Pharmacy Benefit Managers Under Scrutiny

After joining CSRO in 2017, Dr. Levin began working with the group on forming a coalition of provider and patient organizations to combat the PBMs. ATAP was born.

Tackling Goliath

“With the increasing use of biologics and targeted molecules, industry began creating step therapy tiers and formularies [i.e., preferred drug lists],” says Dr. Worthing. “Health plans began contracting with PBMs, and the latter went on to negotiate prices with the drug manufacturers. To get a preferred tier, manufacturers offer rebates on their prescriptions … and the higher the rebate, the more likely their drug will be on the top tier. Adding to the chaos is that the formularies regularly change based on rebates.”

Much of this horse trading happens in the shadows.

Dr. Worthing

“A PBM will tell a manufacturer, ‘Another company has a higher bid. Give us a higher rebate and you’ll get on the preferred tier,’” says Dr. Worthing. “The drug maker passes the expense of the higher rebate on to patients and employers in the form of higher drug prices. In these conversations, no party is discussing how various drugs [may] affect patients. Indeed, as it is now, prescriptions written in the best interest of the patient are frequently denied coverage in favor of a drug preferred by the PBM.”

How big is the problem? In 2021, three PBMs—CVS Health, Cigna (through Express Scripts),and UnitedHealth Group (through OptumRX)—managed 80% of the prescription claims in the U.S.¹

Patients’ Lives Up for Bid

“Are the formulary decisions based on safety or efficacy? No,” says Dr. Feldman. “They are based on how much the drug company is willing to pay the PBM. It is a closed auction [in which the] manufacturer [that] pays the most wins. What we are dealing with is essentially a legal kickback scheme that is protected by safe harbor from the Anti-Kickback Statute.”

To keep this shell game going, says Dr. Levin, PBMs have gotten good at reclassification. “The rebate—a collection of different fees—is supposed to be passed through to the insurer or, ideally, to the patient. In order to keep the money for themselves, the PBMs reclassify many of these dollars into ‘fees.’ This entire process is completely private, and we have little information on the actual back door dealings. However, because a lawsuit was filed by Express Scripts against Kaleo Pharmacies, things were brought out in the open, and it became evident that the majority of millions of dollars was in ‘fees,’ with only a small portion being rebates.”