Life Science Compliance Update

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September 21, 2017

MedPAC Discusses Pharmacy Benefit Managers

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During September 7th’s Medicare Payment Advisory Commission (MedPAC) public meeting, its commissioners discussed issues related to pharmacy benefit managers (PBMs). The slides during the presentation can be found here and an issue brief here as well. The Commission discussed issues related to the conflicts of interest between PBMs and PBM-owned specialty pharmacies, the role for exclusive specialty pharmacy networks in Part D, whether CMS should mandate PBMs’ disclosure of data to plan sponsors, among other topics. The following discussion between the commissioners broke along two lines: those supporting PBMs and others critical of them.

Commissioners Supporting PBMs

Commissioner Bricker (of Express Scripts) made several remarks about PBMs. First, they are required to meet discounts and provide rebates to plan sponsors. Second, they accept financial risk for generating agreed-upon levels of discounts from drug manufacturers. Third, PBMs are required to pass direct and indirect remuneration (DIR) information onto plan sponsors, and she is not aware of any widespread lack of disclosure among PBMs. The commissioner was open to exploring exclusive pharmacy networks in Part D but pushed back against the conflict of interest in PBM-owned specialty pharmacists, suggesting that the competitiveness in the industry forces PBMs to focus on negotiating low prices. Finally, she expressed support for allowing MA-PDs to manage Part B drugs similarly to Part D drugs.

Commissioner Nerenz is quoted as saying, “conflicts-of-interest run throughout the health care system, in some instances, we encourage it.” He said that if conflicts-of-interest are going to be addressed as a concern, it should also be made clear “why it’s a problem here more than elsewhere.” Also, regarding transparency, he said that PBMs work as a consultant to the plan sponsor, and that “in general, we don’t require consultants to disclose elements of their own internal finances.”

Commissioners Critical of PBMs

Commissioner Jack Hoadley raised concerns about the “maze of financial entanglements,” saying it is “unclear where the system saves money and where it adds costs.” He suggested MedPAC should look at where prices go up even as new competitors enter the market and how rebate savings should be shared with beneficiaries. Commissioner Rita Redberg criticized PBMs’ secrecy, fees, and unknown rebates.

Other Comments

Commissioner Warner Thomas acknowledged that “one could have the view that it is so complicated it must be a problem,” adding that, “we don’t really know.” Commissioner DeBusk suggested that it “is complicated enough and there is enough money that singling out a PBM is not the solution to our problem.”

Despite some of the concerns cited with PBMs, several commissioners suggested that the high cost of specialty drugs should be more of a concern than the supply chain. Commissioner Kathy Buto, a former CMS and CBO official, asked, “How big a difference do PBMs make in the value and the reduction in overall cost? Probably not a huge amount,” she said. “It’s probably the manufacture costs and utilization.” Commissioner Buto suggested that “structural changes in Part D” could help address pricing issues, and added expressed support for allowing MA-PDs to manage drugs that under Part B. Commissioner Pat Wang noted she is “not opposed to the recommendations around PBMs, they won’t change the cost of specialty drugs.” Finally, Commissioner Thomas agreed that “this pricing cascade starts with the manufacturer who sets their own price.”

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