How the Trump Administration’s New Proposals Will Affect PBMs
"We're very much eliminating the middlemen. The middlemen became very rich. They won't be so rich anymore."
This is what President Donald Trump said during a speech back in May, regarding prescription drug prices. His administration is focused on four key strategies that will help consumers save from their trips to the pharmacy.
His proposals are in sharp contrast to his campaign promise of allowing Medicare to directly negotiate with drug makers because it is designed to give private health plans more flexibility to negotiate discounts for Medicare-covered seniors and to increase competition.
The Department of Health and Human Services are also given the following directives:
- To allow more substitution through part D four single-source generics
- For health plans to share with patients a minimal portion of drug rebates
- For Part B price increases to be limited above the inflation rate.
Although President Donald Trump blamed everyone involved in the broken system—from the drug makers to the government, his harshest comments are focused on the middlemen, specifically the pharmacy benefit managers (PBMs).
How the New Proposal Will Affect PBMs
Potential restriction of the use of rebates
When it comes to rebates, drug makers and PBMs are blaming each other.
Manufacturers blame PBMs of profiting off higher list prices because they have the power to negotiate for bigger discounts. Pharmacy Benefit Managers, on the other hand, blame drug makers for setting the drug prices high in the first place.
This led the administration to question the entire system of rebates as a means for the pharmacy channel to negotiate discounts.
According to Health and Human Services Secretary Alex Azar, "Because right now, every incentive is for the drug company to have a very high list price and to negotiate list price down, often in a very nontransparent way."
This increases the possibility of restricting the use of rebates. The same is true with discounts of drug prices that PBMs negotiated with manufacturers.
Push for transparency
Aznar has directed Food and Drug Administration Commissioner Scott Gottlieb to look into the possibility to publish list prices in job advertisements, making it a requirement from drug manufacturers.
"Think about all the time everybody spends watching drug company ads, and how much information companies are required to put in them. If we want to have a real market for drugs, why not have them disclose their prices in the ads, too?" Azar said.
PBM transparency has been one of the areas that many legislators want established and passed as law. Currently, pharmacies are bound by the gag clauses in the contract with PBMs not to disclose the actual price of a drug or to inform consumers of a cheaper alternative for their prescription drugs. But with drug prices listed in an advertisement, nothing could be clearer.
Trump's policy may lead to more price transparency. It will also give everyone a better understanding of the role of a PBM.
Passing along pharmacy discounts
The Trump administration proposes that the pharmacy discounts that the government gets from drug manufacturer rebates should be passed along to beneficiaries with Medicare at the point of prescription sale.
According to the Pharmaceutical Care Management Association, “We also support the patient always paying the lowest cost at the pharmacy counter, whether it's the cash price or the copay.” Something that is already standard in the commercial sector and Medicare.
Last month UnitedHealth Group said they will pass along pharmacy discounts from drug manufacturer rebates to their fully-insured customers at the point of a sale.
Express Scripts and CVS Health praised the administration for their efforts in tackling the costs of prescription drugs.
What do the PBMs think about the Trump administration's new proposals?