Ahmed Abulenein
WASHINGTON (Reuters) – Pharmacy benefit managers (PBMs) are in the crosshairs of Republicans and Democrats in Congress but have so far shied away from any new litigation or reforms planned to be included in the U.S. government’s budget deal last month.
Many lawmakers, drug makers and government officials have pointed the finger at these industry middlemen, suggesting they play a critical role in high prescription drug prices in the United States. Below is what you need to know about PBMs.
WHAT ARE PHARMACY BENEFITS MANAGERS?
Pharmacy benefit managers are companies that process prescription drug benefits for health insurance companies, large employers and Medicare prescription drug plans—a group often referred to as payers.
PBMs negotiate on behalf of payers with drug manufacturers and pharmacies for volume-based commissions and discounts known as rebates; create lists, known as formularies, of drugs covered by insurance plans; reimburse pharmacies through claims processing; and manage pharmacy chains. Many also operate their own mail-order pharmacies. They collect fees from payers and rebates from drug manufacturers.
Research, including one from the Congressional Budget Office, shows that rebates reduce drug costs for the government and consumers. Other studies show a correlation between increases in a drug’s list price and increases in drug discounts.
WHO ARE THE BIG PBM PLAYERS?
According to data platform Statista, three companies controlled 79% of pharmacy benefit management in the U.S. in 2022: CVS Caremark had 33%, Express Scripts had 24%, and OptumRx had 22% of the market.
Other noteworthy companies by market share include Humana (NYSE:) Pharmacy Solutions with 8%, Prime Therapeutics with 5%, and MedImpact Healthcare Systems with 4%.
These six companies together control 96% of the PBM market.
Who owns the PBMs?
The top five largest pharmacy benefit managers are from companies that also offer insurance and other health care services.
CVS Health (NYSE:) owns Caremark and the insurance company Aetna, as well as mail-order specialty pharmacies, a national pharmacy chain and a physician group.
UnitedHealth Group (NYSE:) owns OptumRx, the United Healthcare insurance company, specialty pharmacies, physician groups and express medical and surgical centers.
Cigna (NYSE:) operates Express Scripts, an insurance company, and a specialty pharmacy.
Humana is an insurance company and owns a benefit manager, and 19 different Blue Cross Blue Shield plans own a stake in Prime Therapeutics.
HOW AND WHY PBMs ARE SUBJECT TO STRONG INSPECTION
The US Federal Trade Commission (FTC) began investigating major PBMs in 2022 and their impact on prescription drug pricing and access.
The Federal Trade Commission is looking into the fees they charge, how pharmacies are reimbursed, how payments are returned to pharmacies outside their networks, and whether the companies refer patients to their own pharmacies. It also examines whether benefit managers favor more expensive drugs that carry higher discounts over cheaper alternatives.
Since last year, lawmakers have introduced nearly two dozen bills targeting PBMs, including at least five bills that have received bipartisan support, congressional records show. Some have passed committees but have yet to come to a vote in the broader Senate or House of Representatives.
Separate bills seek to ban so-called “spread pricing,” a practice in which PBMs charge health plans more for a drug than they pay pharmacies. Some are calling for greater transparency, which would require companies to provide more information about their behind-the-scenes negotiations.
Rebates are also the subject of proposed new government rules. In 2020, the Trump administration attempted to make rebates for Medicare prescription drug plans illegal by removing “safe harbor” protections that shield rebates from federal anti-kickback laws. The Biden administration delayed the rule until 2023, and Congress delayed it further until 2027.
The Justice Department is investigating UnitedHealth Group, including the relationship between its UnitedHealthcare health insurance business and its OptumRx PBM unit, according to a February Wall Street Journal report.