PBMs counter pharma's pricing blame with proposals to cut $100B in drug costs

Pushing back against recent criticism by the drug industry, pharmacy benefit managers are advocating for some policy changes of their own. If implemented, the proposals would wreak havoc on pharma profits as drugmakers are already struggling to post meaningful growth.

Blamed for pushing up drug spending by demanding higher rebates from drugmakers, PBMs now are backing measures that would cut drug spending by $100 billion over 10 years, they say.

The proposals themselves aren't new, but the industry's trade association has launched a new campaign to lobby for legislation. The campaign is rolling out as at least two PBM giants are reporting double-digit growth for 2016.

Among the proposals backed by the Pharmaceutical Care Management Association (PCMA) are a shortened biologic exclusivity period—seven years compared with the current 12, the number proposed by the Obama Administration when the biologics approval pathway was set up. That would bring biosimilar rivals to market much earlier.

The group is also advocating more biosim use overall, and stepped-up generic competition. And they're pushing to end requirements that insurance plans pay for all drugs in certain classes under Medicare, regardless of price.

And then there's the direct-to-consumer advertising tax deduction, which has come under fire before. According to slides provided to FiercePharma, the PCMA told President Donald Trump’s transition team that ending that tax break could save $37 billion over 10 years. All told, PCMA says its suggestions would amount to $100 billion in savings over a decade.

The industry's campaign, DrugBenefitSolutions.com, argues that PBMs help keep drug costs down by using competition to eke out savings and “stretch” healthcare dollars. PCMA launched the platform last month.

Aside from the website, PCMA is spreading the message on social media and “meeting with key officials all over Washington” to talk drug prices, president and CEO Mark Merritt told FiercePharma.

“Obviously they hear a lot from drug companies on this issue,” he said. “They also know that drug companies are selling the drugs. When it comes to lower costs, you have to talk to those on the buying side.”

Merritt said that as officials “look closely” into the drug pricing, PBMs will be seen as “part of the solution.”

“There’s always going to be scrutiny on healthcare, and there should be. The key is we have answers.”

The new push comes as PBMs continue to catch flak for their role in the drug supply chain. Amid an intense EpiPen pricing crisis, Mylan CEO Heather Bresch placed some blame on “middlemen," saying they account for more than half of the epinephrine injector’s total cost.

Shortly after, the National Community Pharmacists Association called on the House Committee on Oversight and Government Reform to look into PBMs. Rep. Buddy Carter, who’s a pharmacist and a member of the committee, wrote in a column in The Hill that the sector is the “man behind the curtain” in drug pricing.

More recently, a pharma-sponsored study reported that rebates to PBMs have grown in recent years, meaning drug companies are taking home less. In 2015, branded pharmas collected less than half of the total money spent on prescription drugs in the U.S., the study claimed. Rebates accounted for $106 billion of drug spending that year, up from $67 billion in 2013.

A report released by the Berkeley Research Group and sponsored by the pharma industry recently found that rebates and discounts grew to $106.4 billion in 2015, up from $67 billion in 2013.

Addressing that point, Merritt said PBMs “absolutely” generate big discounts, adding “that’s why people hire us.” He said PBMs then pass the rebates on to clients based on individual contracts.

While many top drugmakers are posting paltry growth in their 2016 financials, those operating in the PBM space seem to be having more luck. CVS Health on Thursday reported its pharmacy services unit grew revenue by 19.5% last year to $120 billion. UnitedHealthcare’s PBM, OptumRx, grew sales 25% to $60.44 billion for the year.

Another leading PBM, Express Scripts, hasn’t yet reported earnings. But earlier this week, the company said its price-fighting efforts helped to hold drug price spending to only a 3.8% increase last year, while the list prices for commonly used meds increased by 11% on average.

During the launch of expensive new hep C meds, Express Scripts CMO Steve Miller said the company started a competitive price war that ended up saving $4 billion in healthcare costs in one year.

Editor's note: This story was updated with comments from PCMA president and CEO Mark Merritt.