How Drug Middlemen Impact Medication Prices

New report reveals the complex role of pharmacy benefit managers (PBMs) in drug pricing

Pharmacy benefit managers (PBMs) often deny that they contribute to the high cost of medications, blaming pharmaceutical companies instead. However, recent evidence suggests that the situation is more complicated. A new report shows that PBMs, which are controlled by large health conglomerates, often list hundreds of different prices for the same drug.

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The Role of PBMs

PBMs are intermediaries between drug manufacturers and pharmacies. They negotiate drug prices on behalf of insurers, many of which are part of the same conglomerates. The top three PBMs—owned by CVS Health, Cigna/Express Scripts, and UnitedHealth—control about 80% of insured drug transactions in the United States.

Controversial Practices

Community pharmacists have long accused PBMs of anticompetitive practices, claiming that they favor their own affiliated pharmacies and drive competitors out of business. The Federal Trade Commission (FTC) recently released a report uncovering evidence of such practices. According to the FTC, the top three PBMs’ parent companies have significantly increased their share of U.S. healthcare dollars, from 12% in 2016 to 20% in 2023.

Price Disparities

The report highlights significant price disparities for the same drugs. For example, CVS Health’s affiliated plans reimbursed PBMs at 501 different rates for the cancer drug imatinib, ranging from $1,794 to $6,826 for a month’s supply. Cigna/Express Scripts had 19 different rates, ranging from $2,732 to $3,657, while UnitedHealth’s rates ranged from $79 to $6,826 across 115 different rates.

Influence on Drug Prices

Despite their claims, PBMs have significant influence over drug prices. An analysis by 46 Brooklyn Research showed that Medicare Part D plans owned by PBM parent companies reimbursed their affiliated PBMs at hundreds of different price points for the same drugs. This variability suggests that PBMs could be using pricing to their advantage.

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The FTC report concludes that PBMs and their affiliated entities might engage in practices that benefit their own pharmacies at the expense of independent ones. These practices could include specialty drug classification, self-preferential pricing, and pharmacy contracting procedures.

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References:

• Federal Trade Commission Report
• 46 Brooklyn Research Analysis

For more information on the role of PBMs in drug pricing, read the full reports from the FTC and 46 Brooklyn Research.