How PBMs Make Money and Increase the Cost of Medication
Pharmacy benefit managers (PBMs) are middlemen in the prescription drug supply chain. They negotiate rebates with drug manufacturers, and they also manage prescription drug benefits for health plans and employers.
PBMs make money in a number of ways. They charge health plans and employers fees for their services. They also receive rebates from drug manufacturers, which are typically a percentage of the drug's list price.
In some cases, PBMs use their market power to negotiate rebates that are higher than the actual cost of the drug. This can lead to higher prices for patients and payers.
For example, the price of the EpiPen, a life-saving allergy medication, has increased dramatically in recent years. In 2007, the list price of an EpiPen was $57. Today, the list price is $608.
Part of the reason for the EpiPen's high price is the way that PBMs make money. PBMs have negotiated rebates with the drug manufacturer that are much higher than the actual cost of the drug. In some cases, the rebate has been as high as 90%.
This means that patients and payers are paying much more for the EpiPen than they need to. The money that they are paying for the EpiPen is going to the PBMs, not to the drug manufacturer.
PBMs have also been accused of using their market power to steer patients to more expensive drugs. This can happen when PBMs have financial ties to drug manufacturers. For example, PBMs may own shares in drug companies, or they may receive payments from drug companies for steering patients to their drugs.
When PBMs steer patients to more expensive drugs, it can drive up the cost of prescription drugs for everyone.
PBMs play an important role in the prescription drug supply chain. However, their business practices can sometimes lead to higher prices for patients and payers. There is a need for more transparency and accountability in the PBM industry.
In addition to the EpiPen, there are many other examples of how PBMs make money and increase the cost of medication. For example, PBMs have been accused of using their market power to negotiate lower reimbursement rates for generic drugs. This can lead to higher prices for patients who use generic drugs.
PBMs have also been accused of using their market power to deny coverage for certain drugs. This can make it difficult for patients to access the medications they need.
There is a growing movement to reform the PBM industry. Some people are calling for more transparency in the PBM industry, so that patients and payers can better understand how their money is being spent. Others are calling for more regulation of the PBM industry, so that PBMs are less likely to use their market power to drive up the cost of prescription drugs.
It is important to hold PBMs accountable for their business practices. By doing so, we can help to ensure that patients have access to the medications they need at a fair price.
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