Recently, Sen. Chuck Grassley, a Republican from Iowa, announced S. 844, bipartisan legislation designed to increase competition in the pharmaceutical industry and lower prices for consumers.
The Short on Competition Act would allow the secretary of Health and Human Services (HHS) to grant expedited reviews and inspections, and temporary importation when there is, or is likely to be, a drug shortage; or when there are fewer than five competitors in a market for drugs that have been approved for at least 10 years. The legislation aims to address some of the systemic problems that make prescription drugs unaffordable for some Americans.
This legislation is likely to spur competition across manufacturers, from generics and biosimilars, reduce the tactics pharmaceutical companies use to prolong generics, increase transparency on rebates between manufacturers and PBMs/payers and usher in drug importation.
Unknown Impact on PBM/Payer Market
As I write this, the specifics of the legislation remain unclear, making it difficult to explore its impact on the PBM space, but any hindrance on the market’s ability to negotiate or manage drug spend would pose a significant issue.
(Related: Drug Companies Spend More on Lobbying)
Furthermore, the real issue driving high drug prices — and something legislators consistently overlook or fail to understand – is that prices of brand drugs are set high, especially on launch and when the year-over-year price increases are taken. This occurs because the financial market pressures pharmaceutical manufacturers to recoup costs and make profits almost immediately. This compels manufacturers to charge exorbitant prices and adds significant cost increases year over year.
Ironically, intermediaries such as PBMs, who play a role in delivering transparency and collaborating with clients, patients and payers to save money and reduce costs, have been blamed for high prices. In fact, intermediaries such as specialty-focused pharmaceutical management companies help stakeholders navigate the complex world of drug pricing and high cost specialty drugs to create effective solutions that curb costs.
Exploring All the Issues
Legislators only see high prices, but they should be looking at the underlying causes, such as a fragmented market serving smaller patient populations and creating more individualized therapies that are, by definition, higher cost and render patient compliance more difficult to ensure.
PBMs and specialty-focused pharmaceutical management companies can play a growing role in this ever-evolving marketplace to help specialty pharmacies manage drug benefits, lower costs, and improve the quality of healthcare.
For example, PBMs have proven extremely effective at incentivizing the use of generic drugs over costly branded drugs. In the United States, nearly 90% of all prescriptions written today are for inexpensive generic drugs, in large part thanks to the sophisticated formulary techniques that PBMs introduced.
As a friendly reminder to legislators, PBMs serve patients and payers alike, delivering transparency, collaborating with clients, patients and payers to save money and reduce costs. They help stakeholders navigate the complex world of drug pricing and high cost specialty drugs and create effective solutions that curb costs for clients and health plans.
The bottom line is that intermediaries play an important role in the pharmaceutical supply chain and are positioned to protect consumers and save them out-of-pocket costs. PBMs have an established and successful track record of implementing consumer-friendly, market-based tools, such as negotiating with drug manufacturers – which may be compromised with the proposed legislation.
— Read Drugs Might Be the 2019 Health Cost Good Guy: CMS Actuaries, on ThinkAdvisor.