Editor’s note: This story is based on discussions at Abarca Forward, a conference in San Juan, Puerto Rico, hosted by Abarca Health, a pharmacy benefit manager. MedCity News’ Editor-in-Chief Arundhati Parmar and Senior Reporter Katie Adams were invited to attend and speak at the conference. All travel and related expenses for the team were covered by Abarca. However, company officials had no input in editorial coverage.
For the first time ever, CMS is preparing to negotiate prices for drugs paid for by Medicare. As part of the Inflation Reduction Act signed into law in August, the agency is slated to begin negotiating the prices for 10 drugs in 2026. By 2029, CMS is expected to negotiate the prices for up to 60 drugs.
While governments across the world have been negotiating drug prices for quite some time, this approach is pretty groundbreaking for the U.S. As one would expect, this change has sparked a huge debate — will the creation of this taxpayer-funded drug negotiation infrastructure be a failed experiment, or will it become the standard for the future of drug pricing in this country?
One CEO of a pharmacy benefit manager says it’s the latter.
“I think that once that infrastructure gets created, it’s going to get very difficult to undo it,” said Jason Borschow, president and CEO of Abarca Health.
Borschow shared his prediction last Friday at Abarca Forward, a pharmacy conference held in San Juan, Puerto Rico.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
He pointed out that CMS’ upcoming drug negotiation is interesting because it has widespread bipartisan support — that fact alone should tell Americans that something is seriously wrong with the current drug pricing system.
“Even the biggest PBMs have no solution for these drugs that have no competition. And so who’s going to make the determination? We should find that balance where the government negotiation is limited to drugs that have no competition, and we allow the private markets to have more flexibility around determining what’s best for their area and for their region. That’s my hope,” Borschow said.
In addition to the issue of expensive drugs that have no competition, rebates are another problem that plays a large part in driving up Americans’ pharmacy spending, he pointed out.
Pharmacy rebates are infamously opaque — Borschow described them as “this cash funding source that you can use for whatever you want.” For example, PBMs can use rebates for cost sharing, premiums and other expenses.
Borschow also declared that the U.S. healthcare system is designed to push high list prices for drugs. Rebates give pharmaceutical supply chain participants more opportunities to create margin, and that gives way to price disparities.
“And so the question everybody’s asking is: where are the differences in those dollars going? Are they going to people’s pockets, or are they benefiting the right people?” Borschow asked.
His PBM, along with other upstarts like EmsanaRx and CapitalRx, are trying to bring more transparency to the drug pricing process by showing clients the net cost of prescriptions. Borschow and other founders of PBMs looking to disrupt the space think that clearly showing pharmacies and patients each step of the pricing process — from the list price to the price a patient pays — will be of critical importance as drug pricing strategy evolves over the next few years.
Photo: gerenme, Getty Images
