California Attorney General Rob Bonta recently expressed his support for the statewide regulation of Pharmacy Benefit Managers (PBMs), which have had an outsized, negative impact on drug pricing and medication accessibility in vulnerable communities. Marking California as the 35th state to make progress toward regulating the pharmaceutical middlemen, the AG’s support will allow more patients to save money on their necessary and life-saving medications.
The purpose of a PBM derived from the need to advocate on behalf of consumers by negotiating the purchase prices of drugs between pharmaceutical manufacturers and health insurance plans. As part of this work, manufacturers use rebates on certain medications to ensure the PBM purchases the medication and that their health plan client will “cover” the therapy for patients. Rebates roughly result in a 40% discount off the list price of the medication. So, when a patient goes to the pharmacy, they pay for their medication based off the list price even through the PBMs and their health plan clients only paid the rebated price.
As a result, many PBMs have created deceitful and predatory loopholes to abuse this system, artificially skyrocketing prices at the expense of consumers. In California, a report from the Department of Managed Health Care showed that health plans in the state received more than $1.4 billion in rebates from manufacturers in 2020, up 57% from 2017.
PBMs’ role in this system has allowed them to profit off the price of medicines, manufacturer rebates, and patient out-of-pocket costs. Rebate reform is crucial for a patient’s ability to access affordable prescriptions and treatments – 30% of Americans say they haven’t taken their medication as directed due to costs.
In 2019, data from Ohio’s Medicaid program revealed that Caremark, CVS, and Optum RX, the three biggest PBMs, had charged health plans in the state $2.5 billion, while only compensating pharmacies $2.3 billion, a $200 million dollar difference that went straight into the pockets of these PBMs. The revenue was intended to be reinvested in low-income hospitals and pharmacies in the area.
AG Bonta joining the coalition of attorneys general is a critical win for patients and could be the snowball that starts the avalanche of progress. Implementing new systems and motions for transparent communication are crucial for patient accessibility to their needed medications. The future of progress lies within enacting policies that close loopholes and eliminate bad actors who are profiting at the expense of patients.