Monday, March 12, 2018

A costly PBM trick: set lower copays for expensive brand-name drugs than for generics

In 2014, patients buying Lipitor had lower copays than those buying generic atorvastatin, even though the generic was much cheaper overall. This finding was so unexpected that we wondered if we had made a mistake, and ran the numbers multiple times. It was the real deal.

Tyrone's Commentary:

If a non-fiduciary PBM is permitted to self-govern, this will eventually happen to you - if it hasn't already.

How could that happen? It turned out that Pfizer had partnered with pharmacy benefit managers to ensure that its more-expensive Lipitor had a lower copay than less-expensive generic atorvastatin. This might have saved consumers a few dollars, but it boosted the overall cost of the drug. Deals like that can make it difficult for generic manufacturers to enter a competitive market and drive prices lower.
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If an employer serves as its own pharmacy benefit manager, it has all the incentive it needs to drive down the costs of drugs for its employees. So it’s no wonder that large employers such as Coca-Cola, Verizon, and IBM, which collectively spend $20 billion a year on health benefits, formed a coalition to devise means to buck the influence of pharmacy benefit managers.

American health care is like a pie, with big bites taken out of it by myriad middlemen, including pharmacy benefit managers. These companies could play a highly constructive role in helping lower drug prices by promoting competition for drugs that provide the best value and are then preferred in the drug benefit plan. But as long as pharmacy benefit managers operate and negotiate prices in secret, it seems unlikely that they can be positive agents for change.

If they fail to lift the veil and usher in transparency, the revolt by employers, insurers, the market, and the federal government represents an existential threat to their role in the health system.

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