Large PBMs increase their influence in the marketplace by taking rebates from drug companies eager to get their medications listed in prime position on health plan formularies. Despite calls for transparency in the public interest, companies generally keep negotiation details confidential, citing intellectual property protections.
It’s questionable whether those rebates ultimately lower prices for the patient at the pharmacy counter, notes Mr. Cantrell. Instead, it is suspected that rebate funds often get reclassified as income or administrative fees and added to the PBM revenue stream. The rebates “often don’t flow back to their intended source, which is supposed to be the patient and the health plan,” says Mr. Cantrell.
Pricing Practices
Patient advocates and lawmakers grappling with increasing costs of prescription drugs point to a highly controversial practice known as spread pricing. The term describes how a PBM may boost profits by charging health plans and payers more for a drug than the pharmacy reimbursement amount and pocketing the difference.
In Florida, additional scrutiny of PBM pricing practices could result from an executive order handed down by Gov. Ron DeSantis in July soon after he signed HB 357 into law. The order requires Florida state agencies to audit PBM contracts entered into with state Medicaid plans to ensure that costs to the state are justified.4
The governor’s order calls for state agencies to prohibit spread pricing and financial clawbacks in future contracts with PBMs. It also directs them to capture data on rebates and payments from drug companies, insurers and pharmacies.4
Clawback is a practice in which a PBM claws back the difference between what the prescription cost the pharmacy and the insurance copayment amount. Not only is it like penalizing someone for having health insurance, it’s also unclear if that fee gets returned the health plan in the form of lower costs, according to a 2018 article by Kaiser Health News.5
The executive order to capture data on rebates is in line with patient advocacy efforts to make information public about how drug companies use them to gain PBM formulary placement and market access, says Dr. Levin.
“Our advocacy organizations have been pushing for rebate transparency,” says Dr. Levin. “While this will not affect commercial insurance plans regulated by the state, it is an excellent start.”
Lasting Effects?
For those wondering if the recent spotlight in Florida on PBM pricing practices and calls for greater industry transparency signals a turning point for Florida healthcare policymakers, Mr. Cantrell cautions, “not so fast.”
