usually closely guarded and not readily available to the public.

What is known is that PBM companies, in general, have higher profit margins than drug manufacturers. Drug wholesalers and pharmaceutical benefit managers may have a role in the drug market, but only if they add value for patients. Their contracts and pricing should be transparent, so consumers can decide the amount of value added.

According to the U.S. Senate Finance Committee's press release, the PBM Price Transparency and Accountability Act would:

• "Delink PBM compensation from their negotiated rebates to disincentivize PBMs from promoting higher-priced medications;
  

• Increase PBM reporting requirements to Medicare Part D plan sponsors and to the U.S. Department of Health and Human Services (HHS) and empower Part D plan sponsors to audit their PBM for compliance with contract requirements;
  

• Reinforce existing requirements that plan sponsors contract with any willing pharmacy that meets their standard contract terms and conditions to better protect independent pharmacies in rural areas from practices that have contributed to widespread closures;
  

• Require participation by retail community pharmacies in the National Average Drug Acquisition Cost (NADAC) survey, which would ensure accurate Medicaid payments to pharmacies; and
  

• Mandate PBMs pass Medicaid payments directly to pharmacies to ensure transparent drug costs for states and taxpayers.”

The lack of price knowledge in our health care system is a fundamental problem for patients who want to make informed medical decisions. The Senate Finance Committee is to be congratulated for attempting to make PBMs responsible for holding down pharmaceutical costs.

Hopefully, the full Senate will take up the legislation in a timely fashion.