Pharmacy benefit managers (PBMs), the companies that administer drug benefits for health insurance companies, came under scrutiny last week from the Health Policy Commission, which found that there needs to be more transparency in how PBMs operate to ensure they’re not inflating their profits at the expense of patients and payers, including government programs like MassHealth.
The HPC’s report focused on a pharmacy benefit manager practice known as “spread pricing” for generic drugs. Spread pricing results when PBMs charge payers substantially more for drugs than what they reimburse pharmacies. This is opposed to the other pricing method where PBMs charge insurers the same amount that they reimburse pharmacies, plus a set administrative fee. HPC wrote, “By industry estimates, the share of PBM revenue from spread pricing has grown from 22% in 2014 to 54% in 2016.”
For certain drugs, the PBM reimbursement rate may even fall below the pharmacy acquisition cost of the drug, affecting the long-term financial viability of pharmacies and potentially affecting access to care.
The HPC concluded that, “Greater transparency in spread pricing is needed so payers, employers, and government can make informed choices about allocation of state spending or commercial premium dollars, including appropriate compensation for both pharmacies and PBMs.”