Shedding Light on Role of Pharmacy Benefit Managers in Healthcare Costs 


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To the Editor:

A number of discussions are taking place in Congress and Hartford regarding healthcare costs. Congress is considering action that could actually lower the cost of healthcare, but state legislators are debating pharmaceutical price controls that run the risk of hindering Research and Development required to develop life-saving drugs.

First let’s address the role that pharmacy benefit managers (PBM) have on the cost of drugs. Previously I had an opportunity to address the unchecked damage that PBM’s impose on the small business community efforts to provide meaningful medical benefits for their employees. Additionally, at a recent Chamber luncheon, Sen. Chris  Murphy also expressed concern and indicated he will continue his efforts to enact meaningful legislation to regulate this unchecked industry.

Is the pressure working? After years of playing whack-a-mole with the PBM industry and its shady practices, might we be seeing the start of potential reform? I hope so. But I’m not naïve enough to think this massive influencer of healthcare costs will go down quietly. Our lawmakers in Connecticut and in Congress must continue their efforts to unravel the knots that the PBM’s use to tie the hands of patients, providers, and pharmacists.

The federal government has taken notice and both Congress and the Federal Trade Commission are investigating the PBM industry. Those investigations are heating up as we speak. Additionally, there’s Senate legislation pending that would institute reforms and transparency for PBMs. 

A large part of the federal investigation is looking at the rebate programs that PBMs force upon the pharmaceutical industry to ensure individual medications receive placement on an insurer’s prescription drug formulary. The rebate system has the potential to reduce competition and lead to higher drug prices. Rebates were always intended to go toward lowering the out-of-pocket costs for patients, but instead have given PBMs not only power to decide what medications are available but to make massive amounts of money on those deals for their shareholders.

Despite the impact that PBM’s have on the cost and availability of nearly every prescription medication Americans are prescribed, the industry remains off the radar for most of us. That’s how the industry has thrived — and made massive amounts of money for themselves and their insurance industry partners.

In the last several years, patient advocates, pharmacists, and healthcare providers have brought to light the impact PBM programs have on patients, such as:

  • Gag clauses — which would have prohibited pharmacists from telling a customer if they would pay less for a medication if they bypassed their insurance and paid cash.
  • Copay Accumulator programs — under which the PBM would accept third-party assistance to cover the cost of a patient’s prescription, but not count those dollars toward the patient’s deductible — essentially making double on each transaction.

These are just two of the PBM schemes we’ve seen in Connecticut in the last several years, and thankfully our lawmakers have been quick to pass legislation to shut down these programs as they pop up.

Another concern relates to proposals on the table in Hartford this session, that if implemented could negatively impact the biopharma industry, which is a huge driver in Connecticut’s economy and develops new and innovative treatments for patients. Government-enacted price controls on medications will do little to curb overall healthcare costs — prescription drug costs make up only 10-15 percent of that total number.

Research and Development is an essential component of drug manufacturing, which in turn leads to advancements in treatments which is how we stabilize or lower healthcare costs — people who remain healthy thanks to new treatments stay out of the doctor’s office, the ER, and avoid long hospital stays.

Quality medical care is something every American is entitled to. For this to happen, our healthcare system should be simplified. Middlemen, to the degree possible, should be removed from the supply chain and our drug manufacturers should be allowed to continue to develop the best possible medications for all citizens.  

I urge our state and federal lawmakers to regulate the PBM industry and to work toward developing a system that works for patients, employers, and our healthcare economy while supporting policies that promote innovation rather than shutting the door on the R&D that gives patients hope for a healthy future.

Tony Sheridan

Sheridan is President and CEO of the Chamber of Commerce of Eastern Connecticut