When it comes to how high they price their products, drug companies want the public to ignore what they spend on marketing and the tax breaks they get for direct-to-consumer advertising.
Instead of simply acknowledging their pricing strategies, drug companies and their lobbyists have launched a finger-pointing campaign at pharmacy benefit managers (PBMs).
This isn’t surprising, and certainly not unpredictable, but ignores the basic fact: drug companies set drug prices and they can charge whatever they feel the market will bear. To combat these massive price hikes, PBMs are hired by employers, unions and health plans to negotiate lower drug costs for their enrollees. They do this by negotiating with drug manufacturers and pharmacies, developing networks of pharmacies, promoting generic drugs, creating drug formularies, use of lower-cost mail service, and managing high-cost specialty medications.
One clear example of PBM success is the Medicare Part D prescription drug benefit, which is overwhelmingly popular with a 90 percent satisfaction rate among enrollees.
With skyrocketing drug prices, some employers, and insurers providing health care coverage, are being forced to involve consumers through benefit designs that include higher deductibles or increased cost sharing. In response, the drug manufacturers have seized on this, crying “foul” because it focuses attention on their high prices. They blame the insurers for their benefit designs, instead of taking responsibility for exorbitant pricing of their drugs.
Drug makers also claim that the rebates and discounts they negotiate with PBMs lead to higher drug prices. This is flatly wrong. New research by Visante, Inc. analyzed data on gross and net sales for the top 200 self-administered, patent-protected, brand-name drugs and found no correlation between the price drug makers set and the rebates those drug makers negotiated with health plans or their PBMs. The study found no correlation between rebates, discounts and drug prices.
In fact, many higher-priced drugs involve little or no such rebates, the study shows.
The truth is that the payers of health care coverage are doing their best to provide their entire covered population with affordable, high-quality health care.
Manufacturers have a number of options to alter public perception of their pricing strategies. They can assert that their products are a great value at any price but there is definitely a level where that argument fails. They can also compete on price and refrain from automatic pricing increases that now obviously impact health care affordability.
One thing is for sure, if drug manufacturers continue to set high prices, PBMs will be pressed by their customers to negotiate for even steeper discounts and rebates in an effort to shield America’s consumers from these increasingly unaffordable costs.
John D. Jones, RPh, JD, FAMCP is an expert on managed care pharmacy practice, pharmacy law, regulation and policy. Until recently, he served as the Senior Vice President of Professional Practice and Pharmacy Policy at OptumRx, a UnitedHealth Group Company, in Irvine, California. Mr. Jones is licensed as both a pharmacist and an attorney. He currently teaches Pharmacy Law and Ethics at multiple colleges of pharmacy in California.