PBMs are Costing Pennsylvanians at the Pharmacy

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Op-Ed by state Rep. Jessica Benham

About a year and a half ago, my pharmacist approached me as I was picking up prescriptions at Spartan Pharmacy to ask me if I knew what a “PBM” was. I had heard of Pharmacy Benefits Managers, or PBS, but like many people, I had no idea of the depth of their involvement in our access to medications. As a state legislator, I knew I had to take action, which is why I introduced H.B. 1993, a bill that would provide transparency and accountability for PBMs.

But state action is not enough as our power and scope are limited – we need our federal government to also act because prescription drug pricing is out of control. While nearly four times as much annually is spent on hospitals compared to on prescription drugs, prescription drugs’ out-of-pocket costs outpace hospital out-of-pocket costs by $14 billion.

The medicine itself isn’t changing. There hasn’t been a change with the drug manufacturer. The only thing different is that PBMs have unilaterally decided to charge our insurance companies more, and then that cost is passed on to patients in the form of higher premiums, higher deductibles, and higher copays.

The prescription drug market is broken, and the practices of some PBMs are a large part of the reason why. What initially started as insurance companies hiring PBMs to manage prescription drug claims has transformed into an industry designed to profit off of patients.

PBMs negotiate prices directly with drug manufacturers. They decide what drugs an insurer will cover and whether a patient needs to try other drugs first before getting their doctor-recommended treatment. PBMs also determine how much patients will pay for treatments and what pharmacy can fill a prescription, limiting patient choice and hurting our smaller community pharmacies while unfairly rigging the system for the big corporate players.

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The largest three PBMs control 80% of the market – and they’re now vertically integrated with insurers and pharmacies, allowing them to maximize profits for publicly traded healthcare conglomerates by using complex pricing and fee structures.

PBMs have two different prices – a “net” price and a “list.” The “net” price is the price that PBMs pay to drug manufacturers after manufacturer rebates and discounts have been applied. The “list” price is the retail price that PBMs show to patients and can often be half the “net” price.

In the last few years, the “net” price of brand-name prescription drugs has largely stayed flat, but for patients with deductibles, out-of-pocket costs for these same drugs have increased by 50% because rebates, discounts, and fees are not passed down to patients. And for smaller pharmacies, PBMs are often reimbursing below the cost of the name-brand medication, pocketing those profits too while putting small pharmacies underwater and eventually out of business. Over 140 community pharmacies have closed in Pennsylvania since Jan. 1, 2024.

PBMs also charge fees that drive up drug costs. The higher cost a drug, the more money for a PBM. The way PBMs link fees to drug costs leads them to often exclude more cost-effective alternatives from the formularies, because they make less money from lower priced prescriptions. In recent years, PBM fees have increased by more than 50% and are now the second biggest drive of PBM profits.

As Congress looks to address prescription drug prices, PBM reform must be the next step because we can only do so much at the state level.

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Making these companies more transparent, requiring that co-pays reflect discounts and rebates, and ending the connection between higher fees and more expensive drugs would all save patients money and keep our local community pharmacies in business. Now it is time to act.

– State Representative Jessica Benham represents parts of Allegheny County, including the City of Pittsburgh (Wards 16, 17 with Divisions 04, 05, 06, 07, and 08, Ward 18 with Division 01, Ward 19 with Divisions 11, 12, 14-27, 29-38, Wards 29 and 32), along with the Boroughs of Brentwood and Mount Oliver.

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