A pharmaceutical expert examines the impact of PBM on the drug supply chain

CLEVELAND — Antonio Ciaccia is president of 3 Axis Advisors, a drug pricing research and advisory company. He said that initially Pharmacy Benefit Managers, or PBMs, prohibited pharmacies from telling patients that a drug might cost less if paid out of pocket.

What do you want to know

  • Pharmacy Benefit Managers, or PBMs, are one of the five normal steps in the drug supply chain.
  • A pharmaceutical expert said that PBMs can contribute to rising drug prices.
  • The association representing PBMs says that PBMs negotiate drug prices on behalf of health insurers.

The law passed in 2017 changed that.

“Understandably, the legislators were quite upset and unanimously said that this was not acceptable and that PBMs should not have licenses to bully their pharmacists into charging more than they would otherwise want to charge to this patient,” Ciaccia said.

PBMs are third-party administrators who work with health insurers to negotiate drug costs. Most pharmacies are under contract with a PBM and have been criticized for ‘clawbacks’.

Clawbacks occur when a pharmacy is overpaid for a drug transaction with insurance funds, and PBM then takes back the difference.

Ciaccia said there are several steps in the supply chain before someone buys a prescription:

  1. A manufacturer manufactures the drug
  2. A wholesaler buys it from the manufacturer
  3. A retailer or pharmacy sells the medicine
  4. A patient buys the drug

Ciaccia said the price of the drug can increase with each intermediate step, such as when a PBM gets involved in the third step to negotiate the price on behalf of a health insurer.

“My impulse would be to say there are too many intermediaries in this supply chain, but I would say it’s less about how many intermediaries, but what are the incentives that drive those intermediaries,” Ciaccia said.

The Pharmaceutical Care Management Association, or PCMA, represents PBMs.

When contacted for comment, the PCMA referred Spectrum News to a statement from a previous Spectrum News article:

“There are significant cost fluctuations between competing products in the generic drug market. Pharmacy benefit managers work on behalf of health plan sponsors and consumers to protect against these fluctuations in drug prices.

Ciaccia said more PBM reforms are needed. He wants to see more regulations on what can go in a PBM contract, and he said pharmacists should have more say in their PBM contract.

The executive director of the Ohio Pharmacists Association said pharmacists should have more bargaining power over the price of drugs and how much they keep on a sale.

The PCMA said in its previous statement that any reimbursement made to a PBM reflects the amount and time frame agreed in the contract.

“PBMs are now in the middle of nearly 90% of prescription drug transactions,” Ciaccia said. “The three largest PBMs currently represent almost 80% of the entire market. So think of it this way: if I am a pharmacist and want access to my patients and my community, I have to agree to the terms of the PBM to gain access to the patient.”

The Ohio Pharmacists Association believes clawbacks by PBMs can erode a pharmacist’s bottom line and believe they may be the reason the number of independent pharmacies in Ohio has dropped from 1,200 around 500 since 1988.

Ciaccia said a pharmacy would probably have to fully bill patients if they weren’t working with a PBM because insurance likely wouldn’t cover them.

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