No one disputes that the American health care system has more pain points than we’re ever able to identify. But one of the core issues is prescription drug pricing, including who sets the prices, how they get set, and what, if anything, can be done about it.
Continue Reading Below
At the center of our prescription drug distribution system is a group of middlemen known as pharmacy benefit managers (PBMs) — powerful corporations that play an outsized role in our access to prescription drugs and the flow of dollars surrounding them.
In fact, PBMs spend an exorbitant amount of time, money, and energy trying to convince elected officials, the health care market overall, and we, the consumers, that they are vital to reigning in prescription drug pricing.
Currently, PBMs are not legally required to — and therefore do not — disclose to pharmacies how much money PBMs are collecting from payers, i.e. insurance companies. Nor do they report to insurance companies how much money PBMs are reimbursing the pharmacies. PBMs also refuse to report how much money drug manufacturers are giving them in the form of rebates, nor will they disclose just how much PBMs are marking up prescription drug prices that we all pay for.
PBMs contend that if they actually were to be transparent about their business and pricing protocols… pharmacies, drug manufacturers, insurance companies, Medicaid, other payers, and patients alike would all be worse off.
Excuse me while I wipe up the milk that shot through my nose just thinking about the absurdity of that logic.
Does the system I described sound legitimate to you, on any level? PBMs are intentionally secretive and make the system so confounding with the hopes that all involved will simply throw up their hands in frustration and give up.
So far… it’s been working for PBMs. Only the facade is starting to crack.
I was a community pharmacist with my own business and experienced first-hand how debilitating the practices by traditional PBMs were on pharmacists, the system and ultimately patients.
The three largest traditional PBMs control an astounding 80 percent of the market. To be fair, some traditional PBMs are good stewards and provide valuable health care services and they do so in an ethical manner.
After I closed my pharmacy, I knew I had to do something to help reign in these unwieldy practices. That’s why I created what’s called a pass-through PBM, -- there are a handful of other PBMs operating with this model. The pass-through model means simply this: prescription drug prices aren’t jacked up. Information isn’t hidden. Openness and transparency are valued above all so everyone in the system knows how much money is being allocated to and from all parties, and in which directions.
Pass-through PBMs make their money by charging payers a small fixed administrative fee either per member, per employee, or per claim. That’s it. There’s no price gauging or secret siphoning of dollars. It’s all out in the open.
Traditional PBMs aggressively try to discredit pass-through PBMs, claiming that the model isn’t legitimate. But think about it: Traditional PBMs — companies that operate in secret, raise prices in secret and claim the secrecy is a benefit to all — are trying to kill off pass-through PBMs, competitors that are open, transparent, and do not siphon critical private and public dollars out of the system.
The viability of the pass-through PBM model is confirmed by the very fact that we exist! If the model didn’t work, pass-through PBMs would disappear. But we’re not disappearing. If anything, we’re growing in numbers. Why? Because this model values efficiency, transparency and the ability to provide a valuable health care service at a modest fee.
Think of traditional PBMs this way: You’re buying a car. You ask the salesperson to document gas mileage efficiency, safety features, and warranties. The salesperson says, "Oh, don’t worry about all that. It’s better for you if you don’t know. That’ll be $35,000. Sign here."
Would you go for that?
Of course, you wouldn’t. Then why should any of us accept, for even one second, that we are best served by giant corporations that tell us that being intentionally restricted from having access to critical information — about our own health care! — is in our best interest?
What PBMs say is: We control access to prescription drug prices, information and your health care, and our intentional secrecy about it is a benefit to all.
There’s a myth being perpetuated about PBMs. I consider that myth… busted. But I’ll let you decide.
Yuriy Davydov, Pharm D., is the founder & CEO of ZCP, a pass through PBM, and a former independent pharmacist.