Experts Say Transparency Needed in Drug Pricing Practices

Pharmacy Benefit Managers (PBMs) are under scrutiny for their non-transparent practices in the prescription drug industry, with experts calling for more transparency and competition. During a Senate Finance Committee’s hearing titled “Pharmacy Benefit Managers and the Prescription Drug Supply Chain,” Senator Ron Wyden (D-Ore.), who chairs the committee, stated that the industry is going in the wrong direction.

PBMs were initially tasked with negotiating prices on behalf of consumers in the 1980s, however, they have since evolved into entities that prioritize profit over transparency, according to Wyden and several witnesses. Jonathan Levitt, the founding partner of Frier Levitt Attorneys at Law of Pine Brook, New Jersey, who has sued several PBMs, stated that “PBMs will make money, one way or the other.”

While Senator Mike Crapo (R-Idaho), a committee ranking member, acknowledged that PBMs had helped in keeping medication costs down by negotiating deals with Medicare, Medicaid, CHIP, and private insurers, he stressed the need for transparency in determining prices. Due to the lack of transparency in the PBM industry, consumers, regulators, and researchers are finding it difficult to pinpoint how medicine prices are established.

Law professor Robin Feldman of the University of California’s Hastings College of Law explained that PBMs have become major players in the health care industry, controlling the market with rebate plans and price indexes. Due to their secretiveness, it’s tough to determine how they set prices. Feldman added that PBMs negotiate rebates from drug manufacturers on some of the most expensive medicine while keeping a portion of the rebate, creating “perverse incentive” for PBMs to recommend more costly drugs. PBMs can also limit access to the market by having certain medicines avoid recommendation, she further explained.

Wharton School’s Lawton Robert Burns highlighted that the real issue regarding PBMs is the lack of competition in the industry. “We’ve been down this road,” he said.