Stop Big Pharma’s Money Grab From America’s Seniors

As lawmakers return for the remainder of the 118th Congress, it will be critically important to reject Big Pharma's self-described top year-end priority called "delinking," which amounts to a money grab for big drug companies paid for by massive increases to health care premiums for America's Medicare beneficiaries.

This disastrous policy would "de-link" pay from performance in the prescription drug supply chain, removing market-based forces that act as an impactful counterbalance to Big Pharma's otherwise limitless pricing power.

A research paper, "Ending Pay for PBM Performance: Consequences for Prescription Drug Prices, Utilization, and Government Spending," from University of Chicago Professor of Economics Casey Mulligan, Ph.D, and published by the National Bureau of Economic Research (NBER), examined the consequence of "delinking" in Medicare Part D.

According to the report, such a policy would undermine incentives for pharmacy benefit companies to maximize competition in the market and secure savings for patients and health plan sponsors, resulting in higher drug prices and handing drug companies a profit-boosting windfall.

Read the research paper from Dr. Mulligan HERE.

Mulligan's analysis finds:

• Financial Windfall for Big Pharma: The "delinking" policy has the potential to significantly increase drug prices, reduce drug utilization, and redistribute billions of dollars annually from patients and taxpayers to pharmacy companies and drug manufacturers. The result would be approximately an additional $10 billion every year for drug companies, while costing patients and payers up to $18 billion.
• Taxpayers Pay More for Medicare: Annual federal spending on Medicare Part D premiums would increase from $3 billion to $10 billion.
• Higher Premiums for Seniors in Medicare Part D: Reducing the negotiated rebates and discounts PBMs pass to health plans to lower drug costs for patients and health plans could lead plans to raise premiums to finance drug benefits. Eliminating the pay for PBM performance incentives could also reduce insurance coverage and appropriate drug utilization as costs for patients rise.
  
  

"Incentives matter for PBMs just as they do for other market participants. A financial reward for greater rebates and discounts results in greater rebates and discounts. Conversely, eliminating pay for PBM performance would reduce PBM performance. Absent the financial incentives, plans would pay more to manufacturers and to pharmacies because plans would receive less manufacturer rebates and pharmacy discounts," Dr. Mulligan explained in the paper.

Market-based incentives for securing greater rebates from drug companies lead to more rebate savings for patients. According to a new report from Dennis Carlton, Ph.D., David McDaniel Keller Professor of Economics Emeritus at the University of Chicago Booth School of Business, one of the leading industrial organization economists in the country, and former chief economist at the U.S. Department of Justice (DOJ) Antitrust Division, the manufacturer rebates-passed through by PBMs or distributed by PBMs as discounts-along with fees, are not the driver of increased drug costs.

• The data showed that PBMs are passing through the majority of manufacturer rebates and fees-recently, well over 95% of rebates and fees received from manufacturers are passed through, and in 2020 and 2021, this number has neared 100%.
• There is no basis, according to the research, for the claim that the growth in list prices is higher for rebated drugs than for non-rebated drugs. Between 2018 and 2022, the average wholesale price (adjusted in real terms for inflation) on rebated branded drugs increased by 2% while it increased by 3% on non-rebated branded drugs during this time.

See the full report from Dr. Carlton HERE.

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PCMA is the national association representing America's pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients.

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