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Edmund Pezalla: Pharmacy benefit managers keeping drug costs down

| Tuesday, Nov. 27, 2018, 7:03 p.m.
This Aug. 29, 2018 photo shows an arrangement of prescription Oxycodone pills in New York. Figures from a 2017 survey released on Friday, Sept. 14, 2018, show fewer people used heroin for the first time compared to the previous year, and fewer Americans misusing or addicted to prescription opioid painkillers. (AP Photo/Mark Lennihan)
This Aug. 29, 2018 photo shows an arrangement of prescription Oxycodone pills in New York. Figures from a 2017 survey released on Friday, Sept. 14, 2018, show fewer people used heroin for the first time compared to the previous year, and fewer Americans misusing or addicted to prescription opioid painkillers. (AP Photo/Mark Lennihan)

Recently, the Pennsylvania auditor general and Pennsylvania lawmakers have taken a deeper dive into how pharmacy benefit managers, or PBMs, operate in the Keystone State.

The public officials should be applauded for their efforts.

It’s important for the public to understand that PBMs are fighting to reduce drug costs for patients and the employers and government programs that hire them.

PBMs reduce drug costs by negotiating for price concessions from big drug companies and drugstores. It would be too expensive for employers, the government and other health care payers to match PBMs’ ability to reduce prescription drug costs, which is why these entities choose PBMs to manage their pharmacy benefits.

While the big drug companies attack PBMs and others amid the outcry over high drug prices, drug companies alone are responsible for setting prices. The price concessions, or rebates, that PBMs are able to negotiate from the drug companies are only offered in limited cases (when there is competition among brand name drugs, and manufacturers have an incentive to provide price concessions), and they are used to keep overall health care premiums affordable for patients. Look no further than the Medicare prescription drug program, Part D, as an example of this dynamic working extremely well. In Part D, premiums have essentially remained flat, around $32, since the inception of the benefit over 10 years ago.

In today’s market, drug companies are raising prices out of proportion to increases in the value of the medicines, but PBMs are doing their job by keeping drug costs down. This is clearly evidenced in several of the latest drug cost trend reports that the major PBMs publicly release annually , which analyze and report on pharmaceutical cost trends with and without the use of PBM management tools. In addition, a recent report from an organization, IQVIA Institute, that tracks prescription drug costs shows net prescription drug spending is decreasing in settings in which PBM tools are widely used. The report shows net spending declined by 2.1 percent in 2017, while prescription drug spending increased in 2017 where PBMs were not involved.

It’s true that

PBMs are largely measured by their ability to reduce prescription drug costs, and the fact that they successfully carry out this directive for the employers, public programs and other types of health plans that hire them is not hard to figure out. But, having been involved as a clinician representing insurers and PBMs for more than 25 years, I know first-hand the importance of leveraging savings while ensuring that patients receive their medications and clients receive the clinical support they need.

Management of drug formularies — the list of drugs that are covered by your health plans — is critical to improving the overall health of patients. In this regard, PBMs do sophisticated drug assessments to create clinically safe and cost-effective formularies that promote the most appropriate use of complex medications and mainstay drugs , leading to improved adherence for consumers and better health outcomes overall .

In the design of a drug formulary, pharmacists, doctors and other professionals — employed by PBMs — review safety and effectiveness for every drug approved by the Food and Drug Administration and help determine which drugs should be on a formulary, based on medical evidence, which in turn helps lower costs and increases the quality of patient care.

In addition,

PBMs work toward payment for value rather than volume. PBMs are providing expertise to payers by developing and executing outcomes-based contracts with pharmacies and drug companies that are intended to ensure that our pharmaceutical dollars are spent on drugs and services that provide the best outcomes.

These agreements require a high-level of sophistication about drug use patterns and patient outcomes, as well as the ability to monitor and improve patient compliance and measure relevant outcomes.

PBMs are the best situated companies in the health care system to help achieve significant strides in value-based purchasing in the pharmaceutical market.

As the public debate in Pennsylvania and nationwide continues to unfold on drug pricing issues and the role of PBMs in the health care system, it is vital to understand that PBMs are part of the solution that lowers drug costs for patients while helping improve patients’ health.

Dr. Edmund Pezalla is a scholar-in-residence at the Duke-Margolis Center for Health Policy in Washington.

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