Big Pharma Is Pointing Fingers, and Hoping Trump Will ListenBy , , and
Pharmacy benefits managers lay out lobby plan in strategy memo
President has said he’ll focus on drug costs, pricing
In the fast-moving Washington game of who’s to blame for high U.S. drug prices, an often-overlooked industry is readying its defenses against pharmaceutical companies that fault other parts of the health sector for the costs faced by patients.
Known as pharmacy benefits managers, or PBMs, the industry includes giants such as Express Scripts Holding Co. and CVS Health Corp., which negotiate prices with drugmakers, work with pharmacies and help set the co-pays patients pay out of pocket.
Now these middlemen are now taking it from all sides.
The top executive at British drug giant GlaxoSmithKline Plc took a veiled swipe at the PBM industry on Wednesday, citing an industry-sponsored report that out of every $100 of a drug’s list price, only two-thirds ends up back with the drugmaker.
Much of the rest goes to “non-innovators in a system which thinks it’s paying high prices for innovation,” Glaxo Chief Executive Officer Andrew Witty said on a conference call. “I’m not saying that the people in between aren’t adding value, but people need to understand that dynamic better than it’s understood today.” Other drugmakers, along with the drug industry’s powerful trade group PhRMA, have made similar claims.
The pharmacies that work with PBMs are no fans, either, claiming they charge unfair fees are run an opaque business. The current system “allows these drug middlemen to extract enormous profits with limited oversight and transparency,” said Susan Pilch, vice president for policy and regulatory affairs at the National Community Pharmacists Association, which represents 22,000 independent pharmacies.
Sensing the danger, the lobby group for PBMs, the Pharmaceutical Care Management Association, circulated a six-point plan this week among its members, including its strategy to engage members of President Donald Trump’s administration, build “a political ‘firewall’ on Capitol Hill,” run ads, and mobilize allies such as lobby groups for seniors citizens and health insurers.
“We have an aggressive campaign to defend affordable drug benefits, to defend the tools PBMs use to reduce costs,” Mark Merritt, PCMA’s chief executive officer, said in a telephone interview Wednesday. As lawmakers tackle high drug costs, “PBMs are part of that solution,” he said.
The PBM industry claims that it plays a vital role, helping to push down drug prices and negotiating on behalf of consumers. It played a critical role in the current debate over drug prices, highlighting the high cost of new hepatitis C medications and forcing steep discounts for the expensive drugs.
Trump’s ‘New Thing’
Trump has so far focused on drugmakers, saying that “my new thing is going to be pharma, because we pay too much.” But there’s the sense among other players in the industry that he could flip at a moment’s notice, especially as the industry attempts to shift the focus to what patients pay out of pocket.
“The sense that this president could make any decision, at any time, for any reason, on any issue is rattling industries in the health-care sector,” PCMA said in the memo. “This makes it all the more urgent that we ‘cut through the clutter’ and make our case as vocally and effectively as possible.” The memo was first reported by BuzzFeed.
For the drug industry, the stakes couldn’t be higher. Trump has threatened to get directly involved in setting the prices they charge, especially to government programs, which pharmaceutical companies have for years seen as the top threat from Washington.
As part of PBMs’ lobbying plan, they list $100 billion in government savings that could be proposed to Trump and Congress as a way to get drug costs down -- and deeply cut drug and biotech profits. That includes shortening the time during which drugmakers have exclusive sales rights on new treatments and raising taxes on the industry.
One area where they may find agreement with drugmakers is on Medicare, the U.S. health program for the elderly. The program is barred from directly negotiating prices -- instead contracting with PBMs and insurers. Neither drugmakers or PBMs want that to change, and the memo contains a line saying the government should “continue private market negotiation, not government pricing interventions.”
The pharmaceutical-industry lobby says it too favors “market-based reforms.”
“The private sector can and should lead the move to a more value-driven health care system,” Robert Zirkelbach, a spokesman for Pharmaceutical Research and Manufacturers of America, or PhRMA, said by e-mail.
Scrutiny of PBMs has been building. When Mylan NV faced harsh criticism for the climbing price of its EpiPen allergy shots, the company in interviews and before Congress pinned the blame on benefits managers and other members of the supply chain.
“The people really benefiting from the increase in drug pricing and rebates are the insurers and PBMs,” said Pilch, of the pharmacists lobby group. Express Scripts, one of the U.S.’s two-biggest PBMs, says 80 percent to 90 percent of the rebates on drugs it gets are passed back to clients.
So far, the industry has mostly dodged harsh oversight or legislation. That could be changing, though. Representative Doug Collins, a Republican from Georgia, has a bill that would make PBMs that contract with the federal government to regularly provide information on how they reimburse pharmacies for drugs.
“The PBMs need to come to the table. They cannot continue to hide,” Collins said in a telephone interview.
— With assistance by Naomi Kresge