Attacking PBMs Won’t Result in Lower Drug Costs | Citizens Against Government Waste

Attacking PBMs Won’t Result in Lower Drug Costs

The WasteWatcher

Legislation introduced in the Florida Senate would create unnecessary regulatory barriers and undermine the effectiveness of pharmacy benefit managers (PBMs) in Florida.  The damaging bill is SB 1550, which significantly increases government intrusion into the marketplace, by covering not only private sector healthcare plans, but also government healthcare plans.

PBMs effectively save money for patients by negotiating lower prices on behalf of large groups.  More than 275 million Americans who obtain health coverage from their employers, unions, state government plans, and other sponsors rely on PBMs to administer their prescription drug plans.  PBMs save payers and patients an average of $1,040 per person annually.  PBMs are able to facilitate lower out of pocket costs for patients by utilizing a variety of tools like rebates, pharmacy networks, drug utilization review, formularies, specialty pharmacies, mail-order, and audits to drive down drug costs, improve quality, increase patient medication adherence, and prevent fraud.  

This legislation is damaging to PBMs and will harm patients. The bill undermines PBMs’ negotiating power and hinders their ability to lower prices for patients.  Provisions in the bill could ultimately cost Florida $2.3 billion in excess drug spending in the first year alone and more than $29 billion over the next 10 years. 

The fiduciary mandates in the legislation will subject PBMs to broader legal liabilities than under current law.  This will raise costs for liability insurance, which will be passed onto consumers, and reduce available options for financial structuring agreements made with a plan’s sponsor.

Small and large businesses voluntarily enter into agreements with PBMs to enable them to offer better options and benefits to their employees.  The proposed legislation will make Florida, which is supposed to be a business-friendly state, less competitive than other states that do not limit PBM options. 

PBMs use a variety of preferred network pharmacies, including independent, chain, mail-order, and specialty, to prioritize safety while keeping costs low.  SB 1550 requires PBMs to include all pharmacies in their plans, which is inconsistent with the purpose of PBMs, undermines the agreements they make with pharmacies on behalf of their customers, and raises prices for patients.  

Patients on a PBM negotiated plan have the option to go to any pharmacy they choose but are not guaranteed the lower price if the pharmacy does not have an agreement with their PBM preferred network.  This is similar to a big box membership store that can offer lower prices to consumers who are members because of the bulk purchasing and selling.  Consumers can still buy products from any store, but to lower prices are far more likely to be found at one of the membership stores.

PBMs enable patients to have greater options at a lower cost.  Over-regulating PBMs will limit patient choice and raise costs in Florida.  HB 1550 should be rejected by the House.

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