Health and Human Services Secretary Alex Azar
When pharmacy benefit managers negotiate drug prices with manufacturers, a key element is rebates on purchases of drugs, which the health plans run by employers, government agencies and labor unions that hire PBMs can theoretically then pass on to patients. But those rebates have been criticized by drugmakers, which contend that the PBMs do not provide enough savings for plan beneficiaries, and also by the Trump administration.
Reuters reported Monday that Department of Health and Human Services Secretary Alex Azar said it is within the government’s power to eliminate them. In an interview with the news service Friday, Azar said rebates create a “perverse incentive” to keep raising drug prices. Cracking down on rebates for PBMs is part of the administration’s “Putting American Patients First” initiative for reducing drug prices and out-of-pocket costs, which it released in May.
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The PBM industry disagrees. According to an informational video sponsored by the Pharmaceutical Care Management Association, the PBM industry lobby, plan sponsors can use the savings from rebates and discounts to cut costs for premiums and out-of-pocket costs, and how they use those cost savings is at the plans’ discretion.
Reuters reported that while Azar said the rebates stem from previous HHS regulation, the PBM industry says it would require an act of Congress to change them, while blaming the drugmakers themselves for setting high prices.
The three largest PBMs in the country are Express Scripts, CVS Caremark and OptumRx. The latter two are respectively owned by CVS Health and Unitedhealth Group, while health insurer Cigna said in March that it would buy Express Scripts for $54 billion.
According to a research report released in April by nonprofit health systems research and consulting organization Altarum, the three PBMs respectively account for 29 percent, 24 percent and 13 percent of the industry. But the report called their large size a “double-edged sword” because, while it enables them to extract greater rebates from manufacturers, it likely also results in their withholding more of the resulting savings. “Indeed, critiques of PBMs and rebates focus not upon the size of the rebates negotiated, but upon how PBMs may be diverting potential savings to their own benefit, at the expense of health plans and consumers,” the report read.
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