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News & Advocacy

State Update: Transparency in Drug Pricing: Regulating Pharmacy Benefit Managers (PBMs)

posted: May 1, 2017

One of the many legislative priorities OAR spoke about during its recent advocacy day included regulating PBMs influence over drug pricing. The recent EpiPen fiasco has lawmakers and citizens up in arms about the continued rise in prescription drug pricing and how manufacturers are to blame. The reality is the system is broken and there is plenty of blame to go around.

PBMs or Pharmacy Benefit Managers were established to drive down drug costs as manufacturers would have to negotiate low prices if they wanted to access the PBM patient pool. However, because of a lack of transparency from the PBMs, they have been exploiting this opaque system and are reaping huge profits that should be going to patients.

To give an example, manufacturers pay rebates to PBMs in exchange for preferred formulary placement for their drug. This motivates PBMs to base drug utilization on rebates (aka profits) rather than patient care or reducing drug costs.  The higher the list price the higher the rebate or profit for the PBM.

This tactic has caused a bidding war between manufacturers for preferred placement on a formulary, thus driving up the costs for patients. The worst part about this method is that the rebates are based on the list price the patient pays for their treatment, but the PBM pays a discounted price in which they pocket the difference (savings that should go to the patient).

The OAR has begun to research other state legislation surrounding this issue and is currently educating lawmakers in Ohio and are insisting action be taken on the egregious act.  For more information on PBMs, check out the PBM One-Pager used at the OAR Advocacy Day.

PBM Issue Leave Behind

As always, OAR legislative staff will continue to monitor all relevant legislation and will update OAR membership as required.