PBMs negotiate rebates from drug manufacturers on behalf of the insurance companies they have contracted with. It is the newest form of pay to play, in which manufacturers who pay these rebates get their drugs favorably placed on the PBM formulary while their nonplaying competitors’ drugs languish in the lower tiers of preference. The rebates’ importance in helping companies gain market share has recently led to lawsuits filed between drug manufacturers competing in a therapeutic space familiar to rheumatologists—infliximab.10
The rebate model has created a brisk business for PBMs, which have pocketed $130 billion annually.11 The PBM drug formulary promotes products with the highest rebates and discourages patients from taking drugs that produce less profit for them. They can wield a big stick: 1) by charging higher co-payments for these drugs, and 2) by establishing barriers, such as prior authorizations, that create onerous paperwork for physicians who may choose to reconsider their prescription choice.
The PBMs are under attack in the courts, where several lawsuits have been filed alleging that they often force patients to pay higher costs for certain generic products when using their drug coverage plans rather than simply paying for the drug out of pocket.12 Court proceedings may help strip away their opaque veneer and expose their obfuscatory workings.
Although one can rationalize the need for having a checkpoint, such as the prior authorization, to carefully review a prescriber’s choices, especially when these products are costly, how does one justify the prior authorization when it is applied to cheap generics, such as methotrexate, hydroxychloroquine, proton pump inhibitor drugs and prednisone, to name a few?
Finally, the pernicious nature of prior authorizations may be a critical—though a neglected—factor driving the opioid abuse crisis that has engulfed our nation. The investigative reporting group, ProPublica, and The New York Times analyzed Medicare prescription drug plans covering 35.7 million people in the second quarter of this year. They found that only one-third of the individuals covered had access to buprenorphine skin patches, considered a less risky opioid option for managing chronic pain than oxycodone or hydrocodone. And every drug plan that covered lidocaine patches, which happen to cost more than other generic pain drugs, required prior authorization approval.13
The Steep Ascent of Drug Prices
But let’s not focus our ire about drug costs solely on the PBM. Clearly, drug manufacturers shoulder much of the blame. Their pricing models are not sustainable. The annual cost of most biological therapies has risen well into five digits, and some have broken the six-digit barrier. This should not be surprising, given the reality that the FDA and Medicare are prohibited from determining whether a drug is cost effective. Medicare is forbidden from using its massive buying power when negotiating the purchase of drugs for covered patients. Congress believed this would provide Medicare with an unfair advantage over drug companies. I’m confused: Wouldn’t that be leveling the playing field for our patients?
