‘Invisible middlemen’ of healthcare industry face continued scrutiny

Few healthcare entities are as maligned as pharmacy benefit managers (PBMs).

These so-called industry middlemen have garnered significant negative attention for accusations that they drive up prescription drug prices. They have been assailed by pharma companies, Congress and even The White House.

In January, the Federal Trade Commission accused the three biggest PBMs — CVS Caremark, Optum and Express Scripts — with marking up the price of drugs by more than $7.3 billion over a five-year period. These three PBMs have a market share of about 80%.

PBMs face plenty of headwinds as they navigate not only a contentious relationship with drugmakers but also intra-industry criticism from nascent, smaller-sized PBMs.

Over the past year, PBMs have taken a bruising in the court of public opinion.

Last spring, Congress advanced legislation aimed at curbing “spread pricing” — a practice where large PBMs charge employers more for what the PBMs pay pharmacies for drugs.

At the end of the year, Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) introduced a bill to bar PBMs from owning pharmacies.

Even President Donald Trump — who criticized PBMs for contributing to high prices during his first term — resurfaced those concerns in a news conference prior to his second inauguration.

Still, despite unrelenting pressure, no substantive action has been taken against PBMs.

Congress dropped PBM reforms from a government funding bill in December, leaving PBMs unscathed heading into the new year.

Negotiating nemesis

The ongoing feud between drugmakers and PBMs largely centers on drug pricing. Both sides point fingers, alleging the other is responsible for driving prices higher. 

Matthew Fiedler, an economist at the Brookings Institution, notes that a PBM’s job is to negotiate drug prices for insurance companies and employers in a way that benefits them.

Notably, the three largest PBMs are all owned by insurance giants — UnitedHealth Group owns Optum Rx, Cigna owns Express Scripts and CVS Health owns Caremark.

Fiedler stresses that drugmakers play a role, too, given that they institute list prices and negotiate with PBMs on prices.

Joshua Fredell, VP and head of PBM and special product innovation at CVS Health, claims there is always going to be a “push-pull tension” between PBMs and drugmakers, but added this is natural when two industries work together closely.

Despite this assertion, the relationship between PBMs and pharma is best represented by a public blame game.

PBMs are reeling from PhRMA and other industry-aligned organizations deploying multimillion-dollar ad campaigns accusing PBMs of driving up drug prices.

For all of the conflict surrounding PBMs, there is one thing that both sides agree on: It’s unlikely the relationship between large PBMs and Big Pharma will improve anytime soon.

The lack of transparency

While PBMs claim their role is just to deliver fair drug prices rather than set them, not everyone believes they accomplish that.

Most independent pharmacies don’t think large PBMs provide these services with their best interests in mind.

Ronna Hauser, SVP of policy and pharmacy affairs at the National Community Pharmacists Association (NCPA), says the current pricing model at PBMs makes it difficult for pharmacists to do their job and retain a profit.

Hauser asserted that 90% of  NCPA’s average members prescribe generic versions of a drug because the brand name is often too expensive for consumers. However, these generic drugs account for only 7% of the pharmacists’ profit.

She echoes concerns that PBMs aren’t transparent enough with their pricing decisions, which can also have an adverse impact on prescribing decisions.

“Oftentimes, pharmacists need to change the drug they offer customers because it’s not covered by their plan,” she says. “Pharmacists have been prescribing more and more drugs they may lose money on.”

Intra-PBM feud

PBMs aren’t only feuding with external critics, they face internal consternation, too.

The relationship between large PBMs and small-to-midsize PBMs is particularly fraught. So much so, the latter group has rebranded as “transparent PBMs” — claiming this distinction because they list their prices upfront.

Transparent PBMs want the public to know they aren’t fond of large PBMs, either. If anything, they’re enthusiastic about potential reform and what it could mean for their business.

“We are generally supportive of the type of actions that Congress is contemplating, for the corrective action of what’s been largely malfeasance by large PBMs,” explains Joseph Shields, managing director of Transparency-Rx, a coalition of transparent PBMs.

Michael Passanante, SVP of marketing and communications at Capital Rx, adds the backlash toward large PBMs could create more opportunity for transparent PBMs going forward.

But while some may consider PBMs to be battered, they’re safe for now.

Fiedler noted current legislation aimed at fixing PBMs is far from passage and likely won’t solve the larger factor in high drug prices: insurers.

He says major reform would need to take place to change the way PBMs operate. In the current hyperpartisan environment, that’s unlikely to occur within the next two years.

“PBMs are an extension of insurance companies, doing the work for them,” he explains. “If things are to change, every player in the system needs to be addressed.”

From the February 01, 2025 Issue of MM+M – Medical Marketing and Media