A biotech exec just got real about one of the largest middlemen in the drug industry

Another drug executive just pinned the blame for soaring drug prices on the middlemen who help insurance plans and companies negotiate what they will pay for a medicine. 

Pharmacy benefit managers are hired to help insurance plans determine what drugs they will cover (ideally, favouring the most effective medicine) and what they will pay for it. They also take a cut, though, of the rebates that drugmakers will pay back to the insurer or whoever is paying for the medicine.  

That cut has drawn PBMs into the drug-price debate because biotech and pharmaceutical executives say it is a big factor behind high drug prices. Add to that chorus Jim Myers, Gilead’s executive vice president of worldwide commercial operations.

“I have never met, in this entire experience, a PBM or a payer outside of the Medicaid segment that preferred a price of $US50,000 over $US75,000 and a rebate back to them,” Meyers said in an interview with Bloomberg News. Rebates paid by the drugmakers to the PBMs are meant to be passed along to whomever is paying for the drug, but the PBM is able to keep some, depending on the agreement.

Gilead, of course, has reason to point the finger elsewhere. Its hepatitis C drug Sovaldi has a list price (that is, not accounting for any discounts or rebates) of $US84,000, breaking down to $US1,000 per pill for the 12-week treatment. The high list price became the subject of a congressional investigation, and was criticised by the public and PBMs.

But Meyers told Bloomberg’s Caroline Chen and Robert Langreth that rebates the PBMs receive from drugmakers are one reason why list prices can’t come down. Say Gilead changed the list price of Sovaldi from $US84,000 to $US50,000. If that happened, Meyers told Bloomberg, “every payer would rip up our contract.”

To be sure, drugmakers are the ones responsible for coming up with the list prices. But the role of rebates makes things a bit more complicated. According to data from ZS Associates, a sales and marketing firm that works in the healthcare industry, rebates paid out to PBMs and insurers have gone up from about $US40 billion four years ago to $US100 billion to $US130 billion by 2016.

There are three big PBMs that cover most of the roughly 4 billion retail prescriptions that were filled in the US in 2015: Express Scripts, CVS Caremark, and OptumRx. In February, the companies’ lobbying group — the Pharmaceutical Care Management Association — launched a campaign to promote the work that PBMs do.

Thanks to secrecy of PBM contracts, it’s not always been easy to know how much the PBMs are getting. That’s changing though, as drugmakers start to reveal their net prices after rebates and discounts, which often paint a much different picture than the constantly rising list price. 

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