Pharmacy middle-men under fire for driving up prices

Pharmacy benefit managers face regulatory scrutiny

What you probably already know: Pharmacy-benefit managers, middle-men like Express Scripts and OptumRx that have promised to help control drug costs, came under fire this week after a Republican-led House Committee on Oversight and Accountability found the industry was encouraging the use of higher-priced drugs and driving up prescription drug prices as a result. The PBMs have either declined to comment or continue to insist the work they do drives prices down for customers.

Why? Evidence suggests the PBMs were telling patients they would pay more if they used their local pharmacy, and instead encouraging them to get the same drug through the PBM’s mail-order pharmacy. In addition, PBMs also negotiate with pharmaceutical companies to determine how much health plans and patients pay for the drugs. Doctors and patients have complained though that PBMs have profited by steering patients toward more expensive options that result in better rebates for the PBMs. Emails cited in the House Committee showed Express Scripts staff discouraged their teams from discussing generic medications with patients “due to rebate impact.”

What it means: Independent pharmacies were already struggling but the growth of PBMs like Express Scripts, OptumRx (owned by UnitedHealth Group), and CVS Health-owned Caremark has resulted in mass closures and so-called “pharmacy deserts” across the U.S. PBMs now control about 80% of U.S. prescriptions. People who live in pharmacy deserts tend to have worse health outcomes, as they struggle to get the medications and medical supplies they need.

What happens now? The Federal Trade Commission is preparing to sue the largest PBMs over their negotiating tactics, particularly around life-saving drugs like insulin, alleging the firms are pushing patients toward higher-priced name-brand drugs and away from generics or other cheaper options.

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