Posted: February 28, 2019
CSRO Board Member, Robert Levin, participated in the Healthcare Policy podcast on February 18 to discuss federal prescription drug pricing reform. In his capacity as a practicing physician, and president the Alliance for Transparent and Affordable Prescriptions, Dr. Levin provided expert testimony on drug pricing reform proposals and how the drug supply chain works.
Patients with chronic conditions need access to affordable medications. Dr. Levin described some of the extreme prescription drug costs borne by patients with conditions such as rheumatoid arthritis. He explained how pharmacy benefit managers (PBMs) are primarily to blame for increases in drug pricing given their level of control in formulary placements. Manufacturers are compelled to pay rebates to PBMs so they can stay on formularies designed by the PBMs. According to Dr. Levin, PBMs have been “flying under the radar” for some time and are a major player in unsustainable drug costs for consumers in the U.S.
During the conversation, he described how PBMs have set up a “pay to play” system that primarily rewards the PBM’s bottom line. The greatest incentive the PBM has in the game is retaining the largest dollar rebate possible from the manufacturer. Patients, in turn, do not benefit from the rebate game because little or no cost savings are passed on to them. PBMs charge massive administrative fees for minimal services resulting in increases in list prices. “The PBMs have actually created a system that has driven up list prices,” Dr. Levin stated. Indeed, Americans are paying too much for prescription treatments because of a hidden system of kickbacks.
The Department of Health and Human Services released a proposed rule in January concerning the removal of Safe Harbor protections for rebates/discounts on drugs under Medicare Part D and MCOs. Dr. Levin stated that ATAP is supportive of the proposal since the organization has long been in favor of getting rid of manufacturer rebates that are passed on to PBMs. Under the proposal, all discounts on list prices made available by a manufacturer would be passed off to patients or their health plan sponsor - not to PBMs. The HHS proposal also includes fixed fee arrangements for PBM administrative services in attempt to lower overall drug costs. Certainly, rebate reform is necessary in order to lower cost burden on Medicare Part D patients who have high out-of-pocket drug costs.
The International Pricing Index (IPI) for Part B drugs was also discussed and Dr. Levin explained some details on the advanced notice for the proposed rule. This is a demonstration project in its current proposed form to which ATAP is opposed. For one, participation in the demo would be mandatory for 50 percent of providers selected from random geographic areas. Dr. Levin notes that this is a large-scale demo project to undertake and one of that size is unusual. Dr. Levin holds that the demo project should be both small-scale and voluntary for providers and patients alike. ATAP is also opposed to any proposal that creates third party vendors, otherwise known as middlemen in Part B.
Patients and providers know firsthand how increasing out-of-pocket costs are putting needed treatments out of reach for Americans. Bringing awareness to these issues and the hidden practices of PBMs is imperative in order to achieve any drug pricing reform.