Currently, 6 separate bills have come out of congressional committees to increase pharmacy benefit managers regulation, with more transparency being the common factor.
The behavior of pharmacy benefit managers (PBMs) is often at odds with what is best for patients, primarily because of misaligned financial incentives. An example of this dynamic was recently published as an abstract for the 2023 American Society of Clinical Oncology Annual Meeting by Harvard University researchers.1 They evaluated the prior authorization (PA) rate from 2010 to 2019 in Medicare part D beneficiaries, specifically for imatinib (Gleevec) because a generic alternative became available in 2016. In nearly all cases, the introduction of a generic leads to lower prices for the drug, and imatinib was no outlier. Despite this, the researchers found that PAs increased from 65% in 2010 to 95% upon the generic option’s entry. Moreover, this introduction corresponded to a delay in filling the drug: from an average of 15 days to 40 days. Imatinib is typically taken for years, so encouraging its use before moving on to a newer, more expensive option would be rational. Thus, it’s counterintuitive that PAs, a mechanism to discourage use, increased so dramatically.
The responsibility of this mismatch lies primarily with the PBM, whose purpose is to develop formularies for insurance companies (payers). In the past, they encouraged generic drug use via easy approvals and low co-payments. As competition among branded drugs for the same patient increased, PBMs were also able to obtain price concessions, such as a rebate from the manufacturer, to get a favorable position on the formulary. Unfortunately, these rebates have made the PBM business incredibly lucrative, especially when it is vertically integrated with a payer and a specialty pharmacy. The PBM currently collects the formulary entrance fee and shares some of it with the payers. Further, there is pressure for a PBM to primarily use their own specialty pharmacy to fill these expensive drugs. To ensure the drugs with the best rebate are selected, tactics such as PAs, denials, slow appeals, and high co-payments are used.
The relationship between the PBMs and drug manufacturers has become increasingly convoluted. Higher co-payments lead to higher prescription abandonment,2 so drug manufacturers initiated third-party co-payment assistance. However, assistance interfered with formularies, leading PBMs to try to find ways to interrupt it. That is, until they learned they could save even more by declaring the drug a nonessential therapy and maximize the co-payment assistance. Some insurances have gone as far as eliminating coverage of some expensive drugs, forcing the manufacturer to cover the full cost. This ongoing battle between the pharmaceutical industry, PBMs, and payers is hurting our patients.
There are ways out of this madness, but it won’t be easy. Currently, 6 separate bills have come out of congressional committees to increase PBM regulation, with more transparency being the common factor. This is a good start but still leaves the misaligned incentives untouched. An aggressive option would be to break up the vertical integrations. At a minimum, a “Stark Law” for PBMs should exist to prohibit self-referral and break this disturbing cycle.