PBMs Can Help Make the Prescription Drug Market Work Better

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.