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State report: Drug benefit managers are driving up health care costs


Health Policy Commission

Boston, MA

Government Administration


By Jessica Bartlett  – Reporter, Boston Business Journal

Jun 5, 2019, 12:50pm EDT


Drug benefit managers are increasingly profiting off pharmacies and insurers, according to a new state report, driving up the state spending on health care.


The report, issued Wednesday by the Health Policy Commission, focuses on the pharmacy benefit managers (PBMs), which negotiate rebates to drug manufacturers and payments to pharmacies on behalf of insurers.


Pharmacy benefit managers can negotiate on behalf of several insurers at once, leveraging their size to drive down the price of drugs. The practice consolidates insurer bargaining power with a few entities, so that insurers aren’t tasked with negotiating the price of every drug with every pharmaceutical company individually.


But the Health Policy Commission report said PBMs have bolstered their own profits through the practice of “spread pricing” — by negotiating a far lower price than what it passes on to the insurer. The spread between what PBMs charge insurers for drugs and what they pay to pharmacies has subsequently widened over the last several years.


“We’re trying to untangle the…many pieces of this supply chain,” said David Seltz, executive director for the Health Policy Commission, at Wednesday’s Market Oversight and Transparency Committee hearing. “Much of this is purposefully hidden from the public and we’re trying to bring sunlight and transparency to this topic for the first time.”


The issue is reaching a boiling point. In 2017, total prescription drug spending at pharmacies grew 4.1 percent in Massachusetts — one of the highest growth sectors of health care spending in the state. Spending on drugs in the state’s Medicaid program, MassHealth, also has nearly doubled in five years, from $1.1 billion in 2012 to $1.9 billion in 2017.


Other states are taking action. In Ohio, government officials changed how its Medicaid program would work with PBMs after finding that PBM profit accounted for $208.4 million of the $662.7 million that the state’s Medicaid program spent on generic drugs.


Massachusetts is looking to follow suit, and already MassHealth has issued a bulletin to Medicaid insurers that it wanted to review drug-specific data from their PBMs. “The administration has required Medicaid Managed Care Organizations and Accountable Care Organizations to submit more information to the state on these contracts and what the margins are…but there is a need for further policy action,” Seltz said.

Mass.' biggest revenue-driving drugs


Treatments for everything from Attention Deficit Hyperactivity Disorder (ADHD) to multiple sclerosis topped the sales charts in 2018, according to various local companies' financial reports compiled by the Business Journal. All of the products included have been on the market for a full year.



Despite the focus, the commission said it lacks transparency into how PBMs conduct business. To figure out how much money PBMs are making, researchers at the commission looked at the differences Medicaid paid for the same drugs under its fee-for-service program, which pays for individual services, and Managed Care Organization (MCO) model, which sets a budget for each patient. Because the federal government limits the cost of drugs within the fee-for-service program, researchers said it represented a good comparison for how PBMs might be manipulating the system.


Researchers found that MassHealth was paying thousands of dollars more for 42 percent of drugs under the MCO reimbursement model. For antiviral medication Valganciclovir 450 mg tablets, the difference was as high as $1,134 per prescription, or an additional $63,499 in just the fourth quarter of 2018. For a prescription of Buprenorphine-Naloxone (generic Suboxone, used as an opioid addiction medication), the average price per prescription was $159.24 for the MCO program, 111 percent higher than the $75.53 paid under the older fee-for-service program. That worked out to be an additional $252,536 in just the fourth quarter of 2018. The state has even been paying more for the drug even though the market price of the drug has been falling.


The phenomenon was the same within the commercial market, when researchers compared the insurer’s cost for the drug to the amount pharmacies pay for drugs, according to the National Average Drug Acquisition Cost database. For example, Imatinib mesylate 400 mg tablets (generic Gleevec, used to treat leukemia) had a $1,811 difference per prescription between the two programs, or $278,937 in additional spending in just the fourth quarter of 2016.


Executives at the state's pharmacy lobbying group MassBio lauded the research. MassBio has pointed to PBMs as the cause of the drug pricing problem that have drawn scrutiny from state government officials.

“We applaud the HPC for recommending policy action to require more oversight of PBMs, which offer no added value to the healthcare system and drive up patients’ out-of-pocket expenses," said Bob Coughlin, president and CEO of MassBio. "There’s no doubt spread pricing by PBMs in MassHealth’s managed care program is costing the state millions of dollars a year in excess expense in return for zero added value. If spread pricing was eliminated, we believe the state could save tens of millions of dollars annually.”


Commission staff said the findings show that there is a need for further research. Officials in the state's health and human services secretariat are hoping to receive more data in July from Medicaid insurers.

“These findings raise a lot more questions and certainly reinforce the need for greater transparency to truly understand the flow of these dollars,” Seltz said.

Original article can be found here

© 2019 TruthRX

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