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Pharmacy agent research would show role in drug price ‘dysfunction’

July 27, 2022 by admin

The Federal Trade Commission could help shed light on the complex practices of pharmacies that have long criticized for allegedly inflating consumer drug prices.

FTC Commissioner Noah J. Phillips has said the agency may still launch an investigation into pharmacy benefit administrators — which manage prescription drug coverage for patients — though it stalled last month with a 2-2 vote on a proposed study. The FTC will have to figure out the details of a new proposal, but policy analysts say any revision would at least provide a better understanding of how PPEs interact with the rest of the drug supply chain.

Federal regulators and policy makers should “have a better awareness of how” PBM’s “incentives are structured and how much they may exacerbate the U.S. drug pricing dysfunction,” said Antonio Ciaccia, CEO of 46brooklyn Research, an Ohio-based data company for drug pricing.

There hasn’t been “a lot of information objectively developed” about PPE since they were first created in the 1960s, said Mark Botti, a partner at Baker Botts LLP who previously worked in the Justice Department’s antitrust division. Additional understanding of what PPEs do can help regulators determine whether certain practices are anticompetitive.

PBMs administer drug benefits to health insurers, major employers, Medicare prescription drugs, and others. They negotiate discounts from drug manufacturers, collect rebates from them, and determine how pharmacies are reimbursed for dispensing prescriptions.

Analysts say an effective investigation should focus on the fees PBMs charge drug manufacturers and how much of the savings they negotiate reaches consumers. However, they note that coming up with a clear plan to analyze these amounts can be challenging due to federal laws protecting companies from sharing proprietary information.

A vote in support of the launch of a PPE investigation may take place with or without a fifth FTC commissioner. Senate Commerce Committee Deadlocked on March 3 Presidential Vote Joe Biden‘s nominee, Alvaro Bedoya. His nomination could still go to the full Senate, where Vice President Kamala Harris can act as a tiebreaker if the room is evenly divided.

FTC Chairman Lina Khan has not announced whether she plans to unveil another study before a vote, though the agency said on Feb. 24 it was seeking input “on the ways in which large, vertically integrated Pharmacy Benefit Managers practices” ( PPE) that affect the affordability and access of medicines.”

‘Forbidden fruit’

PPE has expanded significantly since their inception, with consolidation through major health plans increasing their influence on the healthcare pharmaceutical industry. Ciaccia said this was especially true for the largest PPE integrated with pharmacies and health plans, including CVS-Aetna, Cigna-Express scripts, and UnitedHealth-OptumRx.

Independent pharmacies state that consolidation has allowed PPE to send patients to pharmacies or mail order services owned by the insurers that own the PPE.

Policy makers, drug makers and pharmacy groups argue that PBMs benefit disproportionately from higher fees to manufacturers and lower fees to pharmacies. A December 2021 report from the PBM Accountability Project found that PPE gross profits increased 12%, from $25 billion in 2017 to $28 billion in 2019.

“We designed PPE years ago to simplify the basic component of facilitating a claims transaction at the pharmacy counter,” Ciaccia said. Over time, however, the system became complicated as PPEs “started to taste the forbidden fruit”.

The Pharmaceutical Care Management Association, the leading PPE trade group, said in a statement that it is “confident that the FTC will ultimately conclude that drug manufacturers’ pricing is the root cause of high drug costs, putting pressure on patients and they are forced to make difficult decisions about their drugs.”

The group added that PBMs “hold drug companies accountable by relentlessly negotiating the lowest possible cost on behalf of patients.”

The PCMA says they save 40% to 50% on prescription drugs, averaging $962 per person per year.

Discounts, price transparency

The FTC, in its party line vote on Feb. 17, decided not to open an investigation into PBMs and whether their drug pricing practices unfairly favor PBM-affiliated pharmacies over independent ones. Republican Commissioners Phillips and Christine Wilson argued that the proposed study lacked ambiguity and provisions that required an analysis of what consumers end up paying for their prescriptions.

Stacie Dusetzina, an associate professor of health policy at Vanderbilt University, said she agreed that “without these elements, the study would be incomplete.”

She added that an investigation into PPE’s contracts with employers, health plans and pharmacies “would be welcome,” as well as the types of fees PBMs charge and what amounts are returned to plans and employers.

Ciaccia noted that in addition to rebates, drug manufacturers may also be required to pay for PBM’s formulary, data-sharing, and market incentive fees. “We’ve seen more than a dozen different ways drug manufacturers’ price concessions are categorized into PPE contracts with plan sponsors — all of which are designed to essentially hide what the actual net concession is,” he said.

David Balto, former deputy director for policy and evaluation at the FTC Bureau of Competition, said he believes these “discount schemes” ultimately affect costs for consumers, and are an important aspect to investigate. Critics have argued that because PBMs can take advantage of discounts, it could lead them to prefer more expensive drugs in formularies. Drug manufacturers also say that paying PPE discounts and rebates can lead to higher initial list prices.

“You don’t have to go beyond insulin where we have a huge price crisis,” Balto said. “The reason for the price crisis is not that the cost of the goods has increased; it is because the demand for discounts from the PPEs has increased significantly.”

Dusetzina said whether these discounts actually provide discounts for patients is an important question. “We hope that when savings are returned to the plans, they use that savings to improve benefits for their employees or beneficiaries, but that may not always be the case,” Dusetzina said.

‘Pretty hard’

While policy analysts defend the importance of an FTC investigation, developing a review plan can be fraught with complications.

One obstacle that has traditionally prevented a clear understanding of PPE’s practices is that much of their business data is protected by privacy or confidentiality laws. “Any time you’re dealing with proprietary data, there will be limitations on your ability to eventually access that information,” Ciaccia said.

FTC investigations into specific companies are also “pretty difficult to conduct because” it “can be difficult to write tight, focused questions that get you the documents you want,” said Fiona Scott Morton, a professor of economics at Yale University School of Management. .

A study that is too open and doesn’t have very specific metrics for analysis could also be “difficult to control,” Botti said.

Coming up with a more focused, specific study could also prevent bias from creeping in, Botti said. Wilson said at the public meeting that she was “warrant of using the FTC as a pawn to increase the profitability of certain sectors, or to isolate them from competition.”

Botti said that if FTC employees are not charged with conducting the investigation in a “cautious and neutral manner, you will immediately bias your study,” and “you don’t know if you can trust the results, otherwise it won’t have as much credibility.” .”

—With the help of Shira Stein

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