New Study Reveals Discrepancies in Drug Pricing by Pharmacy Benefit Managers, Costing Employers and Hurting Pharmacies in Washington State
26 June 2024 - 3:06AM
Business Wire
The Washington State Pharmacy Association (WSPA) and Washington
Health Alliance (WHA), in partnership with 3 Axis Advisors,
released the results of a first-of-its-kind study that exposes the
erratic pricing practices of pharmacy benefit managers (PBMs) in
Washington State. The study, which was covered today in the Wall
Street Journal, reveals that PBMs charge employers vastly different
amounts for the same prescription medications, inflate drug prices
at PBM-affiliated mail-order pharmacies, and have driven an
increase in employer health care costs over the past four years.
Meanwhile, pharmacies are receiving lower reimbursements for the
same prescriptions that employers are paying higher prices for,
leading to closures of pharmacies while PBMs pocket the difference
for profit.
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The study investigated the experiences of Washington commercial
plan sponsors (employers) and community pharmacies’ with PBMs. It
analyzed both sides of the PBM’s drug transactions: what pharmacies
are paid and what employers are charged for the same drug. This is
the first time both sides of the PBM transactions have been
analyzed in a single study.
“This data paints a stark picture that Washington pharmacists
know all too well – most PBMs and their affiliates are raking in
massive profits from a manipulative drug pricing system, leaving
patients and providers to bear the brunt,” said Jenny Arnold,
PharmD, BCPS, Chief Executive Officer of WSPA. “If this
exploitation is rampant in Washington, it’s undoubtedly a
nationwide crisis. Pharmacies are being forced to close their doors
– impacting access to patient care. Federal action is urgently
needed to confront and rectify the PBM problem.”
Antonio Ciaccia, president of 3 Axis Advisors, said: “As the
public clamors for relief from rising prescription drug costs, it
is important to understand that PBMs play a central role in
determining the fates of pharmacies, plan sponsors and patients.
This study makes clear that PBMs have a knack for making drug
pricing less clear, as the disparate nature of their price-setting
makes the end impact of prescription drug transactions predictably
unpredictable.”
Among the study’s key findings:
- For a subset of matched claims between the plan sponsors and
the pharmacies, the average plan sponsor (employer) costs were
approximately $165,000 higher (roughly 80% more on
generic drug transactions) than the reimbursement provided to
pharmacies (approximately $8 more per prescription).
- Plan sponsor (employer) costs increased by 30%
while commercial pharmacy reimbursement decreased by 3%
between 2020-2023.
- PBM-affiliated mail-order pharmacies had prescription markups
that were more than three times higher than the markups at
retail pharmacies.
- For a subset of claims comprised mostly of costly “specialty
drugs,” plan sponsors were charged more than $1,000 in
markups per prescription at PBM-affiliated mail-order pharmacies
despite retail pharmacies typically filling those medicines at a
loss.
“This study is groundbreaking. For the first time, we’re seeing
'the spread,' or difference, between the prices pharmacy benefit
managers (PBMs) charge employers for drugs to the actual amounts
received by independent and chain pharmacies,” said Michele Ritala,
Benefits Strategic Planner, King County, WA. “While the average
spread was about $25, the employers in the study paid hundreds of
dollars more for some drugs per prescription. It’s a wake-up
call.”
The study analyzed more than 6 million prescription claims from
both independent and small chain pharmacies, as well as over 3
million prescription claims from private and commercial plan
sponsors (employers) operating within the State of Washington.
The data shows that PBMs are incentivized to:
- Charge employers more than necessary to participate in
plans.
- Pay pharmacies less than the cost of dispensing medicines –
known as “spread pricing” – and pocket the difference.
- Steer plans and patients to PBM-affiliated mail-order
pharmacies to increase PBM profits.
“Never before have we had this clear picture of the ways PBMs
drive up costs for everyone involved in the prescription drug
marketplace,” said Denise Giambalvo, Director of Member Engagement
& Business Strategy, WHA. “Armed with this knowledge, employers
should be reviewing their data and contracts for egregious pricing
practices. It’s time to demand consultants and PBMs deliver
contracts that significantly lower prescription costs for the
patient and plan sponsor and provide equitable reimbursement for
all pharmacies. If your partners cannot deliver, it’s time to make
a change.”
Lisa Nelson, PharmD, Chief Pharmacy Officer at Unity Care
Northwest, said: “It is challenging enough operating a pharmacy,
let alone one that is working to assure affordable access to
critical medicines and services to our patients regardless of their
ability to pay. Doing this in a heavily consolidated and volatile
PBM-controlled marketplace makes the work even more challenging. It
is salt in the wound to discover that while PBMs underpay small
pharmacies, they are simultaneously enriching the giant,
out-of-state mail-order pharmacies that they also own.”
The full study can be found here. Wall Street Journal coverage
can be found here.
About the Washington State Pharmacy Association
(WSPA)
Founded in 1890, the Washington State Pharmacy Association
(WSPA) is a professional trade association representing
pharmacists, technicians, student pharmacists and pharmacies in all
practice settings. We are the home and voice of pharmacy practice
and advocate on behalf of the profession to ensure pharmacy
professionals are uniformly recognized as a vital member of the
healthcare team.
About Washington Health Alliance
The Washington Health Alliance, a nonpartisan 501(c)(3)
nonprofit, is the state’s only independent multi-stakeholder
collaborative bringing together more than 150 health care
purchasers, health plans and provider organizations to drive market
change and ensure equitable high-quality care that is accessible
and affordable for all Washingtonians.
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Kat Goodner, Marketing Communications Manager Washington State
Pharmacy Association 425.207.3647 | kat@wsparx.org