Few policy issues have consumed Washington more over the past year than the debate over what to do about prescription drug prices.
Many around the country have pointed fingers at pharmaceutical companies and insurers for these price increases, but people are beginning to realize that the true problem lies with the middlemen in between — pharmacy benefit managers (PBMs).
PBMs are conglomerates in the health care industry that claim to leverage their size and market share to help patients receive discounts on prescription medications. Under closer inspection, this is not the case. Rather than using business practices that benefit patients, they are focused on creating better deals and more profits for themselves instead. To the dismay of many consumer and patient advocates, they often drive up those profits by interfering with the doctor-patient relationship and refusing to fill certain prescriptions in favor of cheaper, often less-effective treatments.
And business is booming for PBMs, with the top three PBMs controlling over 75 percent of the market. Profits have soared by double digits for the Big Three, as their market dominance gives them enormous power and carves out for them the largest profit margin in the drug-supply chain. Meanwhile, states are filing grievances for being overcharged for their employee health plans, including Ohio ($224 million) and Kentucky ($123 million).
But it’s not just by overcharging patients that PBMs pad their bottom line.
With the assistance of health insurers, PBMs use a number of utilization management tools that ultimately deny or delay access to critical, prescribed drugs for patients. It’s one thing to offer a cheaper alternative formulary as an option, but it’s another to downright deny access to the originally prescribed medication. These dubious business practices are detrimental to patient care and can turn fatal when treatment is delayed.
Some of the most common examples of these utilization management tools are the requirement for prior authorization, so-called step therapy or “fail first,” and non-medical switching.
With prior authorization, a patient’s physician is required to obtain prior approval before the insurance plan will cover the cost of a prescribed medication. According to a physician survey last year by the American Medical Association, 65 percent of doctors reported waiting at least one business day for a prior authorization response, and 75 percent reported that prior authorization can lead to treatment abandonment. No patient should face the unsettling fact that abandoning their treatment might be just as risky as waiting for a corporate response that might not come.
These types of management tools spread beyond the doctor’s office to behind the pharmacy counter with non-medical switching. In this case, a PBM directs pharmacists to dispense an alternate medication in the same therapeutic class, but with a different chemical composition, in lieu of the prescribed treatment. This practice increases patient risks because they’re taking a medication that isn’t specifically prescribed to them — resulting in higher medical costs for emergency room or outpatient visits.
Thankfully, states are now taking this issue into their own hands. Most recently, the New York Legislature passed a law and sent it to Gov. Andrew Cuomo for his signature. It would significantly limit PBMs’ abilities to use their bad business practices and give the power of medical decision-making back to the doctors.
Moves like New York’s have been attempted on a federal level, but existing federal legislation was leveraged by PBM lobbyists to invalidate the law that would regulate them. The Employee Retirement Income Security Act of 1974 (ERISA) largely focuses on retirement plans, but also includes provisions that affect other types of employee plans with language that pre-empts state laws. Because of how ERISA is currently written, PBMs can weasel their way out from heightened regulation and continue harming patients.
The states cannot fight this fight alone. Congress should look more closely at the harm PBMs are causing to vulnerable Americans and enact legislation that provides an additional exception to ERISA pre-emption. By doing this, states can put an end to the middlemen malpractice that puts profits above patients.
• Matthew Kandrach is president of CASE, Consumer Action for a Strong Economy.