Analysis Shows PBM Reform Could Save Billions in Drug Spending
Just days before President Trump signed his sweeping budget bill into law, the Senate removed a provision that would have “delinked” drug list prices from compensation for drug middlemen. Now, a new analysis suggests that type of provision could have lowered annual U.S. drug spending by nearly $100 billion without hindering pharma innovation.
Drug List Prices and Their Impact
Drug list prices often come under scrutiny for their high costs. From ultra-rare disease treatments like Orchard Therapeutics’ Lenmeldy priced at $4.25 million to widely-used drugs like Keytruda and Ozempic, list prices play a significant role in the overall drug spending in the country.
While patients rarely pay the full list price due to rebates and discounts, the list prices still matter in determining the country’s drug spending. Pharmacy benefit managers (PBMs) are one example of entities that profit from drug list prices, getting a percentage of the list price for negotiating benefits on behalf of insurers and employers.
The Potential for Savings
An analysis from the USC Schaeffer Center for Health Policy & Economics suggests that if PBMs, wholesalers, and pharmacies were compensated based on revised payment models instead of list prices, the U.S. could have saved $95.4 billion in prescription drug spending in 2023.
Reforming PBMs is crucial, and while all 50 states have passed legislation to rein in their profits, the most effective approach, according to the analysis’s author Geoffrey Joyce, is to delink compensation from list prices. This would address the distorted incentives in the drug supply chain that drive up costs without hindering innovation.
Moving Towards Reform
While the recent removal of the PBM provision was a setback, there is still movement towards delinking on the federal level. The introduction of the PBM Reform Act by Rep. Earl L. “Buddy” Carter aims to delink PBM compensation from the cost of medications under Medicare Part D, along with other strategies to lower drug spending and promote transparency.
Overall, PBM reform is seen as a critical step in addressing the escalating costs of prescription drugs and ensuring a more transparent and cost-effective healthcare system.
