Why do Pharmaceutical Companies hate PBMs so much?

You may have been hearing a lot about Pharmacy Benefit Managers (PBMs) recently. That’s because the pharmaceutical industry needs to point the finger at someone for the rising cost of drugs and has decided PBMs make a convenient scapegoat for the rising price of drugs in America. And to their credit, they are doing a great job of getting their message out there.

But is it correct that PBMs are responsible for rising prices? Let’s look at the claims of Phrma – a gang that lobbies on behalf of the pharmaceutical industry.

If it sounds like it doesn’t make sense, that’s because it doesn’t.

Let’s start by looking at this claim.

“…they get paid as a percent of the list price of a medicine. This creates a system where middlemen make more money when your medicine prices increase.”

Is Phrma seriously trying to get us to believe that this is what happens behind closed doors?

  1. Drug makers set a high price.
  2. PBMs, representing patients, come into the room and demand the price be higher.
  3. Drug makers say “No, no! Our shareholders can’t handle any more profits! They’re too rich already!”
  4. But the PBMs are adamant! “Raise your prices even higher!”
  5. The sad drug makers reluctantly raise their prices forcing them to be the most profitable industry in the world.

In a piece for Forbes, Avik Roy lays out the truth about PBMs: 

"Prescription drug prices, insurance premiums, and overall health spending would all be far higher if PBMs weren't driving more market share to low-cost generic drugs."

So why does Big Pharma hate PBMs? 

A recent report by Visante, a “clinician-composed consulting firm specializing in the business of pharmacy and healthcare compliance,” found:

“PBMs save payers and patients 40-50% on their annual prescription drug and related medical costs compared to what they would have spent without PBMs.”

So why does Big Pharma hate PBMs?

Because PBMs do their job well. 

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