Most employers have little concept what the pharmacy profit managers they rent do with the cash they trade for the medicines utilized by their workers, in keeping with a KFF survey launched Wednesday morning.
In KFF’s newest employer well being advantages survey, firm officers have been requested how a lot of the rebates collected from drugmakers by pharmacy profit managers, or PBMs, is returned to them. Lately, the pharmaceutical trade has tried to deflect criticism of excessive drug costs by saying a lot of that revenue is siphoned off by the PBMs, firms that handle sufferers’ drug advantages on behalf of employers and well being plans.
PBM leaders say they save firms and sufferers billions of {dollars} yearly by acquiring rebates from drugmakers that they cross alongside to employers. Drugmakers, in the meantime, say they increase their record costs so excessive to be able to afford the rebates that PBMs demand in trade for putting the medication on formularies that make them obtainable to sufferers.
Leaders of the three largest PBMs — CVS Caremark, Optum RX and Specific Scripts — all testified in Congress in July that 95% to 98% of the rebates they gather from drugmakers circulation to employers.
For KFF’s survey of two,142 randomly chosen firms, officers from these with 500 or extra workers have been requested how a lot of the rebates negotiated by PBMs returned to the corporate as financial savings. About 19% mentioned they obtained a lot of the rebates, 27% mentioned some, and 16% mentioned little. Thirty-seven p.c of the respondents didn’t know.
Whereas a bigger share of officers from the most important firms mentioned they acquired most or a number of the rebates, the solutions — and their distinction with the testimony of PBM leaders — mirror the confusion or ignorance of employers about what their drug profit managers do, mentioned survey chief Gary Claxton, a senior vp at KFF, a well being data nonprofit that features KFF Well being Information.
“I don’t suppose they will ever know all of the methods the cash strikes round as a result of there are such a lot of layers, between the wholesalers and the pharmacies and the producers,” he mentioned.
Critics say huge PBMs — that are elements of conglomerates that embody pharmacies, suppliers, and insurers — might conceal the scale of their rebates by conducting negotiations via corporate-controlled rebate aggregators, or group purchasers, principally primarily based abroad in tax havens, that siphon off a share of the money earlier than it goes on the PBMs’ books.
PBMs additionally generate profits by encouraging or requiring sufferers to make use of affiliated specialty pharmacies, by skimping on funds to different pharmacies, and by amassing further money from drug firms via the federal 340B drug pricing program, which is aimed toward reducing drug prices for low-income sufferers, mentioned Antonio Ciaccia, CEO of 46brooklyn Analysis.
The KFF survey signifies how little employers perceive the PBMs and their pricing insurance policies. “Employers are usually annoyed by the shortage of transparency into all the costs on the market,” Claxton mentioned. “They will’t truly know what’s true.”
Billionaire Mark Cuban began an organization to undercut the PBMs by promoting prescription drugs with clear pricing insurance policies. He tells Fortune 500 executives he meets, “You’re getting ripped off, you’re dropping cash as a result of it’s not your core competency to grasp how your PBM and medical insurance contracts work,” Cuban instructed KFF Well being Information in an interview Tuesday.
Ciaccia, who has carried out PBM investigations for a number of states, mentioned employers are usually not outfitted to grasp the conduct of the PBMs and sometimes are shocked at how unregulated the PBM enterprise is.
“You’d assume that employers wish to pay much less, that they might wish to pay extra consideration,” he mentioned. “However what I’ve discovered is they’re usually underequipped, underresourced, and oftentimes not understanding the severity of the shortage of oversight and accountability.”
Employers might assume the PBMs are appearing of their greatest curiosity, however they don’t have a authorized obligation to take action.
Costs might be everywhere in the map, even these charged by the identical PBM, Ciaccia mentioned. In a Medicaid examine he just lately carried out, a PBM was billing employers wherever from $2,000 to $8,000 for a month’s value of imatinib, a most cancers drug that may be purchased as a generic for as little as $30.
PBM contracts usually assure reductions of sure share factors for generics and brand-name medication. However the contracts then include 5 pages of exclusions, and “no employer will know what they imply,” Ciaccia mentioned. “That particular person doesn’t have sufficient data to have an knowledgeable opinion.”
The KFF survey discovered that firms’ annual premiums for protection of particular person workers had elevated from a mean of $7,739 in 2021 to $8,951 this 12 months, and $22,221 to $25,572 for households. Amongst employers’ biggest considerations was how you can cowl more and more widespread weight reduction medication that record at $2,000 a month or extra.
Solely 18% of respondents mentioned their firms coated medication akin to Wegovy for weight reduction. The biggest group of employers providing such protection — 28% — was these with 5,000 or extra workers.
