Pharmacy benefit managers, or PBMs, work on behalf of health insurers and use the large number of patients they represent to negotiate rebates off a drug’s list price. The bigger the rebate, the more favorable placement a drug company’s product gets on the formularies PBMs create that say which drugs a health plan will cover.
Who's really controlling your drug prices? 5 things to know about PBMs
The lawsuit claims the rebate system has incentivized insulin makers to raise their list prices higher and higher to account for the rebates. This drives up the difference between the list price, which is the one the public sees, and the negotiated price that insurers actually pay, which is kept a secret.
“To secure the PBMs’ business, drug companies, including defendants, offer PBMs prices that are lower than their publicly reported, benchmark prices. Both the PBMs and drug companies refuse to disclose these lower, real prices, labeling them trade secrets,” the lawsuit said.
The bigger the difference between the list price and the secret negotiated price, the more money the PBM makes when it takes a cut of the rebate. The lawsuit argues the drug makers are complicit in this price inflation in order to please the powerful PBMs.
All three companies responded with statements denouncing the lawsuit.
“We strongly believe these allegations have no merit, and will defend against these claims,” Sanofi’s statement said.
Novo Nordisk said, “We are aware of the complaint and its characterization of the pharmaceutical supply chain. We disagree with the allegations made against the company, and are prepared to vigorously defend the company in this matter.”
And Eli Lilly’s statement said, “Lilly conducts business in a manner that ensures compliance with all applicable laws, and we adhere to the highest ethical standards.”
The Pharmaceutical Care Management Association, a pharmacy benefit manager trade group, released a statement condemning the attacks on the PBM industry laid out in the lawsuit, even though PBMs are not named as defendants.
“It inexplicably attacks prescription drug rebates, long used to reduce costs in public programs like Medicaid and in the commercial market,” the statement said.
Consumers kept in the dark over drug pricing
Brian Henry, a spokesman for Express Scripts, the nation’s largest pharmacy benefit manager, declined to comment on the lawsuit, but said, “Rebates don’t raise drug prices, drug makers do.”
The rising costs of prescription drugs has drawn ire from patients and politicians on both sides of the aisle, with President Donald Trump declaring that the drug industry is "getting away with murder."
He’s meeting with the leaders of pharmaceutical companies this morning.
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