PhRMA-copay

Manufacturer-PBM standoff over drug pricing intensifies

PhRMA is critical of basing coinsurance or deductibles on drugs’ list prices


The debate over who’s to blame for high drug costs for consumers is going a next round. In this corner, PhRMA, the trade association of pharma manufacturers, has issued a report pointing out that consumers often pay coinsurance (or monies counted within their deductible) based on the list price of drugs, not the 35-55% discounted price that is usually set by rebates to insurers. In the other corner, the Pharmaceutical Care Management Assn, the trade group of PBMs, argues that high drug prices originate with manufacturers, and implying that while some health plans apply manufacturer rebates to reduce cost-sharing on each drug, the ones who don’t are using the savings to reduce premiums.

PhRMA’s claim is based on analysis done by the Amundsen Consulting, a unit of QuintilesIMS; it found that roughly one in five brand drugs, and one in three specialty brand drugs, have deductibles or coinsurance based on list prices; patients paying for brand drugs under these terms can sometimes wind up paying more than the insurers themselves. (Uninsured patients are in an entirely different world of pain.)

In January, PhRMA issued another report noting that 37% of retail drug revenues are retained in the pharma “supply chain” (i.e., the intermediaries including wholesalers PBMs and retailers). And in 2016, when the imbroglio involving Mylan and its pricing for EpiPen, the branded emergency treatment for allergic shock, was raging, Mylan asserted (to little sympathy) that its price hikes over the years were increasingly taken up by PBMs, leaving its net revenue per sale relatively flat. The role played by PBMs in prescription drug fulfillment has been drawing increasing attention—but no more than the attention drawn by pharma manufacturers themselves. It’s commonplace now for an exciting new drug introduction—say, the recent FDA approval of Genentech’s Ocrevus (ocrelizumab), the first drug approved for a severe form of multiple sclerosis—to be accompanied by frowns and finger-wagging over the drug’s price. (In Ocrevus’ case, the drug will reportedly cost $65,000 annually; the clinical trials had a regimen of four infusions annually.)

The coinsurance/deductible aspect of drug costs has become more prominent in recent years partly because newer health plans have increasingly carved out drug costs for different treatment. Coinsurance (paying a percentage of the drug’s cost) is a relatively recent development; and health plans have been raising the deductible (and consumers have been purchasing them) to keep the monthly premiums down. But why have PBMs and insurers used list prices rather than the negotiated, discounted prices to base coinsurance and deductible payments? In large part, it seems, it was simply because they chose to.