×

Pharmacy benefit practices need to be reformed

In 2021, the FDA approved a new insulin drug, Semglee, that was interchangeable with a brand-name insulin called Lantus. Lantus cost $292 for a 30-day supply. Drugmaker Viatris launched two versions of its drug — Semglee cost $269 and a generic version cost $99 for the same amount, according to the Biosimilars Council.

Now, in a rational world, insurers would immediately switch to the generic drug so patients with diabetes could save money.

Instead, pharmacy benefit managers (PBMs) — which determine what drugs insurers cover under what terms — wouldn’t put the unbranded drug into their formularies. Insurers wouldn’t cover or would only partially cover the cheaper drug, driving patients toward the more expensive ones.

That example, cited in a lawsuit Massachusetts Attorney General Andrea Campbell filed Jan. 13 against insulin manufacturers and pharmacy benefit managers, is emblematic of the skewed incentives in drug pricing. Campbell’s lawsuit follows similar suits in other states and a lawsuit brought by the Federal Trade Commission that aim to use the courts to force PBMs to change practices that drive up drug prices.

It’s not only insulin. The FTC on Jan. 14 released a report charging PBMs with driving up prices for specialty drugs to treat cancer, HIV, and other illnesses.

There is a role for PBMs in the system, but only if they actually negotiate lower costs and improve consumer access to drugs. Often, as in the case of the diabetes drug, they do the opposite.

In Massachusetts, the legislature recently passed a bill putting PBMs under the state’s health care cost trends hearing process and capping the co-pays insurers can charge for insulin. But truly resolving the problem requires Congress.

Massachusetts Representative Jake Auchincloss, who introduced a bill to rein in PBM practices, told the editorial board that PBMs started out performing a legitimate function but “got greedy.” Now, Auchincloss said the amount of money PBMs take from the health care system raises premiums, increases drug co-pays and hurts independent pharmacists.

Campbell’s lawsuit highlights the impact PBMs have on one drug. In Massachusetts, about 500,000 residents are living with diabetes, nearly all of whom rely on the daily use of insulin to survive. This is not some new wonder drug whose research and development costs manufacturers need to recoup. Versions of insulin have been around since the 1920s, and current formulations were pioneered in the 1990s.

A 2018 study estimated that in a competitive market, insulin should cost between $72 and $133 a year. A 2024 study suggested that based on the manufacturing costs, a year’s supply of insulin could cost $111. Yet in 2016, the lawsuit filed by Campbell’s office said, the average diabetic spent $5,705 on insulin, and the average cost per month for the most popular types of insulin was $450.

Prices have skyrocketed, far exceeding inflation. If insulin is too expensive, patients may avoid using recommended doses, leading to serious health consequences.

As Campbell’s lawsuit explains, manufacturers want their drugs included with good coverage on insurers’ formularies. To get that placement, manufacturers voluntarily raise their list prices then pay a portion of the price to the PBM, through rebates and fees. PBMs give these expensive drugs “preferred” status, while excluding lower-priced drugs from insurance coverage. That means manufacturers and PBMs benefit when a drug price is higher — but consumers get overcharged. PBMs also steer consumers to their affiliated pharmacies, which can charge more.

Several PBM reform bills have been introduced in Congress. Auchincloss has a more comprehensive bill that he has introduced in Congress, which would apply to federal government-run insurance plans. It would stop PBMs from requiring patients to use affiliated pharmacies and would use a pricing metric to avoid wide swings in how much pharmacies are reimbursed for the same drug.

There is a role for PBMs in health care, and they should be paid through reasonable administrative fees. But they shouldn’t be allowed to operate in ways that drive up costs for consumers.

— The Boston Globe

Starting at $2.99/week.

Subscribe Today