The facts are clear: Pharmacy benefit managers (PBMs) help lower drug costs and enhance outcomes. However, proposed legislative changes threaten to cut competition and cause unintended adverse consequences for patients and plan sponsors. If plan sponsors were required to self-provide PBM services, roughly 40% of the net value would disappear due to increasing management costs – resulting in an increased cost burden for plan sponsors and higher premiums for employees.
Those findings are highlighted in “The Role of PBMs in the U.S. Healthcare System,” a new paper from Avalere Health based on an in-depth literature review. While Express Scripts provided funding for the paper, Avalere retained full editorial control.
Emily Gillen, a principal at Avalere Health and one of the paper’s co-authors, noted that PBMs help drive efficiency within the health care ecosystem. “By effectively managing drug costs, fostering competition, and implementing clinical programs, PBMs not only support patients in accessing necessary medications but also enable plan sponsors to achieve significant cost savings.”
How PBMs drive savings
Working in partnership with health plans and plan sponsors, PBMs generate cost savings by negotiating with manufacturers and pharmacy networks. PBMs offer clients access to discounts and clinical programs that drive impactful savings on prescription drugs, Avalere found. In turn, those savings help patients access medications and services to help them live healthier lives while supporting employers in their efforts to effectively manage health care costs.
For example, utilizing formulary management to encourage the use of generics and biosimilars saved the U.S. health care system $445 billion in 2023, according to the Association for Accessible Medicines. Another area with substantial savings is the Part D Medicare benefit, which provides drug coverage to seniors and qualifying people with disabilities. The U.S. Government Accountability Office (GAO) has calculated that PBMs’ work with plan sponsors to manage drug benefits and negotiate rebates has reduced Part D spending by 20%.
How PBMs unlock better health outcomes
PBMs help improve health outcomes through clinical programs including adherence initiatives, safety interventions, and care management and by using real-time data to quickly identify high-risk patients. For example, automated drug utilization reviews monitor prescribing patterns, medication use, and outcomes to identify potential issues like drug interactions, inappropriate dosages, and therapeutic duplications.
Therapy management programs help lower inpatient hospital admissions by 10.4% and emergency department utilization by 2.6%, while member and provider outreach programs can increase medication adherence by up to 16% for members with chronic conditions.
Why PBM reform efforts won’t keep pharma from setting sky-high prices
The paper discusses how proposed and pending legislation at the state and federal level – such as reforms targeting spread pricing and pass-through rebates – may fail to provide the intended relief of lowering the cost of prescription drugs.
Our nuanced and complex health care ecosystem has multiple stakeholders, each with its own unique impacts. These include drug companies, which set list prices for prescription drugs and utilize the U.S. patent system to block competition from more affordable alternatives, such as generics and biosimilars.
Legislation focused solely on PBMs fails to address the root cause of high drug costs – the prices set by drugmakers – while gifting PBM imitators with many opportunities to exploit the prescription drug market. Legislative efforts that are not paired with industrywide pricing commitments could reduce competition and limit access for patients.
“When considering policy reforms, it is important to understand the role PBMs play within the broader health care system,” Gillen said. “By grounding discussions in comprehensive, evidence-based analysis, we can ensure that future policies support an approach to maintaining affordability and access that reflects the shared responsibility of all stakeholders across the drug supply chain.”
